IER 207 – Theory of Foreign Trade
IER 207 – Theory of Foreign Trade; Weekly hours: 2+1, ECTS: 6
Foreign trade theory provides explanations for the pattern of foreign trade and the distribution of the gains from trade. The theory convinces most economists of the benefits of liberal trade. But many non-economists oppose liberal trade. Opponents include some who may have encountered trade theory but nevertheless fall prey to fallacious reasoning. This course attempts to convey why trade theory is so persuasive to economists and also to deal with why many non-economists are not persuaded. In this course, we examine the development of trade theory from the seventeenth century through the first part of the twentieth century. This historical approach is useful not because we are interested in the history of economic thought as such but because it is a convenient way of introducing the concepts and theories of international trade from the simple to the more complex and realistic. This course will help the students understand: Mercantilists’ and Adam Smith’s Views on Trade, Trade Based on Comparative Advantage and Opportunity Costs, The Basis for the Gains from Trade under Constant Costs, The Production Frontier with Increasing Costs and Community Indifference Curves, Equilibrium in Isolation and the Basis for and the Gains from Trade with Increasing Costs, The Equilibrium-Relative Commodity Price with Trade-Partial and General Equilibrium and Relationship between Partial and General Equilibrium, Offer Curves and the Terms of Trade, Factor Endowments Theory, Heckscher-Ohlin Theory, Economies of Scale and International Trade, Imperfect Competition, and International Trade, Economic Growth, International Trade.