Econ 3HH3: International Trade

Course presentation
Lecture 1: Trade in the Global Economy

>>>> Starting from next class, we will open each lecture with a
breaking news related to international trade.

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All PowerPoints should be used for this course only and MUST not be shared online or outside of this course
✓Course presentation
• Students’ expectations and Professor’s background;
• Course objectives;
• Detailed course outline;
• Tips to maximize your grade;
• Your questions are welcome.

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What do you expect from this course?

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Professor’s background
Name: Dr. Ado, Abdoulkadre

✓PhD in International Business. Laval University, Canada.

▪ Vanier Scholar (Most prestigious doctoral distinction by Federal Government of Canada)
✓Award of $150,000 cash
▪ Best doctor award from Alma mater

✓MBA, International Strategy. Wuhan University of Tech., China.

✓Bachelor in Economics/Management. University Sidi M. B. Abdellah, Morocco.

✓Diploma in Mathematics. Lycée d’Excellence de Niamey, Niger.

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Professional experience
✓Professor of International Trade, McMaster University (Hamilton)
✓Professor of Global Management, Ryerson University (Toronto)
✓Professor of International Business, University of Ottawa (Ottawa)
✓Professor of International Management, Laval University (Quebec City)

✓Researcher/consultant at Stephen-A.-Jarislowsky Chair in IB

✓Scholar, Office of UN special adviser, UN Headquarters, New York
✓Additional work experience:
▪ Pannel Kerr Forster, Consulting firm (PKF)
▪ Ministry of Justice
▪ International Bank for Africa

✓Spoke at many institutions/events including at Harvard University, LSE

✓Expertise: Global business management, focus on emerging countries
✓Been to 41 countries, all continents
>>>>>>>>>>>>>>>>>>For more details, add me on LinkedIn.
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Course Learning Objectives
1. Learn the basis, consequences, and policies of international trade
2. Understand major theories applied to international trade
3. Understand the role of multilateral institutions of trade
4. Identify the advantages and disadvantages of trade
5. Determine the importance of trade for the Canadian economy

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Methods Used to Evaluate Performance

Assignment 1 (due May 15th) 10% 10%

Assignment 2 (due June 5th) 10% 10%
Midterm (on Chap. 1, 2, 3, 4 & 5), on May 17 30% 0%
Exam (Cumulative), on June 14 50% 80%

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 Timetable
Week DATE TOPIC Readings
1 05/1 Trade in the Global Economy Ch 1
1 05/3 Trade and Technology: The Ricardian Model Ch 2
2 05/8 Gains and Losses from Trade in the Specific-Factors Model Ch 3
2 05/10 Trade and Resources: The Heckscher-Ohlin Model Ch 4
3 05/15 Movement of Labor and Capital Between Countries - Assignment 1 is due Ch 5
3 05/17 Midterm
4 05/22 Increasing Returns to Scale and Monopolistic Competition Ch 6
4 05/24 Increasing Returns to Scale and Monopolistic Competition Ch 6
5 05/29 Offshoring of Goods and Services Ch 7
5 05/31 Import Tariffs and Quotas Under Perfect Competition Ch 8
6 06/5 Import Tariffs and Quotas Under Imperfect Competition - Assignment 2 is due Ch 9
6 06/7 Export Subsidies in Resource-Based and High-Technology Industries Ch 10
7 06/12 International Agreements: Trade, Labor, and the Environment Ch 11
7 06/14 Final Exam Cumulative

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 Although key points of this course will be
Course resources covered following the economic perspective
presented in this book, our main approach to its
content will follow a business perspective.

Recommended book - International Trade by Robert C. Feenstra & Alan M. Taylor, 4th Ed.
Additional resources:
1. Dr. Carl A. Nelson, (2009), Import / Export, 4th ed., McGraw-Hill Publishing, Toronto.
2. Seyoum Belay, (2014), Export-import theory, practice, and procedures, 3rd E. NY: Routledge.
3. Charles & Thomas Mckaig (2015). Global Business Today (4th Canadian Edition), McGraw-Hill.
4. Thomas J & D. L. Bade, (2010). Export/import procedures and documentation, NY AMACOM.
5. Maurice Archer, (2000). Canadian Exporting, 4th ed., Maurice Archer Books, Oakville.
6. P.T. Malkovsky, (1998). The Basics of Import/Export, Dryden Publishing.

Key trade data sources

https://www.wto.org/
https://comtrade.un.org/
https://www.statcan.gc.ca/eng/trade/data
http://unctad.org/en/Pages/Home.aspx
http://www.worldbank.org/
http://www.imf.org/external/index.htm
http://www.dfait-maeci.gc.ca/commerce/index.aspx?lang=eng
http://www.jibs.net/
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http://www.edc.ca/EN/Pages/default.aspx
 Tips to optimize your performance:

-Course Attendance!
-Personal reading and research!
-Follow the guidelines!
-ACMO principle…

For more details, read course outline and check ATL.

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Contact information

Professor: Abdoulkadre Ado, Ph.D.

Office: Kenneth Taylor Hall, Room 436
Office hours (by appointment)
Tuesdays: 12:45pm to 1:50pm
Thursdays: 12:45pm to 1:50pm
E-mail: abdoulka@mcmaster.ca

Teaching assistant: Saeed-ur-rehman Rana (Ph.D. student)

ranas3@mcmaster.ca; Office (KTH 436)
His proposed time: Tuesdays, 5 to 8pm or Thursdays, 5 to 8pm?

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 Teaching Approach

We will combine various means to achieve our course objectives.

We remember:
 10% of what we read
 20% of what we hear
 30% of what we see
 50% of what we see and hear
 70% of what we discuss with others
 80% of what we experience
 95% of what we teach each other

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Lecture 1: Trade in the Global Economy:
➢ Preview and theories of international trade
➢ Nature and trends of global trade

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Today’s Learning Objectives:
1.1 Give a brief description of trade history.
1.2 Introduce major categories of trade theories.
1.3 Describe the trend of international trade.
1.4 Understand the systemic nature of global trade.

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 Classical Trade Theories
Focused on mercantilism, absolute advantage, and comparative advantage

•Brief recall: Trade started since 2500 BC, boosted in the

15th century, and global paths emerged in the 20th century.

•Theory of Mercantilism: The wealth of the world

(measured in gold and silver) was fixed; nation that
exported more and imported less would enjoy net inflows
of gold/silver and is thus richer.

•Protectionism: Governments actively protecting

domestic industries from imports and vigorously
promoting exports.
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Free Trade Theory
Free market forces should determine how much to
trade with little (or no) government intervention

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 Key notions
➢Export – Import: Selling to, or buying from, a foreign nation
➢International trade: Movement of goods/services across borders
➢Trade balance: Country’s total exports minus its total imports
➢Trade surplus: Positive trade balance
➢Trade deficit: Negative trade balance
➢Bilateral trade balance: Country’s trade balance vis-à-vis another country
➢Import tariff: Impose a tax on imported goods into a nation
➢Import quota: Put a limit to the amount of imported goods into a nation
➢FDI: Flow of capital between countries
➢GDP: Value of all final goods produced in a year

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Role of Location in International Trade
• Different countries have particular advantages
in different productive activities

• It makes sense for a firm to disperse its

productive activities to those countries where,
according to the theory of international trade,
they can be performed most efficiently

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 Apple’s use of theories of international trade

▪ iPhone production
cost: $227

▪ iPhone is mostly
exported from
China

▪ China contributes
only $8 to that cost

Value creation is when an organization’s operations

add value to the original cost of resource inputs.
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https://www.wto.org/english/res_e/statis_e/wts2017_e/wts2017_e.pdf
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https://www.wto.org/english/res_e/statis_e/wts2017_e/wts2017_e.pdf
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Benefits of Trade
The gains of trade arise because international trade
allows a country to specialize in the manufacture and
export of products that can be produced most
efficiently in that country, while importing products
that can be produced more efficiently in other
countries.

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Systemic Risks Inherent to Global Trade
What is global
country-risk?

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Source: WEF
 Merchandise export trend: Trade among developing
economies increased from 41% to 52% of global trade in 10 years.

What does this https://www.wto.org/en

mean for export glish/res_e/statis_e/wts
2016_e/wts2016_e.pdf
business?

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Economies by size of merchandise trade, 2016

https://www.wto.org/en
glish/res_e/statis_e/wts
2017_e/wts2017_e.pdf

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Modern Trade Theories

•Strategic Trade Theory: Strategic intervention by

governments in certain industries to enhance their odds for
international success through government subsidies

•First-Mover Advantages: Advantages that first entrants

enjoy and do not share with late entrants

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First-mover Implications for International Trade
• Firms that establish a first-mover
advantage with regard to the production of
a particular new product may subsequently
dominate global trade in that product

• It pays to invest huge financial resources

in trying to build a first-mover, or early-
mover, advantage, even if that means
several years of substantial losses before a
new venture becomes very profitable

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Policy Implications for Businesses
• Theories of international trade also matter to
international businesses because firms are major
players on the international trade scene.

Because of their pivotal role in international

trade, businesses can influence government
trade policy, lobbying to promote free trade or
trade restrictions

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Example of exam questions

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 See you next lecture !
Merci!
Thanks

‫شكرا‬
谢谢大家!

Nagodé

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