An Open Letter Requesting Answers From Robert Lighthizer

Mr. Robert Lighthizer
United States Trade Representative
Washington, DC

Mr. Lighthizer:

Yesterday you informed the Senate Finance Committee that the Trump administration plans to punitively tax more Americans who buy imports.  In that testimony you declared that “the president’s view, and mine, is that when you see a trade deficit in the hundreds of billions of dollars – and that deficit goes on for years and years regardless of changes in the broader economy – one must then be concerned that the deficit represents structural problems in global trade.”

The flipside of the U.S. trade deficit is the U.S. capital-account surplus.  Indeed, “capital-account surplus” is simply another way of saying “trade deficit” (or, more precisely, “current-account deficit”).  And a U.S. capital-account surplus means both that (1) foreigners find America to be an especially attractive place to invest, and (2) capital – that is, resources necessary to expand the productive capacity and productivity of the economy – flows from around the world into America.

So let’s reword your statement without changing its economic content: “[T]he president’s view, and mine, is that when you see global investors consistently willing to increase their stakes in the American economy to the tune of the hundreds of billions of dollars – and that economy-expanding fondness for investing in America goes on for years and years regardless of changes in the broader economy – one must then be concerned that the investments represents structural problems in global trade.”

In light of the reality that America remains an especially attractive destination for investment,* can you explain to us Americans just why the continued willingness of foreigners to invest in the U.S. economy is a danger to us – one that justifies your further obstructing our freedom to choose how to spend our own money?  And can you elaborate on why you believe that something is amiss with U.S. government policies that fail to more vigorously block capital from abroad flowing into our economy?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* Although the administration’s trade policies do seem to be designed to greatly reduce the attractiveness of America to investors.

The above originally appeared at Cafe Hayek.