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Goodluck

Thanks Utazi

can refer to

International Trade Theory and Policy

Authors: Gandolfo, Giancarlo

I made a quick review on Dunn and Mutti's International Economics that Okechukwu Utazicited above.  Indeed it is a good textbook if you want to get a general view on how international economics is taught in introductory undergraduate course in the majority of economics departments. It covers almost all topics which are taken up in introductory international economics.

 As the authors put it, "the classical framework assumed differences in productivity across countries caused differences in costs internationally and created the basis for trade" (p.15) and explains first ideas in chapter 2. This is the very basis to think on north-south problems and economic development. However, the authors hurry to change the topic and explain that trade is possible even between the same productivity countries. In this way, the authors divert the most important topic that is the difference of productivity among nations.

The first "classical framework" is Ricardian trade theory whereas the latter is Heckscher-Ohlin trade theory (HO theory). One of the main consequences of HO theory is the factor-price equalization theorem, which claims that factor prices (including wage rates) are the same between trading countries provided that the standard assumption of HO theory is satisfied. Can you believe that a theory that claims that wages are the same across countries? Authors admit that the "ratio of the UK to the Sri Lankan wage rate of about 30:1" (p.7) How can they reconcile this fact and the HO theory?

What is worse for professional researchers as Sayed Irshad Hussain in a country where the economic development is the paramount subject of all economic researches is that it lacks information about the state of the art of international economics. As the book was published in 2004 it is inevitable that it lacks information on the so called "new new trade theory" of Melitz. Melitz's first paper appeared in 2003. However, the authors do not tell anything about recent remarkable phenomena such as fragmentation, offshoring, trade in input goods, trade in value added, or global value chain. The word "development policy" appears only once among more than 500 page book in an explanation of “import substitution” in the glossary (p.502).

Today Ricardian trade theory is experiencing a rapid and amazing progress. It can now treat trades of intermediate goods in a general many-country, many-commodity framework. If you want to use international economics for your research, it is necessary that you follow this new progress. As a first step please read my working paper: The New Theory of International Values: An Overview

https://www.researchgate.net/publication/304717720_The_New_Theory_of_International_Values_An_Overview

It is published as a chapter of a book but he can know the idea what the new theory of international values is.

Working Paper The New Theory of International Values: An Overview

International Trade: Theory and Policy by Paul Krugman

here is the link for the 6th edition

http://course.sdu.edu.cn/G2S/eWebEditor/uploadfile/20120417191243_590081573385.pdf

But try to get the latest edition (10th edition)  

In addition I recommend my article in Development and Change, titled“International Trade Theory and Policy: What Is Left of the

Free Trade Paradigm?” Development and Change 36(6) (November 2005): 1011–29.

You can access a copy in Levy Economics Institute Working Paper no 635

The 6th of Krugman and Obstfeld's International Economics was published in 2003. I have checked how various topics were treated in the beginning of the 21 century.

Just like Dunn and Mutti's International Economics, Krugman (the practical author of Parts 1 and 2) does not mention on input trade, fragmentation, or global value chain. “Intermediate goods” appears 3 times but there are no theoretical mentions. Import-substitution is mentioned 8 times and export-oriented (industrialization, etc.) 4 times.

With these examinations, we have to say that topics treated in that time are still very old fashioned and that Krugman is observing international trade as exchange of finished goods.

As for empirical relevance, two following comments are important:

"[I]s the model a good fit to the real world? Does the Ricardian model make accurate predictions about actual international trade flows?

The answer is a heavily qualified yes. ...

In spite of these failings, however, the basic prediction of the Ricardian model—that countries should tend to export those goods in which their productivity is relatively high—has been strongly confirmed by a number of studies over the years." (Chap. 3, pp.31-32)

"The mixed results of tests of the factor-proportions theory place international economists in a difficult position. We saw in Chapter 2 that empirical evidence broadly supports the Ricardian model's prediction that countries will export goods in which their labor is especially productive. Most international economists, however, regard the Ricardian model as too limited to serve as their basic model of international trade. By contrast, the Heckscher-Ohlin model has long occupied a central place in trade theory, because it allows a simultaneous treatment of issues of income distribution and the pattern of trade. So the model that predicts trade best is too limiting for other purposes, while there is by now strong evidence against the pure Heckscher-Ohlin model." (Chap.4, p.85)

This estimate is retained in the 8th edition (of which I have the Japanese edition.). I do not know how this point is treated in the 10th edition. Even he had noticed the trouble with HO models, Krugman presents in Chapter 5 The Standard Trade Model.

"In spite of the differences in their details, our models share a number of features:

Are these assumptions good starting assumptions? Not at all, in my opinion. A point on the production possibility frontier of a country means that the country is in a state of full employment. A simple consequence of this formulation is that the standard trade model excludes by definition the state of unemployment in the arguments. Unemployment occurs only as a result of distorted prices (e.g. by the resistance of trade unions). Introduction of input trade requires a total reformulation of the model.

It seems to me quite evident that we should change our fundamental framework. The first step is to abandon the standard trade theory.

Respected Shiozawa

thanks for valuable information. that is work in my research work.

thanks and best regards

Sayed Irshad Hussain

Good greeting.

The following books may be helpful for you -

1) International Economics, Trade and Finance by - Dominick Salvatore.

2) International Trade, Theory and Policy by - Paul Krugman.

3) International Economics by - Robert Carbaugh.

4) International Economics by - Bo Sodersten.

5) International Economics: Global markets and International Competition by - Henry Thompson.

Good Luck.

Dear Karobi Borah,

can you check how the recent topics like input trade (trade in intermediates goods), global value chains, value added trade are treated? 

Sure mam. My pleasure.

Dear Yoshinori Shiozawa mam,

The trade in value added and Global Value Chains (GVCs) statistical profiles provide insight on the actual contribution of foreign trade to an economy, the interconnection of national economies within global value chains and the impact of the services industry on trade. Other GVC related topics such as trade in intermediates, trade facilitation or foreign direct investment are also covered.

The estimation of trade in value added terms leads to the decomposition of gross exports into their domestic and foreign value added contents.

The GVC participation index is composed of two components reflecting the upstream and downstream links in the chain. Individual economies participate in global value chains by importing foreign inputs to produce the goods and services they export and also by exporting domestically produced inputs to partners in charge of downstream production stages.

Best regards.

Dear Karobi,

thank you for your quick survey. Perhaps my question was ambiguous. I wanted to know how the concepts like trade in intermediate goods, global value chain and trade in value added are treated in the textbooks you have quoted in your post #9.  

Yoshinori

Mam, I haven't gone through on  these topics in those particular books. Therefore I feel sorry if I went wrong in answering your question.

Thank you.

Advanced International Trade: Theory and Evidence by Feenstra, R.C., published by Princeton University Press

International Economics: Theory and Policy, 10th Edition ... the author team of Nobel Prize-winning economist Paul Krugman, renowned researcher Maurice  Obstfeld, University of California, Berkeley Marc Melitz, Harvard University

Let me add a few comments on tow books that Matha Pantoja listed.

(1) Fenstra's Advance International Trade (2004)

This is a textbook which is to be used in graduate courses. This book includes a chapter: Chap.4 Trade in Intermediate Inputs and Wage.

In spite of the title, the main topic is in wages and trade in intermediary inputs is treated only a topic among three possible approaches that may explain the stagnation of the wage of low skilled workers. Intermediate inputs are incorporated into  a traditional HOS model assuming a prefixed pattern of division of labor. In this sense, this book does not present a theory by which to analyze commodity chains in a general form. (The word "commodity chains" appears in the conclusion [p.133] but is not listed in the Index. )

(2) International Economics: Theory and Policy, 10th Edition

This is a new edition of older editions written by Krugman and Obstfeld. In the 10th edition, a new writer is added.  Marc Melitz is the initiator of "new new trade theory" and represents a new trend after Melitz (2003). However, The new new trade theory does not cover the commodity and value chains which emerged and are developing since  1990's.

See for example

Tilman Alenburg 2014 Governance Patterns in Value Chains and their

Development Impact. The European Journal of Development Research 18(4): 498-521.

https://www.researchgate.net/profile/Tilman_Altenburg/publication/247478012_Governance_Patterns_in_Value_Chains_and_their_Development_Impact

WTO 2017 Global Value Chains Development Report 2017.

See in paricular Chapter 1 Analytical framwork for global value chanis; an overview

https://www.wto.org/english/res_e/booksp_e/gvcs_report_2017_chapter1.pdf

Article Governance Patterns in Value Chains and their Development Impact

Re Pr. Shiozawa's suggestion, there is a recent book freely availble on trade, GVC and development policy:

“Global Value Chain Development Report 2017: Measuring and Analyzing the Impact of GVCs on Economic Development” co-produced by IDE-JETRO, OECD, World Bank, WTO, and UIBE.

Chapter 1 provides a review of the theoretical aspects.

Other chapters are on the empirical/positive side, investing various aspects of the question, from the recent evolution of GVCs from a global or regional (Africa, Latin America) perspective to institutional environment or the role of trade costs. 

The link :

https://www.wto.org/english/res_e/publications_e/gvcd_report_17_e.htm

Best,

Hubert

Amazon.co.jp： The Law and Policy of the World Trade Organization: Text, Cases and Materials: Professor Peter Van den Bossche, Werner Zdouc:

https://www.amazon.co.jp/Law-Policy-World-Trade-Organization/dp/1107694299

Essentials of WTO Law, Professor Peter Van den Bossche, Denise Prévost 

https://www.amazon.co.jp/Essentials-WTO-Professor-Peter-Bossche/dp/1107638933

International Trade and International Finance, Explorations of Contemporary Issues, Editors: Roy, Malabika, Sinha Roy, Saikat (Eds).

I endorse Hubert Escaith's recommendation. The chapter 1 of WTO's Global Value Chain Development Report 2017 is the best available introduction to the present state of trade theory and tasks to be challenged. As this is obtainable at free cost, I hope as many students in trade theory as possible (and including specialists) will read this introduction. The author concludes that a new new new theory of trade is needed.

  https://www.wto.org/english/res_e/booksp_e/gvcs_report_2017_chapter1.pdf

One of the best text books of international trade for UG level is " World Trade and Payments; An introduction" written by Caves, Frankel and Jones.

For Graduate level, besides : Handbooks of International Economics, You would also like the book " International Trade and Economic Development" authored by Rajat Achharya and Saibal Kar; OUP

As Mausumi Kar suggested Handbooks of International Economics for graduate students, I have checked it. This is a voluminous book with 2010 pages for first three volumes and extra 750 pages for volume 4. This may be a good reference book to know what are known until around 2010. However, it is important for graduate students to know that this voluminous book does not teach what are lacking as topics and theories.

For example, these more than 2080 pages do not contain a topic on global value chains (GVCs) or global supply chains (GSCs). It needs a general theory on how input trade is organized, but there were no such theory and the handbooks do not mention it. In view of rapidly growing importance of input trade and GVCs and GSCs, this is a great defect. Let me also note that a new theory that covers this question is now available in the name of the new theory of international values.

International Trade and Economic Development by Rajat Achharya and Saibal Kar seems very interesting and must be a good introduction to the history in thoughts of international trade theory and policy in relations to economic development. I have bought a copy from Amazon.

International Trade and Economic Development

Rajat Acharyya and Saibal Kar

• A complete and comprehensive textbook for courses in trade and development
• Covers trade and the labour market, trade and public economics, the theory of the second best, foreign aid, factor mobility, regional and global welfare, labour standards, the informal labour market, and TRIPS
• Includes cutting edge research in major areas of international trade and economic development
• Balanced mix of models and discussions
• Emphasis on new insights and the political economy of trade