The Senate Committee on Commerce, Science, and Transportation will hold a confirmation hearing for Howard Lutnick, President Donald Trump’s nominee to be U.S. Secretary of Commerce, this week. Here are four areas relating to his views on international trade and investment that senators should consider exploring.
1. What is his perspective on the role that international investment plays in the U.S. economy?
Background: The United States has been the largest recipient of foreign direct investment in the world every year since 2006. We receive even more investment in stocks, bonds, and Treasury securities. Trump, Congress, and governors across the United States have made attracting international investment a priority. Tax and regulatory reforms that would strengthen the United States and make us a better place in which to do business would likely increase international investment in our economy.
President Trump recently encouraged other countries to invest in the United States: “Come make your product in America and we will give you among the lowest taxes as any nation on earth.” The Commerce Department’s SelectUSA program’s mission is to attract new business investment into the United States. However, foreign investment has also attracted criticism. Trump advisor Peter Navarro calls it conquest by purchase, and former U.S. Trade Representative Robert Lightizer calls it debt.
Would Lutnick support tax, trade, and regulatory policies to attract more investment in our economy?
2. How does international trade affect Americans?
Background: Nearly all economists believe that the costs of trade restrictions outweigh the benefits. In 2018, NTU released a letter from more than 1,100 economists warning that increased tariffs could raise the cost of targeted goods, reduce exports, and damage our international relations.
Nearly 60% of imports are either raw materials, intermediate goods, or capital goods used by American businesses. Would he support new taxes on these imports, even if they could lead to foreign retaliation?
3. Does the President have the authority to impose taxes without a vote of Congress, and, if so, under what circumstances?
Background: Article I, Section 8 of the Constitution gives Congress the authority to lay import duties and regulate foreign commerce. Previous Ccongresses have delegated the authority to regulate commerce to the president under certain limited circumstances. How much unilateral power does Lutnick believe the president has, and how would he work with Congress to make sure its views are taken into account? Would he support legislation to allow Congress to vote before new taxes are imposed?
4. Is voluntary trade with our allies mutually beneficial, or does it threaten U.S. national security?
Background: Some of Trump’s advisors want Trump to declare that the trade deficit is a national emergency that justifies broad-based increases in import taxes under the International Emergency Economic Powers Act. The president’s authority to restrict commerce under this statute “may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.” The trade deficit does not meet that criteria. For example, imports have exceeded exports for 48 years in a row. During this time, the U.S. economy has grown by 255% after adjusting for inflation. NTU recently explained that tariffs, not trade deficits, pose the greater threat to the United States.
Section 232 of the Trade Expansion Act of 1962 authorizes the Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports on the national security of the United States. A 1983 Section 232 investigation conducted in the midst of the Cold War included this observation from the Council of Economic Advisers: “Trade restrictions . . . act as a drag on the rest of the economy, eroding the industrial base in other sectors, and undermining our ability to sustain a balanced defense effort in a national emergency.” In general, does Lutnick view imports provided by U.S. allies as a national security threat?
Addressing these questions will help the Trump Administration succeed in pursuing an America First trade policy that benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.