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SECTION 4.1: Theoretical Foundations

Introductory Video

SECTION 4.1

Lecture Video 1

Theoretical Foundations

I. From Absolute to Comparative Advantage

II. The China Shock: Adjustment as the Weak Assumption

III. Factor Endowments and the Heckscher-Ohlin Model

IV. The Leontief Paradox

V. AI as a Productivity Shock

VI. Distributional Consequences: Capital, Labor, and Skill

VII. Telemigration and the Service Frontier

VIII. From Theory to Decision

Section Summary

SECTION 4.2: Modern Trade Accounts

SECTION 4.2

Lecture Video 2

Modern Trade Accounts

I. New Trade Theory: Scale Rather Than Difference

II. The AI Cost Structure and Winner-Takes-Most

III. Agglomeration and the Geography of Gains

IV. National Competitive Advantage: Constructed, Not Inherited

V. The Value Chain and Where Advantage Can Be Built

VI. Leapfrogging and Downstream Migration

VII. From Diagnosis to Decision

SECTION 4.3: Policy Instruments

SECTION 4.3

Lecture Video 3

Policy Instruments

I. Statutory and Applied Rates

II. Tariff Forms and the Levers That Move the Applied Rate

III. Quotas and Tariff-Rate Quotas

IV. Trade Remedies: Anti-Dumping, Countervailing Duties, and Safeguards

V. Section 301 as a Standards Regime

VI. Subsidies and Structural Excess Capacity

VII. From Instruments to Decision

SECTION 4.4: The Economics of Incidence

SECTION 4.4

Lecture Video 4

The Economics of Incidence

I. Legal and Economic Incidence

II. Two-Stage Pass-Through

III. Production Tariffs: The Cost That Never Crosses Your Border

IV. Strategic Pricing Spillovers

V. Forward-Looking Pricing Under Uncertainty

VI. Distributional Incidence: Regressivity and Cheapflation

VII. From Incidence to Pricing Decision

SECTION 4.5: Services Trade and AI

SECTION 4.5

Lecture Video 5

Services Trade and AI

I. The Scale and Composition of Services Trade

II. AI's Two Channels in Services

III. The GATS Four Modes of Supply

IV. Inter-Modal Complementarity

V. Mode Switching — and Where It Stops

VI. Concentration in AI Services

VII. From Modes to Strategy

SECTION 4.6: Strategic Trade Policy

SECTION 4.6

Lecture Video 6

Strategic Trade Policy

I. From Protection to Denial

II. Item Controls: End-Use Restrictions

III. Person Controls: The U.S. Person Restriction

IV. Technology Lineage: The Foreign Direct Product Rule

V. The 2026 Adjustments

VI. Enforcement, Transshipment, and What a Firm Must Know

VII. From Regime to Compliance Decision

SECTION 4.7: Political Economy of Protection

SECTION 4.7

Lecture video 7

Political Economy of Protection

I. The China Shock: Magnitude and Geography

II. Why Reallocation Failed

III. Concentrated Benefits and Diffuse Costs

IV. The Regressive Burden

V. Political Consequences of Concentrated Loss

VI. Comparative Resilience

VII. From Political Economy to Decision

SECTION 4.8: Trade Compliance and Engineering

SECTION 4.8

Lecture Video 8

Trade Compliance and Engineering

I. Three Levers, and How They Interact

II. Tariff Engineering: Where the Line Sits

III. Classification at Scale and the AI Question

IV. Advance Rulings

V. Statutory Against Applied: A Behavioral Gap

VI. Governance: Audits and Design-Stage Integration

VII. From Compliance to Decision

SECTION 4.9: Managerial Decision

SECTION 4.9

Lecture Video 9

Managerial Decision

I. The Diversion Trap, Correctly Specified

II. Why Relocation Often Fails to Change Origin

III. The Sourcing Portfolio and Correlated Risk

IV. Compliance as the Alternative to Relocation

V. Three Pillars of a Defensible Recommendation

VI. Pricing During the Transition

VII. Constructing the Recommendation

Welcome to "International Trade Theory and Policy in the AI Era," a comprehensive course designed to bridge the gap between classic economic theories and the rapidly evolving landscape of global commerce driven by Artificial Intelligence. In today's interconnected world, understanding international trade is no longer just about tariffs and borders; it requires a deep dive into how AI acts as a massive productivity shock, reshaping value chains, telemigration, and the very nature of competitive advantage.

Welcome to "International Trade Theory and Policy in the AI Era," a comprehensive course designed to bridge the gap between classic economic theories and the rapidly evolving landscape of global commerce driven by Artificial Intelligence. In today's interconnected world, understanding international trade is no longer just about tariffs and borders; it requires a deep dive into how AI acts as a massive productivity shock, reshaping value chains, telemigration, and the very nature of competitive advantage. This course offers an in-depth exploration of theoretical foundations, from comparative advantage to the Heckscher-Ohlin model, while contextualizing them within modern trade accounts and the "China Shock." You will explore the intricate mechanics of policy instruments, including quotas, trade remedies, and Section 301, and understand the real-world economics of incidence, strategic pricing, and cheapflation. Furthermore, we will navigate the complexities of services trade under GATS, strategic trade policies like export controls and the Foreign Direct Product Rule, and the political economy of protectionism. Finally, you will learn practical trade compliance, tariff engineering, and how to make robust managerial decisions regarding sourcing portfolios and supply chain resilience. Whether you are a business leader, policy analyst, or student of economics, this course will equip you with the analytical tools to make decisions you can defend in the complex, AI-driven global market.

Chapter 4

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            <p>The landscape of global commerce is undergoing a profound transformation, driven by the rapid integration of Artificial Intelligence into the fabric of international trade. "International Trade Theory and Policy in the AI Era" explores this dynamic intersection, bridging classical economic frameworks with contemporary technological realities. The curriculum begins by grounding learners in essential theoretical foundations, tracing the evolution from absolute and comparative advantage to the Heckscher-Ohlin model, while critically examining historical anomalies like the Leontief Paradox. From there, it transitions into modern trade accounts, analyzing how AI acts as a massive productivity shock that reshapes cost structures, accelerates agglomeration, and fosters winner-takes-most dynamics. By understanding these foundational shifts, participants will grasp how national competitive advantages are no longer merely inherited through factor endowments, but actively constructed within highly digitized global value chains.</p>

<p>Beyond theoretical models, the course delves deeply into the mechanics of global trade policy and its real-world economic incidence. Participants will navigate the complexities of modern policy instruments, including statutory versus applied tariffs, quotas, and trade remedies, while unpacking the political economy of protectionism and the enduring impacts of the "China Shock." As AI revolutionizes services trade through telemigration and shifting modes of supply, the curriculum also addresses the rising importance of strategic trade policy, such as end-use restrictions, person controls, and technology lineage. Ultimately, the program culminates in actionable managerial strategies. By mastering trade compliance, tariff engineering, and the nuances of two-stage pass-through pricing, leaders will be equipped to build resilient sourcing portfolios, avoid diversion traps, and make defensible, forward-looking decisions in an increasingly uncertain geopolitical environment.</p>
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