When is it Optimal to Delegate: The Theory of Fast-Track Authority

55 Pages Posted: 3 Feb 2012

See all articles by Levent Celik

Levent Celik

City, University of London; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); National Research University Higher School of Economics

Bilgehan Karabay

RMIT University, School of Economics, Finance and Marketing

John McLaren

University of Virginia; NBER

Date Written: February 2012

Abstract

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.

Suggested Citation

Celik, Levent and Karabay, Bilgehan and McLaren, John, When is it Optimal to Delegate: The Theory of Fast-Track Authority (February 2012). NBER Working Paper No. w17810. Available at SSRN: https://ssrn.com/abstract=1998608

Levent Celik (Contact Author)

City, University of London ( email )

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United Kingdom

HOME PAGE: http://www.city.ac.uk

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

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Czech Republic

HOME PAGE: http://www.cerge-ei.cz

National Research University Higher School of Economics ( email )

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Russia

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Bilgehan Karabay

RMIT University, School of Economics, Finance and Marketing ( email )

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Melbourne, 3000
Australia

John McLaren

University of Virginia ( email )

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Charlottesville, VA 22904-4182
United States
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434-982-2904 (Fax)

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