Chapter 1International Economics Is DifferentI.Teaching Objectives:The objective of this unit is to show that international economics addresses important and interesting current events and issues, show why international economics is special, and provide a broad overview of the textbook.II. Teaching Focus1.The importance of international economics2. The most important policies that each country can manipulate separatelyIII. Time Allocation1. Lead-in 10 MIN2. Study the event Steel 30 MIN3. Study the event Poor Workers in Poor Countries 20 MIN4. Study Economics and the Nation-state 30 MIN5. Discussion 10 MINIV. Teaching proceduresWe begin with two sets of events that show the importance of current issues addressed by international economics. The first is the imposition by President Bush in early 2002 of tariffs of up to 30 percent on imports of steel into the United States. Here we introduce the ability of a national government to respond to domestic political pressures by raising barriers to international transactions. In this case pressure by steel firms and steel workers led to new protection. Firms that use steel in the United States knew that they would be hurt by these new tariffs, but their economic case that their industries would suffer more harm than the steel industry would get in benefits failed to win the political fight. We also introduce the role of the World Trade Organization (WTO) as a global arbiter. The governments of foreign countries whose firms lost export sales to the U.S. buyers filed complaints with the WTO that the U.S. government had violated the accepted international rules when it imposed the new steel tariffs.The second is the ongoing protests against low pay and poor working conditions in developing countries, including the protests at the Seattle meeting of the World Trade Organization in 1999. Here we introduce the huge differences in economic conditions across countries, with a focus on child labor. One observation is that international trade, and globalization more generally, are not the causes of the huge gaps in incomes. Poverty is most dire in places that have been little touched by globalization. Another observation is that trade sanctions or other restrictions on international trade or international transactions more generally are not likely to help the poor workers in poor countries. Such restrictions would reduce their economic opportunities and make them even poorer. Instead, more international trade can be part of the solution. Countries (or regions like coastal China) that are more open to international trade tend to grow faster. More broadly, workers in poor countries also need education and better health to raise their productivity and incomes. Protesting about trade and globalization is wrong-headed if the concern is really about raising the incomes of the worlds very poor people.These two sets of events show that international economics addresses important current issues. They also can be used to show why international economics is specialwhy national boundaries matter in economics. The first reason that international economics is special is that national government policies matterin fact, they matter in two ways. One way is that national governments adopt policies toward international transactions. This is seen clearly in the discussion of steel. The other way is that national governments adopt different macroeconomic policies. These national policies usually are designed to serve national interests, but they often have international effects. The tension between national interests and international effects is raised in the discussion of Argentinas crisis and its inability to tighten the government budget. Tension is also seen in the controversy over ceding national monetary authority to the European Central Bank in the monetary union.The second reason that international economics is special is that some resources do not move freely between countries. Land is essentially immobile. There are substantial impediments to the movement of labor internationally, because the personal and economic costs to people of moving from one country to another can be substantial, and because government policies often restrict international movements of labor. Most poor people in poor countries cannot improve their lot just by moving to developed countries. Financial capital moves more freely, but, as the discussion of Argentinas crisis shows, international capital movements can sometimes be disruptive.Chapter 2The Basic Theory Using Demand and SupplyI.Teaching Objectives:The objective of this unit is to indicate why we study theories of international trade and present the basic theory using supply and demand curves