Robert Lighthizer, President Trump’s United States Trade Representative nominee, will testify before the Senate Finance Committee Tuesday afternoon. Lighthizer, a former deputy USTR and long-time Washington trade lobbyist and lawyer, espouses views on trade that are well outside the mainstream of Republican and conservative orthodoxy.
Given his protectionist leanings, it was unsurprising that Trump chose Lighthizer as his USTR. Given these unorthodox views, free-traders in the Senate ought to ask the following questions of Lighthizer during the confirmation hearing:
Determining Trump’s Primary Architect of Trade Policy
Under U.S. law, USTR is required to take the lead on trade negotiations, yet it has been reported that Commerce Secretary Wilbur Ross will be the primary driver of trade policy in the new administration. This news, coupled with the creation of the National Trade Council within the White House, has created confusion about responsibilities and hierarchy for trade policy in the new administration.
Question for Lighthizer: Can you provide additional clarity about this departure from USTR’s traditional role in setting U.S. trade policy?
U.S. Credibility After U.S. Withdrawal from TPP
The Trump administration has withdrawn the United States from the Trans-Pacific Partnership. This marks the first time the U.S. has failed to ratify a trade agreement it has negotiated to completion.
Question for Lighthizer: Do you believe this will damage the U.S.’s credibility in future trade negotiations? If not, why not? If so, how will you counteract such damage?
Renegotiating NAFTA
The Trump administration has, at various times, suggested renegotiating the North American Free Trade Agreement.
Question for Lighthizer: If USTR pursues NAFTA renegotiation, what, specifically, would you seek to change about the agreement? Do you have concerns about disrupting North American supply chains that have evolved over the last two decades since NAFTA was implemented?
Downstream Effects of Trade “Enforcement”
As a trade litigator, you have brought numerous anti-dumping and countervailing duties cases. While trade “enforcement” may benefit the industry seeking protection, it can raise prices for downstream users of the product facing higher levies. Between 50 and 60 percent of U.S. imports are intermediate goods used by American businesses in the production process.
Question for Lighthizer: Can you provide an example in which import restrictions have served the United States’ economic interests as a whole?
The Trade Deficit and Foreign Investment
The administration routinely laments the trade deficit as a drag on economic growth. Yet in December, Trump celebrated the announcement by Softbank, a Japanese company, to invest $50 billion and create 50,000 new jobs in the United States. This $50 billion investment will count as part of the capital account under international accounting rules, meaning it will be a $50 billion addition to the trade deficit. The administration’s positions seem incongruous as it expresses concerns about the dire effects of the trade deficit while simultaneously celebrating additions to it through foreign investment in the U.S.
Question for Lighthizer: Given your longstanding concerns about the trade deficit, do you worry about Softbank’s decision and the decisions by foreigners to invest in the United States?
Chinese Business Subsidies
During the campaign, Trump routinely complained about China breaking the rules of international trade. While many of those claims were overblown, there is a kernel of truth in them. Derek Scissors of the American Enterprise Institute notes that China subsidizes its domestic companies “and harms others in two main ways: (1) with basically no cost loans from state-owned banks and (2) by preventing competition with state-owned enterprises in industries from insurance to machinery.” These forms of Chinese protectionism hurt American businesses. While not as egregious, the U.S. provides too many subsidies to its own domestic businesses and industry.
Question for Lighthizer: For the U.S. to credibly make the case against Chinese business subsidies, we must eliminate as many of our own domestic subsidies as possible. Will you use your position at USTR to urge Congress to clean up its house?
WTO in the Trump Administration
During the campaign, candidate Trump suggested withdrawing the United States from the World Trade Organization. In addition, USTR recently released its 2017 Trade Policy Agenda and 2016 Annual Review, which declared a top priority for the administration will be “Defending our national sovereignty over trade policy.”
Taken together, a picture emerges that the administration is highly critical of our international trade obligations. Though complying with adverse dispute settlement rulings at the WTO is optional for member nations (rulings are couched as recommendations), the system relies on good faith compliance. If the U.S., the most indispensable member of the WTO, routinely begins thumbing its nose at adverse rulings, the system may be in jeopardy.
This would be an enormous self-inflicted wound. As former Treasury Secretary Larry Summers once said, the creation of the WTO was the largest tax cut in world history at the time. It still pays enormous dividends for American consumers and businesses.
Question for Lighthizer: Will you assure the Senate that the United States will respect adverse rulings at the WTO and work toward compliance in good faith?
There is little doubt that Lighthizer will be confirmed as USTR, but asking him to explain or expound on these questions would be a worthwhile endeavor for free-trading senators.
Clark Packard (@clarkpNTU) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is counsel and government affairs manager for the National Taxpayers Union.
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