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When is it optimal to delegate : the theory of fast-track authority

Çeli̊k, Levent, Ph.D

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Summary

  • 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.

Notes

  • Title from http://www.nber.org/papers/17810 viewed February 7, 2012.
  • "February 2012"
  • Includes bibliographical references (pages 48-50).
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