Anti-lobbying Gains From International Agreements

I argue that an important potential benefit of international agreements is to reduce wasteful rent-seeking activities by domestic and foreign special interest groups, through a reduction in policy discretion. The presence of foreign lobbying generates a novel type of international externality: by inviting wasteful rent-seeking by foreign lobbies, the presence of policy discretion itself generates a negative international externality. I examine the potential anti-lobbying effects of three salient types of international rules: exact policy commitments, policy bounds and non-discrimination rules. Unlike exact policy commitments, which remove policy discretion and hence shut down ex-post lobbying, policy bounds may invite ex-post lobbying and hence may forego part or all of the potential anti-lobbying gains. I also find that policy bounds may lead to mixed-strategy equilibria of the rent-seeking game. A non-discrimination rule can reduce rent-seeking by foreign lobbies, by injecting a free-rider problem in the strategic interaction between these lobbies, and under some conditions can achieve all the potential anti-foreign-lobbying gains.