Lecture 9: Politics of Trade - Current Debates

Lecture 9: Politics of Trade - Current Debates • Benjamin Graham • Lecture 10: Trade and Development Benjamin Graham

Today’s Plan • Housekeeping • Reading quiz • Tariffs vs. Quotas vs. Subsidies vs. Dumping • Understanding public opinion • Group exercise • Lecture 10: Trade and Development Benjamin Graham

Housekeeping • Homework 2 is due now • Midterm is next Tuesday (October 2) • Midterm study guide is posted • I will remove a few of the trade and development questions and repost tonight • Lecture 10: Trade and Development Benjamin Graham

Reading Quiz (1) Which important country was not part of the TPP negotiations? • China • Japan • Mexico • Canada • China, Mexico, and Canada were all excluded • IR 213: Introduction Benjamin Graham

Reading Quiz (2) • Trade Adjustment Assistance: • A. Less generous than traditional unemployment • B. Only lasts for 8 weeks • C. Is the “Cadillac of retraining programs” • Lecture 6: Barriers to Trade Benjamin Graham

Reading Quiz (3) What type of benefits are included in Trade Adjustment Assistance? • A. Cover your moving costs to go take a new job • B. Pay for you to go back to school in selected fields • C. Both A & B • Lecture 6: Barriers to Trade Benjamin Graham

The Midterm Exam • Key Terms, Short Answer, Mini-Essay • Key terms: • Definition: 1 sentence. • Relevance: 1-3 sentences • Example: 1-3 sentences • Short Answer: 1 sentence is all it takes, sometimes just 1 word. • Mini-Essay: 3-6 Sentences. • There will be multiple points we’re looking for • Lecture 11: Midterm Review Benjamin Graham

How Tariffs and Quotas Work (review) • Lecture 7: Domestic Politics of Trade Benjamin Graham

How Subsidies work (review) • Lecture 7: Domestic Politics of Trade Benjamin Graham

How Dumping Works • Lecture 7: Domestic Politics of Trade Benjamin Graham

Checking Understanding • If Chinese producers dump cheap car axels into the U.S. market, which groups are harmed? • A. U.S. axel makers • B. U.S. car makers • C. U.S. car buyers (consumers) • D. U.S. taxpayers • E. C & D • F. A & B • Lecture 6: Barriers to Trade Benjamin Graham

Let’s Talk A Bit About the Readings • What is your main takeaway from the Retraining Day episode? • What do you think of the U.S. decision to pull out of the TPP? • What is one way the TPP would have been good for the U.S.? • What is one way it would have been bad?

Global Opinion on Trade • According to a report from the Pew Research Center (pre-2016 election cycle), 66% of people in developing countries say increased trade leads to local job creation and 55% say it increases their wages. Only 20% of Americans say trade creates more jobs at home, and 17% say it leads to bigger paychecks. What could explain this? • A. Poor people are more optimistic responding to surveys • B. Governments in developing countries mislead the public • C. Trade has different effects on employment in poor countries and rich countries • Lecture 7: Domestic Politics of Trade Benjamin Graham

Global Opinion on Trade • “Similarly, most people in Uganda (79%), Bangladesh (78%) and Lebanon (77%) say trade increases their wages. Even people in some larger economies such as China (61%) see global trade as a way to increase wages.” Why do I consider the phrase “even people in some larger economies…” to be poor journalism? • A. The size of the economy isn’t what’s relevant here • B. China has a large population but is not a large economy • C. China shouldn’t be used as a proxy for all large, developing economies • Lecture 7: Domestic Politics of Trade Benjamin Graham

Global Opinion on Trade • “The poll found that most people around the world (81%) agree when asked if growing trade and business ties with other countries is good for their nation. Even 68% of Americans support that general idea.” Is it consistent for Americans to believe that trade costs jobs but is good for their nation? • A. Yes • B. No • Why? • Lecture 7: Domestic Politics of Trade Benjamin Graham

The Great Depression vs. the Great Recession • The great depression caused (and was made worse by) a tariff war. • During the global financial crisis, trade barriers increased slightly, but not much. • Why the difference? • Lecture 7: Domestic Politics of Trade Benjamin Graham

Some big think • In groups, please write down at least one benefit and at least one cost of each of the following strategies. In each case, identify who is harmed (for the cost) and who is benefitted (for the benefit) • Total trade openness • Subsidizing/protecting key industries • Big government safety net • Lecture 7: Domestic Politics of Trade Benjamin Graham

Colonial Legacies • Many of todays poor countries are former colonies • But not all former colonies are poor • It matters who you were colonized by and how you were colonized • Economic institutions • Political institutions • Infrastructure • Human capital • Lecture 7: Domestic Politics of Trade Benjamin Graham

The Colonial Archetype • Colonial government: • Low investment in infrastructure or human capital • Produce raw materials (mining, agriculture) • Trade exclusively with colonial metropole on unfavorable terms (mercantilism) • Lecture 7: Domestic Politics of Trade Benjamin Graham

Legacies of Colonialism • Colonies were governed better where the colonists actually resided themselves • Less malaria -> less colonists dying -> more colonists staying • US, Canada, Australia (genocide) and South Africa (Apartheid) • Colonists continued to rule after colonial ties ended. • Lecture 7: Domestic Politics of Trade Benjamin Graham

If nothing else, hope that you were colonized by the Brits • The Brits hired locals into their civil service • Developed local capacity & human capital • When they left, this civil service persisted • India is a prominent example: • Hundreds of languages, 30 of which have at least 1 million speakers, several major religions, huge regional economic imbalances • Picture ruling all the Americas as a single country -- only harder • Also, the common-law system and English • Lecture 7: Domestic Politics of Trade Benjamin Graham

Better or worse colonizers The core questions: • Was there investment investment in education and infrastructure? • Were there efficient courts, rule of law, etc? • Did the protection of these courts extend to locals, or just colonizers? • Did these institutions survive when the colonizers exited? • Lecture 7: Domestic Politics of Trade Benjamin Graham

Lecture 9: Politics of Trade - Current Debates