Abstrakt
Under Fast-Track Authority (FT), the US Congress commits to an up-or-down vote without amendments for any trade agreement presented for ratification. We interpret FT in terms of a hold-up problem.
If the US negotiates an agreement with a smaller economy, businesses there may make sunk investments for the US market. At the ratification stage, the partner economy will be locked in to the US in a way it was not previously and Congress can make changes adverse to the partner, so to convince the partner to negotiate, it must first commit not to amend the agreement.
FT is then Pareto-improving. (c) 2020 Elsevier B.V. All rights reserved.