Covering the Economy: February 28: International Trade

Covering the Economy: February 28, 2006: International Trade

Today's lecture is going to be much more like a standard economics lecture than our classes have been so far. I'm sorry. But I see no way of doing it otherwise.

Major points to be hit:

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International Trade: Background

1. From 2% of GDP (1800) to 8% of GDP (1913) to 5% of GDP (1939) to 15% of GDP (today) to ????
2. Effects of trade:
   1. Comparative advantage--each specializes in what it does best
   2. Stolper-Samuelson: the "scarce" factor in each country loses from the opening-up of trade
   3. Dynamic effects
      1. Does manufacturing matter?
      2. The political economy of protection
      3. Extent of the market
      4. Examples of countries that have gained lots of relative ground under free trade?
   4. Political consequences: late nineteenth century Germany and the marriage of iron and rye

International Trade: Effects

1. Not number of jobs, quality of jobs.
2. What if monetary factors mean that the exchange rate is wrong?
   1. Reagan deficits and the high dollar of the 1980s
   2. Bush deficits, Chinese dollar purchase program, and the trade deficits of the 20002.
3. Our current $1 trillion annual deficit
   1. Balance up or balance down?
   2. How long can this go on?

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Readings:

Monthly Trade Release http://www.bea.gov/bea/newsrel/tradnewsrelease.htm

U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES December 2005

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total December exports of $111.5 billion and imports of $177.2 billion resulted in a goods and services deficit of $65.7 billion, $1.0 billion more than the $64.7 billion in November, revised. December exports were $2.3 billion more than November exports of $109.2 billion. December imports were $3.3 billion more than November imports of $173.9 billion.

In December, the goods deficit increased $1.2 billion from November to $70.6 billion, and the services surplus increased $0.3 billion to $4.9 billion. Exports of goods increased $1.9 billion to $79.0 billion, and imports of goods increased $3.1 billion to $149.6 billion. Exports of services increased $0.5 billion to $32.5 billion, and imports of services increased $0.2 billion to $27.6 billion.

In December, the goods and services deficit was up $11.0 billion from December 2004. Exports were up $9.8 billion, or 9.6 percent, and imports were up $20.8 billion, or 13.3 percent.

Commentators:

• Alan Greenspan on the current-account deficit: http://economistsview.typepad.com/economistsview/2005/11/the_grass_is_al.html
• Paul Blustein on Tim Adams's dilemma: http://economistsview.typepad.com/economistsview/2005/11/the_grass_is_al.html
• Martin Wolf on global imbalances: http://delong.typepad.com/sdj/2005/04/martin_wolf_on_.html

From the Economists' Voice http://bepress.com/ev:

• J. Bradford DeLong (2005) "Divergent Views on the Coming Dollar Crisis", The Economists' Voice: Vol. 2: No. 5, Article 1 http://www.bepress.com/ev/vol2/iss5/art1
• John Quiggin (2004) "The Unsustainability of U.S. Trade Deficits", The Economists' Voice: Vol. 1: No. 3, Article 2 http://www.bepress.com/ev/vol1/iss3/art2
• J. Bradford DeLong (2004) "Should We Still Support Untrammelled International Capital Mobility? Or are Capital Controls Less Evil than We Once Believed?", The Economists' Voice: Vol. 1: No. 1, Article 1. http://www.bepress.com/ev/vol1/iss1/art1