When is it Optimal to Delegate: The Theory of Fast-track Authority
With fast-track authority (FTA), the US Congress delegates trade-policy authority to the President by committing not to amend a trade agreement. We suggest an interpretation in which Congress uses FTA to forestall destructive competition between its members for protectionist rents. We show that FTA is never granted if an industry is operating in the majority of districts. Second, the more equally distributed are the industries across districts and the more similar are the industries' sizes, the more likely it is that FTA is granted. This is true since competition over rents is most punishing when bargaining power is symmetrically distributed, and in that case the ex ante expected welfare of each district is lower without FTA. Third, if existing levels of protection are very different across industries, even if FTA is granted, it may not lead to free trade because a majority of industries may prefer the status quo to free trade.
We would like to thank to seminar participants at the University of Colorado-Boulder, the University of Adelaide, the University of Southern Australia, and Auckland University of Technology, as well as participants at the ASSET annual meetings in 2009. We are also grateful to CERGE-EI, the University of Virginia and the University of Auckland for their hospitality during the authors' visits. This research was supported by a grant (project reference number 3625352/9554) from the University of Auckland Faculty Research Development Fund. All opinions expressed are those of the authors and have not been endorsed by the University of Auckland. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Levent Celik & Bilgehan Karabay & John McLaren, 2015. "When Is It Optimal to Delegate: The Theory of Fast-Track Authority," American Economic Journal: Microeconomics, American Economic Association, vol. 7(3), pages 347-89, August. citation courtesy of