PECN 600-2

Majors’ Seminar in Political Economy:

Law and Economics of International Trade

Professor: Nelson

Office: Murphy Institute (108 Tilton)

Phone: 865-5317

The purpose of this course is to study the positive law and economics of international trade. That is, we will examine the impact of current international trade law and its implementation in domestic law on the pattern of trade and the distribution of the benefits of trade. We will be particularly interested in the World Trade Organization and the North American Free Trade Agreement as international agreements/organizations, and will focus on a variety of administered protection mechanisms as they operate in the United States.

Although this is not a course on the economics of international trade, microeconomic tools will be used extensively in our analysis. Thus, Economics 301 is a prerequisite. While not required, a course on the application of microeconomics to the study of international trade (e.g. Econ 433) will make your life easier.

Primary texts for the course will be:


John Jackson (1989). The World Trading System: Law and Policy of International Economic Relations. Cambridge: MIT Press.


R. Lawrence and R. Litan (1986). Saving Free Trade. Washington, DC: Brookings.


R. Lawrence and C. Schultze, eds. (1990). An American Trade Strategy: Options for the 1990s. Washington, DC: Brookings Institution. [Lawrence/Schultze]


G.C. Hufbauer and K.A. Elliott (1994). Measuring the Costs of Protection in the US. Washington, DC: IIE.


D. Irwin (1994). Managed Trade: The Case Against Import Targets. Washington, DC: American Enterprise Institute.


Foreign Affairs (1995). Competitiveness: An International Economics Reader. Council on Foreign Relations: New York. [CFR]


I.M. Destler (1995). American Trade Politics. 3rd Edition. Washington, DC: IIE.


R. Boltuck and R. Litan, eds. (1991). Down in the Dumps: Administration of the Unfair Trade Laws. Washington, DC: Brookings Institution.


G.C. Hufbauer and J. Schott (1993). NAFTA: An Assessment. Washington, DC: IIE.

Evaluation of Performance: This course is a seminar. That means active participation from all students in every class. So that you will be able to discuss the issues and the readings, every member of the seminar is responsible for having read all of the reqired material by the class in which it is to be discussed. In addition to class participation, your performance in this course will be evaluated on the basis of:


1) Three short (i.e. 3 pages) reaction papers (20 points each, 60 total points);

2) A take-home mid-term essay (40 points);

3) A final examination (100 points); and

4) A paper (100 points).

To receive an A, you must earn at least 270 points out of the total of 300 points available. To pass the course you must earn at least 120 total points. Grades between these limits will be determined on the basis of your performance relative to that of the class as a whole.

With regard to the reaction papers. In the first three weeks of the course we will review three debates on the puropses of trade policy. A reaction paper is a short paper discussing some aspect of the relevant debate. In the reaction paper you must explicitly discuss all of the readings for that topic and evaluate some aspect of their discussion. Note: “evaluate” does not mean “agree or disagree with” but, rather, means identify the source of some disagreement between authors, explain why you think the disagreement is interesting/important, and explain why (given the arguments and evidence developed in the readings) one of the positions dominates the other. The reaction papers are due in class on the date we discuss the readings, late papers will not be accepted and will earn a grade of zero.

With regard to the midterm essay. Instead of an in-class midterm examination, I will distribute an essay question dealing with the books by Destler and Nivola (the subjects of the seminar on 13 and 20 February) in class on 13 February, your essays will be due in class on 20 February, late papers will not be accepted and will earn a grade of zero. I expect the essay to be in the 5 to 7 page range and definitely not to exceed 10 pages.

With regard to the final examination. The final examination will be made up of a number of identification and short-answer questions, and an essay question that asks you to synthesize material from the part of the course immediately preceding the examination. The final examination will be given only on Monday, 29 April 1996 at 1:00 pm. Do not make travel or other plans that conflict with either date.

With regard to the paper. It is in the nature of a course of this sort that much of the material presented will be at a fairly high level of generality. Thus, in an effort to provide you with the opportunity to develop some more detailed expertise, every student will select an industry that has been actively involved in the trade policy process for detailed study. A satisfactory paper must examine the economics and politics of trade policy in the industry you choose to study. By the end of the third week of class, each student will present, in writing, the industry and specific trade policy issue(s) s/he proposes to study. This is intended to be a substantial piece of research. An A paper must express a clear, positive argument and present evidence in support of that argument in a coherent fashion. I would expect most papers to be in the 25-30 page range. I expect you to use available primary and secondary sources, and I expect you to cite the authorities you use accurately and honestly. Plagiarism will not be tolerated. The paper is due by 5:00 pm on the last regularly scheduled day of class (23 April 1996). Late papers will not be accepted and will earn a grade of zero.

A couple of useful references: Much of our discussion will have direct reference to theories and results developed by trade economists. A couple of useful references on the economics of trade are:


-Stephen Husted and Michael Melvin (1990). International Economics. New York: Harper and Row. This is an excellent introductory text on international economics. Chapters 2-8 cover the basic economics of international trade and commercial policy.


-Neil Vousden (1990). The Economics of Trade Protection. Cambridge: Cambridge University Press. This is an excellent intermediate textbook that focuses specifically on the economics of trade policy.

For those who want more detail on the legal aspects of trade regulation, the industry standard is


-John Jackson, William Davey, and Alan Sykes (1995). Legal Problems of International Economic Relations. St. Paul, Minn.: West Publishing Co.

PECN 600                       Law and Economics of International Trade                      Spring 1996


Week 1: Course Introduction


-Jackson, chapter 1

Topic I: Costs of Protection, Gains from Trade, and an International Trade Regime

Week 2: The Political Economy of Interdependence


-Jackson chapter 1


-something on the concepts of power and interdependence


-R. Rosecrance, et al. (1977). “Whither Interdependence?”. International Organization; V.31-#3, pp. 425-445.


First reaction paper due (23 January)

Week 3: International Legal Foundations of Trade Law: The WTO/GATT Regime


-Jackson, Chapters 2-3


-something on regimes


-J. Finlayson and M. Zacher (1981). "The GATT and the Regulation of Trade Barriers". International Organization; V.35-#4, pp. 561-602.


-J.M. Finger and S. Dhar (1994). "Do Rules Control Power? Gatt Articles and Arrangements in the Uruguay Round". in A. Deardorff and R. Stern, eds. Analytical and Negotiating Issues in the Global Trading System. Ann Arbor: University of Michigan Press, pp. 195-223.


Second reaction paper due

Week 4: Implementing Interdependence Norms: Liberalization and Nondiscrimination


-Jackson, Chapters 5, 6, and 8


-A.O. Krueger (1990). “Free Trade is the Best Policy”. in Lawrence/Schulze.


-A. Tonelson (1994). “Beating Back Predatory Trade”. CFR, pp. 49-61.


-G.C. Hufbauer and K.A. Elliott (1994). Measuring the Costs of Protection in the US. Washington, DC: IIE.

Week 5: Implementing Interdependence Norms: International Obligations and Dispute Resolution


-Jackson, Chapters 4 and 9


-some case study of international trade dispute resolution

Week 6: Implementing Sovereignty Norms: Escape Clause and Adjustment Assistance


-Jackson, Chapter 7


-Lawrence and Litan (1986). Saving Free Trade.

Topic II: The Domestic Politics of Trade Law

Week 7: Context of Trade Politics


-Destler, Chapters 1-3


-D. Nelson (1989). "The Domestic Political Preconditions of US Trade Policy: Liberal Structure and Protectionist Dynamics". Journal of Public Policy. (1989) V.9-#1, pp. 83-108.

Week 8: Structure and Process


-Destler, Chapters 4-8

Midterm Essay Due (20 February)

Topic III: Implementing Trade Law

Subtopic A: Unfair Trade and Aggressive Unilateralism

Week 9: Industrial Policy and Promotion of Competitiveness


-L. D’A. Tyson (1990). “Managed Trade: Making the Best of Second Best”. in Lawrence/Schulze.


-P. Krugman (1994). “Competitiveness: A Dangerous Obsession”. in Competitiveness. [Also read comments on Krugman’s argument and Krugman’s response]. CFR, pp. 1-36.


-P. Krugman (1994). “The Myth of Asia’s Miracle”. CFR, pp. 63-79.


Third reaction paper due (6 February)

Week 10: Unfair Trade Practices and VIE Agreements


-R. Dornbusch (1990). “Policy Options for Freer Trade: The Case for Bilateralism”. in Lawrence/Schulze.


-R. Altman (1994). “Why Pressure Tokyo”. CFR, pp. 37-41.


-J. Bhagwati (1994). “Samurai’s No More”. CFR, pp. 43-48.


-D. Irwin (1994). Managed Trade: The Case Against Import Targets. Washington, DC: American Enterprise Institute.


Fourth reaction paper due (30 January)

Week 11:

The Law and Economics of 301 and Super 301


-J.H. Bello and A. Holmer (1988). "The Heart of the 1988 Trade Act: A Legislative History of the Ammendments to Section 301". Stanford Journal of International Law. V.25-#1, pp. 1-44.


-A. Sykes (1990). "`Mandatory` Retaliation for Breach of Trade Agreements: Some Thoughts on the Strategic Design of Section 301". Boston University International Law Journal; V.8-#2, pp. 301-324.


-T. Bayard and K. Elliott (1992). "`Aggressive Unilateralism` and Section 301: Market Opening or Market Closing?". World Economy; V.15-#6, pp. 685-706.


-J. Odell (1992). "International Threats and Internal Politics: Brazil, the EC and the US, 1985-1987". in P. Evans, H. Jacobson and R. Putnam, eds. International Bargaining and Domestic Politics. Berkeley: University of California Press.

Subtopic B: Title VII and Trade at Less than Fair Value

Week 12: The Basic Economics of Dumping and Subsidies


-Jackson, Chapter 11


-R. Boltuck (1987). "An Economic Analysis of Dumping". Journal of World Trade Law; V.21-#?, pp. 45-54.


-J. Eaton (1986). "Credit Policy and International Competition". in P. Krugman, ed. Strategic Trade Policy and the New International Economic. Cambridge: MIT, pp. 115-145.


-H. Flesig and C. Hill (1984). "The Benefits and Costs of Official Export Credit Programs". in R. Baldwin and A. Krueger, eds. The Structure and Evolution of Recent US Trade Policy. Chicago: University of Chicago Press/NBER, pp. 321-355.


-G. Yarrow (1987). "Economic Aspects of Antidumping Policies". Oxford Review of Economic Policy; V.3-#?, pp.


-J. Francois (1992). "Countervailing the Effects of Subsidies: An Economic Analysis". Journal of World Trade; V.26-#1, pp. 5-13.

Week 13: Title VII and Trade at Less than Fair Value: Main Legal Aspects


-Jackson, Chapter 10 and 11


-R. Boltuck and R. Litan (1991). “America’s Unfair Trade Laws”. in Boluck and Litan, pp. 1-22.


-N.D. Palmeter (1991). “The Antidumping Law: A Legal and Administrative Trade Barrier”. in Boltuck and Litan, pp. 64-94.


-R. Cass and S. Narkin (1991). “Antidumping and Countervailing Law: The US and the GATT”. in Boltuck and Litan, pp. 200-252.


-P. Messerlin and G. Reed (1995). “Antidumping Policies in the US and the EC”. EJ; V.105-#433, pp. 1565-1575.

Week 14: Title VII and Trade at Less than Fair Value: The DoC and Sales at LTFV


-T. Murray (1991). “The Administration of Antidumping Duty Law by the Department of Commerce”. in Boltuck and Litan, pp. 23-63.


-J. Francois, N.D. Palmeter, and J. Anspacher (1991). “Conceptual and Procedural Biases in the Administration of the Countervailing Duty Law”. in Boltuck and Litan, pp. 95-151.


-R. Boltuck, J. Francois, and S. Kaplan (1991). “The Economic Implications of the Administration of US Unfair Trade Law”. in Boltuck and Litan, pp. 152-199.

Week 15: Title VII and Trade at Less than Fair Value: The ITC and Injury to Domestic Industry


-M. Morkre and H. Kruth (1989). "Determining Whether Dumped Or Subsidized Imports Injure Domestic Industries: The ITC Approach". Contemporary Policy Issues; V.7-#3, pp. 78-95.


-N.D. Palmeter (1987). "Injury Determinations in Anti-Dumping and Countervailing Duty Cases--A Commentary on US Practice". Journal of World Trade Law; V.21-#1, pp. 7-45.

Week 16: Title VII and Trade at Less than Fair Value: Political Aspects


-R. Baldwin and M. Moore (1991). “Political Aspects of the Administration of Trade Remedy Law”. in Boltuck and Litan, pp. 253-287.


-R. Baldwin and J. Steagall (1991). "An Analysis of Factors Influencing ITC Decisions in Antidumping, Countervailing Duty and Safeguards Cases". WA; V.130-#2, pp. 290-307.


-Ben Wildavsky (1995). “Cracking Up”. National Journal, 28 October, pp. 2636-2640.


-P.K.M. Tharakan and J. Waelbroeck (1994). "Antidumping and Countervailing Duty Decisions in the EC and in the US: An Experiment in Comparative Political Economy". EER; V.38-#1, pp. 171-193.

Week 17: Antitrust and Trade Policy


-K. Elzinga (1987). "Antitrust Policy and Trade Policy: An Economist's Perspective". Antitrust Law Journal;


-J. Davidow (1991). "The Relationship between Anti-Trust Laws and Trade Laws in the US". World Economy; V.14-#1, pp. 37-52.


-R. Boltuck and S. Kaplan (1993). "Conflicting Entitlements: Can Antidumping and Antitrust Regulation be Reconociled". University of Cincinnati Law Review; V.61-#?, pp. 903-917.

Subtopic C: Other Issues in the Implementation of Trade Law

Week 18: Customs Valuation

Week 19: Government Procurement

Topic IV: International Investment and Trade Law

Week 20: Content Protection

Week 21: Export Performance Requirements

Week 22: Rules of Origin

Week 23: Off-shore Assembly Provision

Topic V: The Law and Economics of Free Trade Agreements


G.C. Hufbauer and J. Schott (1993). NAFTA: An Assessment. Washington, DC: IIE.