Seminar In International Political Economy
POL 480

Dr. Louis L. Ortmayer

Policy Choices in the International Economy:
Efficiency, Equity, and Value Tradeoffs

"No economic system can maximize all social values simultaneously."

Scope and Purpose of the Seminar

The seminar intends to explore some of the implications for political and economic analysis, as well as for the foreign economic policies of states, of a dominant fact of the international political economy since the end of World War II: the growing interdependence among nations. Improvements in transportation, communications and movement of goods along with rapid industrialization, the internationalization of production and banking, and reductions in national barriers to international transactions have together contributed to the rapid revival of trade and investment from the havoc wrought first by world wide depression and then by world war.

Interdependence owes much to the increasing openness of countries spurred by the growth and dynamics of international economic exchange in the past three decades.

INTERDEPENDENCE, however, is ambiguous. While it has served to create the conditions for unprecedented wealth for many participants, and contributed to overall world prosperity, at the same time it has occasioned the rise of critical political problems. Put directly, international interdependence has grown more rapidly than the policies and mechanisms designed for its management.

INTERDEPENDENCE is essentially a matter of lic interaction: of the extent to which developments in one country affect the economies of others, stimulating responses that in turn have feedback effects on the economy and policies of the original country. Coinciding with the growth of economic openness internationally, nevertheless, has been an equally important factor--the very significant rise in the degree of government intervention in, and responsibility for, the domestic economy of the modem nation-state. The governments of virtually all of the industrialized democracies have taken upon themselves, or had thrust upon them by their electorates, responsibility for a broad range of economic goals that, in earlier times, were thought to be the province of Divine Providence, chance, or the marketplace. Thus, sovereign states view suspiciously the threats of interdependence to their own control of national political and economic policies and authority over their own citizens.

Finally, neoclassical economic theory in general, and the theory of international trade in particular, is predicated on the assumption that economic systems operate without friction: that the factors of production, such as labor and capital, can be smoothly, quickly, and costlessly shifted from one use to another, from producing a particular good in one place to another particular good, perhaps in some other place. The costs of adjustment, however, are quite real, and attention needs to be focused on criteria for minimizing them--or, more accurately, for maximizine the social benefits of economic chanae (from which the costs of adjustment must be subtracted) and on the development of policies to distribute the burden of adjustment in an equitable manner. These propositions lie at the heart of discussions and demands for a New International Economic Order.

FREEDOM and EFFICIENCY are important values promoted by a liberal, democratic market society. Stability, personal security and distributive justice are also important, however. The growth of government in recent years is probably best understood as an attempt to make gains in these latter values without paying sufficient attention to the cost in efficiency and personal freedom.

The seminar POL 480 takes as its basic focus the struggle between the values of equity, efficiency, order and autonomy as the tradeoffs under consideration in the contemporary international political economy. We will examine the thesis that "the market needs a place, and the market needs to be kept in place," along with the investigation of possible incentives for alternative use or more just distribution (and use) of world scarce resources. The tradeoff dilemma will be applied to such problem areas as:

  • competing foreign economic policies of states,
  • global trade and trade politics,
  • dimensions of domestic political economy,
  • the rise of the "new protectionism and managed trade" sectoral trade politics,
  • North-South trade issues,
  • international competitiveness, and
  • the US-Japan political economy.

    Readings

    The following are required texts for the seminar:

    Bruce E. Moon, Dilemmas of International Trade (Boulder: Westview, 1996)
    Stephen D. Cohen, Joel R. Paul and Robert A. Blecker, Fundamentals of U.S. Foreign Trade Policy (Boulder: Westview, 1996)
    Leonard J. Schoppa, Bargaining With Japan: What American Pressure Can and Cannot Do (Columbia University Press, 1997)
    Robert S. Walters (ed.), Talking Trade: U.S. Policy in International Perspective (Boulder: Westview, 1993)
    Robert Lekachman and Boris Van Loon, Capitalism for Beginners (N.Y.: Pantheon, 1981)
    James Fallows, How the World Works (ATLANTIC MONTHLY 1993-94)

    Pew Case Study Program in International Affairs
    Alberto Coll, "Should the Reagan Administration Have Signed the U.N Convention the Law of the Sea?"
    Stefanie Ann Lenway et al, "Remembering U.S. Memories: The Fate of the U.S. Semiconductor Production Consortium"
    Richard Mshomba, "The Uncertainty of the International Coffee Agreement" Louis Ortmayer, "Through the Looking Glass: U. S. - Japan Dispute Over Luxury Autos"
    Louis Ortmayer, "Wall Street Educates Main Street: The Mexican Peso Crisis"

    Highly recommended and sources of possible additional readings: 

    C.Fred Bergsten and Marcus Noland, Reconcilable Differences? United States-Japan Economic Conflict (Washington: Institute for International Economics, 1993)
    Jeffrey E. Garten, A Cold Peace: America, Japan, Germany and the Struggle for Supremacy (NY:Twentieth Century Fund, 1993)
    Joan Edelman Spero, The Politics of International Economic Relations, 5th ed. (N.Y.: St. Martin's, 1996)
    Miriam Camps, Collective Management: The Reform of Global Economic Organiizations (N.Y.: Council on Foreign Relations/ McGraw-Hill, 1981).
    I.M. Destler and John S. Odell, Anti-Protection: Changing Forces in United States Trade Politics (Washinton: Institute for International Economics, 1987).

    Students are also strongly encouraged to become familiar with and do as much supplementary reading as possible in the following scholarly journals:

    Foreign Policy, Foreign Affairs, International Affairs, International Organization, The World Economy, Journal of Political Economy, Washinzton Quarterly, The Brookings Review, etc.

    and the following useful periodicals:

    The Economist, Far Eastern Economic Review, Finance and Development.

    Finally, students will be expected to remain current on international political and economic affairs through regular readership of at least one of the following:

    New York Times, Washington Post, Wall Street Journal, Christian Science Monitor, London Financial Times

    Requirements

    Evaluation in the seminar takes as its primary criteria: student preparation, participation, and critical thought and analysis. Each student will be expected to read the assigned materials closely (presenting a weekly written critical synopsis), to participate actively in class discussions and activities, to lead one of the weekly seminar presentations and to set out the corresponding questions for discussion. Four policy-oriented papers (6-8 pages) will be assigned (outline) designed to encourage the student to tie together relevant points and analytical perspectives from the readings, discussions, and current affairs. There will be no formal reviews or examination. Rough percentages of evaluation are: policy papers (each 15%), class preparation and participation (including peer evaluations) (30%), and seminar presentation (I0%).

    "...There is an incompatibility between extraordinary performance of one or more members in a system and the maintenance of a voluntary rule-based order. The strong tend to believe that a system which allows others the freedom to emulate them is the best of all possible worlds. In the real world, however, the weak have to be either bribed or forced to continue playing a game they lose."

    Seminar Outline And Topics For Discussion

    (Required readings indicated in parentheses)

    Aug. 28 I. The Contemporary International Political Economy: An Overview
    A. Study of International Political Economy.
    B. Evolution of the International Economic Order.
    C. Characteristics and Determinants of the Bretton Woods System.
    D. System Collapse: Political-Structural Reasons for the Demise of the Old Order
    (Economist, "Bretton Woods Revisited"; Spero, "The Link Between Economics and Politics")

    Sept. 4 II. Perspectives of the International Political Economy:
    A. Liberal (neo-), Marxist, Mercantilist.
    B. Authority and Non-Authority: Who Makes the Rules?
    C. Individual, Group, National, and International Objectives
    (Lekachman--selections; Theodore Rueter, "Introduction: The Nature of International Political Economy"; Barry B. Hughes, "The Rise and Maintenance of A Global Economy; Moon ch. 1-2)

    Sept. 11 III. Equity and Efficiency: The Tradeoffs
    A. Government and the Economy: Who Gets What? Why?
    B. Values and Their Priorities.
    C. Considering the Costs of Adjustment.
    D. Determining the Distribution of the Social Benefits/ Costs of Economic Change
    ("Nari and Gendyn"; Miriam Camps, "Goals and Values (of the International Economy)"; Robert Reich, "Toward a New Public Philosophy," Atlantic, May 1985; Fallows 11)

    Sept. 18 IV. Values and Tradeoffs in IPE / Theories of International Political Economy
    A. Case Study: Alberto Coll, "Should the Reagan Adminstration Have Signed the U.N. Convention on the Law of the Sea?"
    B. Case Study: Ortmayer, "Through the Looking Glass: U.S. Japan Dispute Over Luxury Autos"
    (Robert D. Putnam, "Diplomacy and Domestic Politics: The Logic of Two Level Games")

    Sept. 25 V. International and Domestic Politics of Trade
    A. Comparative Advantage
    B. Created Advantage and Competitiveness
    C. International "Regimes": GATT/Uruguay Round
    D. General Policy Issues
    E. U. S. International Economic Policy
    (Moon, ch. 3-4; Cohen et al, ch. 1-3 and 13; Fallows 111; Schoppa ch 1)

    Oct. 2 VI. Case Study: "Whether to Renew the Semiconductor Accord"
    (Case: Lenway, "Remembering U.S. Memories;" Walters, "The U.S. - Japan Semiconductor Problem;" Fallows 1; Schoppa ch. 2; ( Handouts updating semicondutor trade)

    Oct. 10 PAPER #1 5:00 PM (Semiconductors)

    Oct. 16 VII. Capitalism in Competition: International Competitiveness
    A. New Theories and Patterns of Trade
    B. Impediments to Trade: NTBs and Beyond
    C. State-Societal Arrangements: Organization for Trade
    D. Rival Capitalisms or Neo-mercantilism?
    E. Competition in Strategic Industries
    (Cohen et al, Part II and ch. I0; Yoffie, "New Theories....... pp. 15-27; Robert J. Carbaugh, "Strategic Trade Policy and Commercial Jet Aircraft"; Handouts on Boeing-McDonald Douglas merger)

    Oct. 23 VIII. International Trade Agreements / International Production
    A. NAFTA and Free Trade Agreements
    B. After Uruguay Round: GATT and Beyond
    C. Shocks to the System: International "Management"
    D. Case Study: "US - Brazil Informatics Dispute" (Walters)
    E. Case: "Wall Street Educates Main Street: The Mexican Peso Crisis" (Case; Moon ch. 6; Cohen Part III [Ch. 1 1 - 1 2], handouts)

    Oct. 31 PAPER #2 5:00 p.m. (Strategic Trade or US/Mexico/NAFTA)

    Nov. 6 IX. The Political Economy of International Commodity Trade
    A. Economic and Political Environment
    B. Concepts and Terminology
    C. Issues of the "Commodity Problem"
    D. Commodities: oil, copper, sugar, coffee, bauxite
    E. Commodity Negotiations: Bargaining and Policy
    (Spero, Part 111, pp. 286-299; Mingst - all, reserve; John D. A. Cuddy, "Commodity Trade;" Robert Rothstein, "Commodity Bargaining: The Political Economy of Regime Creation,"; Richard Mshomba, "The Uncertainty of the International Coffee agreement"; handouts)

    Nov. 13 X. Multinational Corporations and Interdependence
    A. Are the NWCs really "Multinational"?
    B. NWCS: Impact on Global Welfare and Power.
    C. NWCs and "Dependencia".
    D. NWCs and Development: Are the Gains Genuine?
    (Stephen Hymer,"The Efficiency (contradiction) of Multinational Corporation;" Joseph S. Nye, "The Multinational Corporation in the 1980s;" David Leyton-Brown, "The Nation-State and the Multinational Enterprise: Erosion or Assertion," Steve Chan, "Multinational Corporations"; Robert Kudrle, "Several Faces of the MNC;" John Madeley, "Trade and the Poor: Transnationals;Ó "Multinationals," Economist survey 3/27/93)

    Nov. 20 XI. Partnership or Confrontation: The U.S. and Japan
    A. The Macroeconomic Context
    B. Trade Problems and Protectionism
    C. Initiatives and Response: The Politics of Competition
    D. "Gaiatsu" Renewed
    (Moon ch. 5,7; Cohen ch 9; Schoppa ch. 3-6)

    Nov. 25 PAPER #3 5:00 P.M. (North-South Trade & Development Strategy)

    Dec. 4 XII. U. S. & Japan: Competition Into the Future
    A. Competitiveness Reconsidered
    B. Trade Deficits and Budget Deficits
    C. Hi-Tech Trade and "Active" Trade Policies
    D. Gaiatsu: Does It Work?
    (Schoppa ch 7-1 0; Bruce Stokes, "High-Tech Tussle;" B. R. Imnan and Daniel Burton, "Technology and Competitiveness: The New Policy Frontier")

    Dec. 18 PAPER #4 By 5:00 P.M. (Gaiatsu Politics / Hi-Tech Trade)