Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Does Fast-Track lead to Better Deals, or just More Bad Deals?
One oft repeated argument for granting the President fast-track authority to propose a take-it-or-leave-it offer to Congress on 'trade' deals is that if the president has such authority he or she will be able to negotiate a better deal for the US.
This is a curious argument, since a little bit of elementary logic suggests that in fact the opposite is sometimes true. A common negotiating strategy is to play "good cop - bad cop" -- one of the negotiators is constrained by an ally in a way that prevents major concessions, but can leverage the fact that he or she is constrained to bond with the opponent in the negotiations -- "I wish I could give you a better deal, but the "bad cop" won't let me." More generally, a fundamental principle of bargaining models is that having less room to make concessions can lead you to be better off in a negotiation because if a deal is to be struck the other side will have to make most of the concessions.
Indeed, although Fast-Track may lead to more deals taking place, the gain in the number of deals is likely to be at least partially offset by the tendency of those deals to be worse deals for the United States relative to the deals that would have been struck in the absence of Fast-Track authority.
Here I develop an example of a simple bargaining situation in which not granting fast track authority makes both Congress and the President better off. I use the political science equivalent of the supply and demand graph -- the one-dimensional spatial model.
Basic assumptions of the model:
The President (P), Congress (C), and a foreign government (F) are negotiating a new trade deal. All parties must agree to the deal in order for the deal to be passed. The current status quo of trade-relevant policies in the countries is q.
Under Fast-Track authority P and F negotiate the deal, which is then presented to C which either approves or rejects.
Absent Fast-Track authority, P and F negotiate the deal, which is then presented to C which either approves, rejects, or revises the deal by paying a cost r and attempting to shift the deal to C. The cost r of revising the deal reflects the risk that the deal will be rejected by F after revision leading to a loss of the possible gains associated with the deal.
I will focus on the following two configuration of preferences:
_F P C__ ____q
Here F's preferred deal is on the left, the preferred deal of P is next, and the preferred deal of C is in the center of some policy dimension. Because Q is on the far right of the policy dimension, there are deals that make all three better off. I assume that r is less than the distance between Congress and the President: r< |C-P|.
q _F P C_
Here all of the preferences are aligned in the same way except that the status quo is at the far left instead of the far right.
Fast-Track to a Bad Deal?
Given the preferences in the example, under Fast-Track a deal will be reached somewhere between P and F, which the exact deal a function of the usual mix of factors that influence negotiating performance such as time discounting etc.
I have labeled one such deal on the line below: a point "f" to indicate Fast Track.
_F f P C__ ____q
Since C is closer to f than to q, C prefers f andwill ratify the deal.
A very similar pattern should obtain under the second configuration of preferences. Again a bargain is reached between F and P.
q _F f P C_
Slow-Track to a Better Deal
Absent Fast-Track, no deal can be reached that is a distance greater than r away from C. Hence, if r= |C-P|/2, we have an expected deal midway between P and C. I have labeled this point n.
_F P n C__ ____q
This is a better deal for both P and C, so both benefit as a result of Congress not granting Fast Track authority. Both are better off because the need to prevent Congress from revising gives the President more leverage in negotiations here, leading to better outcomes.
A similar outcome occurs with the second preference configuration. Once again Congress is able to constrain the deal in a way that makes both U.S. players better off.
q _F P n C_
There are arguably counter examples in which the absence of Fast Track prevents a deal. Here is one:
q _F f P n C_
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