Trump prepares to pass the world leadership baton to China


March 19, 2017

Trump prepares to pass the world leadership baton to China

by Fareed Zakaria

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https://www.washingtonpost.com/opinions/trump-prepares-to-pass-the-world-leadership-baton-to-china/2017/03/16/c64ccee2-0a84-11e7-a15f-a58d4a988474_story.html?utm_term=.d4e26b95c9c6

We do not yet have the official agenda for next month’s meeting in Florida between President Trump and Chinese President Xi Jinping. But after 75 years of U.S. leadership on the world stage, the Mar-a-Lago summit might mark the beginning of a handover of power from the United States to China. Trump has embraced a policy of retreat from the world, opening a space that will be eagerly filled by the Communist Party of China.

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Trump railed against China on the campaign trail, bellowing that it was “raping” the United States. He vowed to label it a currency manipulator on his first day in office. But in his first interaction with Beijing, he caved. Weeks after his election, Trump speculated that he might upgrade relations with Taiwan. In response, Xi froze all contacts between Beijing and Washington on all issues, demanding that Trump reverse himself — which is exactly what happened. (Perhaps just coincidentally, a few weeks later, the Chinese government granted the Trump Organization dozens of trademark rights in China, with a speed and on a scale that surprised many experts.)

The Trump administration’s vision for disengagement from the world is a godsend for China. Look at Trump’s proposed budget, which would cut spending on “soft power” — diplomacy, foreign aid, international organizations — by 28 percent. Beijing, by contrast, has quadrupled the budget of its foreign ministry in the past decade. And that doesn’t include its massive spending on aid and development across Asia and Africa. Just tallying some of Beijing’s key development commitments, George Washington University’s David Shambaugh estimates the total at $1.4 trillion, compared with the Marshall Plan, which in today’s dollars would cost about $100 billion.

China’s growing diplomatic strength matters. An Asian head of government recently told me that at every regional conference, “Washington sends a couple of diplomats, whereas Beijing sends dozens. The Chinese are there at every committee meeting, and you are not.” The result, he said, is that Beijing is increasingly setting the Asian agenda.

The Trump administration wants to skimp on U.S. funding for the United Nations. This is music to Chinese ears. Beijing has been trying to gain influence in the global body for years. It has increased its funding for the U.N. across the board and would likely be delighted to pick up the slack as the United States withdraws. As Foreign Policy magazine’s Colum Lynch observes, China has already become the second-largest funder of U.N. peacekeeping and has more peacekeepers than the other four permanent Security Council members combined. Of course, in return for this, China will gain increased influence, from key appointments to shifts in policy throughout the U.N. system.

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The first major act of the Trump administration was to pull the United States out of the Trans-Pacific Partnership, a treaty that would have opened up long-closed economies such as Japan and Vietnam, but also would have created a bloc that could stand up to China’s increasing domination of trade in Asia. The TPP was, in Singaporean Prime Minister Lee Hsien Loong’s words, “a litmus test” of U.S. credibility in Asia. With Washington’s withdrawal, even staunchly pro-American allies such as Australia are hedging their bets. Australian Prime Minister Malcolm Turnbull has raised the possibility of China joining the TPP, essentially turning a group that was meant to be a deterrent against China into one more arm of Chinese influence.

The United States’ global role has always meant being at the cutting edge in science, education and culture. Here again, Washington is scaling back while Beijing is ramping up. In Trump’s proposed budget, the National Institutes of Health, NASA and the national laboratories face crippling cuts, as do many exchange programs that have brought generations of young leaders to be trained in the United States and exposed to American values. Beijing, meanwhile, has continued to expand “Confucius Institutes” around the world and now offers 20,000 scholarships for foreign students to go to China. Its funding for big science rises every year. The world’s largest telescope is in China, not the United States.

The Trump administration does want a bigger military. But that has never been how China has sought to compete with U.S. power. Chinese leaders have pointed out to me that this was the Soviet strategy during the Cold War, one that failed miserably. The implication was: Let Washington waste resources on the Pentagon, while Beijing would focus on economics, technology and soft power.

Trump’s new national security adviser, H.R. McMaster, once remarked that trying to fight the United States symmetrically — tank for tank — was “stupid.” The smart strategy would be an asymmetrical one. The Chinese seem to understand this.

President Donald J. Trump’s Address at the Joint Session of the US Congress–February 28, 2017


March 1, 2017

President Donald J. Trump’s Address at the Joint Session of the US Congress–February 28, 2017

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Mr. Speaker, Mr. Vice President, Members of Congress, the First Lady of the United States, and Citizens of America:

Tonight, as we mark the conclusion of our celebration of Black History Month, we are reminded of our Nation’s path toward civil rights and the work that still remains.

Recent threats targeting Jewish Community Centers and vandalism of Jewish cemeteries, as well as last week’s shooting in Kansas City, remind us that while we may be a Nation divided on policies, we are a country that stands united in condemning hate and evil in all its forms.

Each American generation passes the torch of truth, liberty and justice — in an unbroken chain all the way down to the present.

That torch is now in our hands. And we will use it to light up the world. I am here tonight to deliver a message of unity and strength, and it is a message deeply delivered from my heart.

A new chapter of American Greatness is now beginning.

A new national pride is sweeping across our Nation.

And a new surge of optimism is placing impossible dreams firmly within our grasp.

What we are witnessing today is the Renewal of the American Spirit. Our allies will find that America is once again ready to lead.

All the nations of the world — friend or foe — will find that America is strong, America is proud, and America is free.

In nine years, the United States will celebrate the 250th anniversary of our founding — 250 years since the day we declared our Independence.

It will be one of the great milestones in the history of the world. But what will America look like as we reach our 250th year? What kind of country will we leave for our children?

I will not allow the mistakes of recent decades past to define the course of our future. For too long, we’ve watched our middle class shrink as we’ve exported our jobs and wealth to foreign countries.

We’ve financed and built one global project after another, but ignored the fates of our children in the inner cities of Chicago, Baltimore, Detroit — and so many other places throughout our land.

We’ve defended the borders of other nations, while leaving our own borders wide open, for anyone to cross — and for drugs to pour in at a now unprecedented rate.

And we’ve spent trillions of dollars overseas, while our infrastructure at home has so badly crumbled.

Then, in 2016, the earth shifted beneath our feet. The rebellion started as a quiet protest, spoken by families of all colors and creeds — families who just wanted a fair shot for their children, and a fair hearing for their concerns

But then the quiet voices became a loud chorus — as thousands of citizens now spoke out together, from cities small and large, all across our country.

Finally, the chorus became an earthquake — and the people turned out by the tens of millions, and they were all united by one very simple, but crucial demand, that America must put its own citizens first … because only then, can we truly MAKE AMERICA GREAT AGAIN.

Dying industries will come roaring back to life. Heroic veterans will get the care they so desperately need.

Our military will be given the resources its brave warriors so richly deserve.

Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land.

Our terrible drug epidemic will slow down and ultimately, stop. And our neglected inner cities will see a rebirth of hope, safety, and opportunity.

Above all else, we will keep our promises to the American people.

It’s been a little over a month since my inauguration, and I want to take this moment to update the Nation on the progress I’ve made in keeping those promises.

Since my election, Ford, Fiat-Chrysler, General Motors, Sprint, Softbank, Lockheed, Intel, Walmart, and many others, have announced that they will invest billions of dollars in the United States and will create tens of thousands of new American jobs.

The stock market has gained almost three trillion dollars in value since the election on November 8, a record. We’ve saved taxpayers hundreds of millions of dollars by bringing down the price of the fantastic new F-35 jet fighter, and will be saving billions more dollars on contracts all across our Government. We have placed a hiring freeze on non-military and non-essential Federal workers.

We have begun to drain the swamp of government corruption by imposing a 5 year ban on lobbying by executive branch officials — and a lifetime ban on becoming lobbyists for a foreign government.

We have undertaken a historic effort to massively reduce job‑crushing regulations, creating a deregulation task force inside of every Government agency; imposing a new rule which mandates that for every 1 new regulation, 2 old regulations must be eliminated; and stopping a regulation that threatens the future and livelihoods of our great coal miners.

We have cleared the way for the construction of the Keystone and Dakota Access Pipelines — thereby creating tens of thousands of jobs — and I’ve issued a new directive that new American pipelines be made with American steel.

We have withdrawn the United States from the job-killing Trans-Pacific Partnership.

With the help of Prime Minister Justin Trudeau, we have formed a Council with our neighbors in Canada to help ensure that women entrepreneurs have access to the networks, markets and capital they need to start a business and live out their financial dreams.

To protect our citizens, I have directed the Department of Justice to form a Task Force on Reducing Violent Crime.

I have further ordered the Departments of Homeland Security and Justice, along with the Department of State and the Director of National Intelligence, to coordinate an aggressive strategy to dismantle the criminal cartels that have spread across our Nation.

 We will stop the drugs from pouring into our country and poisoning our youth — and we will expand treatment for those who have become so badly addicted.

At the same time, my Administration has answered the pleas of the American people for immigration enforcement and border security. By finally enforcing our immigration laws, we will raise wages, help the unemployed, save billions of dollars, and make our communities safer for everyone. We want all Americans to succeed — but that can’t happen in an environment of lawless chaos. We must restore integrity and the rule of law to our borders.

For that reason, we will soon begin the construction of a great wall along our southern border. It will be started ahead of schedule and, when finished, it will be a very effective weapon against drugs and crime.

As we speak, we are removing gang members, drug dealers and criminals that threaten our communities and prey on our citizens. Bad ones are going out as I speak tonight and as I have promised.

To any in Congress who do not believe we should enforce our laws, I would ask you this question: what would you say to the American family that loses their jobs, their income, or a loved one, because America refused to uphold its laws and defend its borders?

Our obligation is to serve, protect, and defend the citizens of the United States. We are also taking strong measures to protect our Nation from Radical Islamic Terrorism.

According to data provided by the Department of Justice, the vast majority of individuals convicted for terrorism-related offenses since 9/11 came here from outside of our country. We have seen the attacks at home — from Boston to San Bernardino to the Pentagon and yes, even the World Trade Center.

We have seen the attacks in France, in Belgium, in Germany and all over the world.

It is not compassionate, but reckless, to allow uncontrolled entry from places where proper vetting cannot occur. Those given the high honor of admission to the United States should support this country and love its people and its values.

We cannot allow a beachhead of terrorism to form inside America — we cannot allow our Nation to become a sanctuary for extremists.

That is why my Administration has been working on improved vetting procedures, and we will shortly take new steps to keep our Nation safe — and to keep out those who would do us harm.

As promised, I directed the Department of Defense to develop a plan to demolish and destroy ISIS — a network of lawless savages that have slaughtered Muslims and Christians, and men, women, and children of all faiths and beliefs. We will work with our allies, including our friends and allies in the Muslim world, to extinguish this vile enemy from our planet.

I have also imposed new sanctions on entities and individuals who support Iran’s ballistic missile program, and reaffirmed our unbreakable alliance with the State of Israel.

Finally, I have kept my promise to appoint a Justice to the United States Supreme Court — from my list of 20 judges — who will defend our Constitution.

I am honored to have Maureen Scalia with us in the gallery tonight. Her late, great husband, Antonin Scalia, will forever be a symbol of American justice. To fill his seat, we have chosen Judge Neil Gorsuch, a man of incredible skill, and deep devotion to the law. He was confirmed unanimously to the Court of Appeals, and I am asking the Senate to swiftly approve his nomination.

Tonight, as I outline the next steps we must take as a country, we must honestly acknowledge the circumstances we inherited.

Ninety-four million Americans are out of the labor force.Over 43 million people are now living in poverty, and over 43 million Americans are on food stamps.

More than 1 in 5 people in their prime working years are not working.We have the worst financial recovery in 65 years.

In the last 8 years, the past Administration has put on more new debt than nearly all other Presidents combined.

We’ve lost more than one-fourth of our manufacturing jobs since NAFTA was approved, and we’ve lost 60,000 factories since China joined the World Trade Organization in 2001.

Our trade deficit in goods with the world last year was nearly $800 billion dollars. And overseas, we have inherited a series of tragic foreign policy disasters.

Solving these, and so many other pressing problems, will require us to work past the differences of party. It will require us to tap into the American spirit that has overcome every challenge throughout our long and storied history.

But to accomplish our goals at home and abroad, we must restart the engine of the American economy — making it easier for companies to do business in the United States, and much harder for companies to leave.

Now, American companies are taxed at one of the highest rates anywhere in the world.

My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone. At the same time, we will provide massive tax relief for the middle class.

We must create a level playing field for American companies and workers

Currently, when we ship products out of America, many other countries make us pay very high tariffs and taxes — but when foreign companies ship their products into America, we charge them almost nothing.

I just met with officials and workers from a great American company, Harley-Davidson. In fact, they proudly displayed five of their magnificent motorcycles, made in the USA, on the front lawn of the White House.

At our meeting, I asked them, how are you doing, how is business? They said that it’s good. I asked them further how they are doing with other countries, mainly international sales. They told me — without even complaining because they have been mistreated for so long that they have become used to it — that it is very hard to do business with other countries because they tax our goods at such a high rate. They said that in one case another country taxed their motorcycles at 100 percent. They weren’t even asking for change. But I am. I believe strongly in free trade but it also has to be FAIR TRADE.

The first Republican President, Abraham Lincoln, warned that the “abandonment of the protective policy by the American Government [will] produce want and ruin among our people.”

Lincoln was right — and it is time we heeded his words. I am not going to let America and its great companies and workers, be taken advantage of anymore.

I am going to bring back millions of jobs. Protecting our workers also means reforming our system of legal immigration. The current, outdated system depresses wages for our poorest workers, and puts great pressure on taxpayers.

Nations around the world, like Canada, Australia and many others — have a merit-based immigration system. It is a basic principle that those seeking to enter a country ought to be able to support themselves financially. Yet, in America, we do not enforce this rule, straining the very public resources that our poorest citizens rely upon. According to the National Academy of Sciences, our current immigration system costs America’s taxpayers many billions of dollars a year

Switching away from this current system of lower-skilled immigration, and instead adopting a merit-based system, will have many benefits: it will save countless dollars, raise workers’ wages, and help struggling families — including immigrant families — enter the middle class.

I believe that real and positive immigration reform is possible, as long as we focus on the following goals: to improve jobs and wages for Americans, to strengthen our nation’s security, and to restore respect for our laws.

If we are guided by the well-being of American citizens then I believe Republicans and Democrats can work together to achieve an outcome that has eluded our country for decades.

Another Republican President, Dwight D. Eisenhower, initiated the last truly great national infrastructure program — the building of the interstate highway system. The time has come for a new program of national rebuilding.

America has spent approximately six trillion dollars in the Middle East, all this while our infrastructure at home is crumbling. With this six trillion dollars we could have rebuilt our country — twice. And maybe even three times if we had people who had the ability to negotiate

To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States — financed through both public and private capital — creating millions of new jobs.

This effort will be guided by two core principles: Buy American, and Hire American.

Tonight, I am also calling on this Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower costs, and at the same time, provide better Healthcare.

Mandating every American to buy government-approved health insurance was never the right solution for America. The way to make health insurance available to everyone is to lower the cost of health insurance, and that is what we will do.

Obamacare premiums nationwide have increased by double and triple digits. As an example, Arizona went up 116 percent last year alone. Governor Matt Bevin of Kentucky just said Obamacare is failing in his State — it is unsustainable and collapsing.

One third of counties have only one insurer on the exchanges — leaving many Americans with no choice at all

Remember when you were told that you could keep your doctor, and keep your plan? We now know that all of those promises have been broken.

 Obamacare is collapsing — and we must act decisively to protect all Americans. Action is not a choice — it is a necessity.

So I am calling on all Democrats and Republicans in the Congress to work with us to save Americans from this imploding Obamacare disaster.

Here are the principles that should guide the Congress as we move to create a better healthcare system for all Americans:

First, we should ensure that Americans with pre-existing conditions have access to coverage, and that we have a stable transition for Americans currently enrolled in the healthcare exchanges.

Secondly, we should help Americans purchase their own coverage, through the use of tax credits and expanded Health Savings Accounts — but it must be the plan they want, not the plan forced on them by the Government.

 Thirdly, we should give our great State Governors the resources and flexibility they need with Medicaid to make sure no one is left out.

Fourthly, we should implement legal reforms that protect patients and doctors from unnecessary costs that drive up the price of insurance — and work to bring down the artificially high price of drugs and bring them down immediately.

Finally, the time has come to give Americans the freedom to purchase health insurance across State lines — creating a truly competitive national marketplace that will bring cost way down and provide far better care.

Everything that is broken in our country can be fixed. Every problem can be solved. And every hurting family can find healing, and hope.

Our citizens deserve this, and so much more — so why not join forces to finally get it done? On this and so many other things, Democrats and Republicans should get together and unite for the good of our country, and for the good of the American people.

My administration wants to work with members in both parties to make childcare accessible and affordable, to help ensure new parents have paid family leave, to invest in women’s health, and to promote clean air and clear water, and to rebuild our military and our infrastructure.

True love for our people requires us to find common ground, to advance the common good, and to cooperate on behalf of every American child who deserves a brighter future.

An incredible young woman is with us this evening who should serve as an inspiration to us all.

Today is Rare Disease day, and joining us in the gallery is a Rare Disease Survivor, Megan Crowley. Megan was diagnosed with Pompe Disease, a rare and serious illness, when she was 15 months old. She was not expected to live past 5.

On receiving this news, Megan’s dad, John, fought with everything he had to save the life of his precious child. He founded a company to look for a cure, and helped develop the drug that saved Megan’s life.

Today she is 20 years old — and a sophomore at Notre Dame. Megan’s story is about the unbounded power of a father’s love for a daughter.

But our slow and burdensome approval process at the Food and Drug Administration keeps too many advances, like the one that saved Megan’s life, from reaching those in need.

If we slash the restraints, not just at the FDA but across our Government, then we will be blessed with far more miracles like Megan. In fact, our children will grow up in a Nation of miracles.But to achieve this future, we must enrich the mind — and the souls — of every American child.

Education is the civil rights issue of our time. I am calling upon Members of both parties to pass an education bill that funds school choice for disadvantaged youth, including millions of African-American and Latino children. These families should be free to choose the public, private, charter, magnet, religious or home school that is right for them.

We want all children to be able to break the cycle of poverty just like Denisha. But to break the cycle of poverty, we must also break the cycle of violence. The murder rate in 2015 experienced its largest single-year increase in nearly half a century.

In Chicago, more than 4,000 people were shot last year alone — and the murder rate so far this year has been even higher. This is not acceptable in our society.

Every American child should be able to grow up in a safe community, to attend a great school, and to have access to a high-paying job. But to create this future, we must work with — not against — the men and women of law enforcement.

We must build bridges of cooperation and trust — not drive the wedge of disunity and division.

Police and sheriffs are members of our community. They are friends and neighbors, they are mothers and fathers, sons and daughters — and they leave behind loved ones every day who worry whether or not they’ll come home safe and sound. We must support the incredible men and women of law enforcement. And we must support the victims of crime.

I have ordered the Department of Homeland Security to create an office to serve American Victims. The office is called VOICE — Victims Of Immigration Crime Engagement. We are providing a voice to those who have been ignored by our media, and silenced by special interests.

Joining us in the audience tonight are four very brave Americans whose government failed them.Their names are Jamiel Shaw, Susan Oliver, Jenna Oliver, and Jessica Davis.

Jamiel’s 17-year-old son was viciously murdered by an illegal immigrant gang member, who had just been released from prison. Jamiel Shaw Jr. was an incredible young man, with unlimited potential who was getting ready to go to college where he would have excelled as a great quarterback. But he never got the chance. His father, who is in the audience tonight, has become a good friend of mine.

Also with us are Susan Oliver and Jessica Davis. Their husbands — Deputy Sheriff Danny Oliver and Detective Michael Davis — were slain in the line of duty in California. They were pillars of their community. These brave men were viciously gunned down by an illegal immigrant with a criminal record and two prior deportations

Sitting with Susan is her daughter, Jenna. Jenna: I want you to know that your father was a hero, and that tonight you have the love of an entire country supporting you and praying for you.

To Jamiel, Jenna, Susan and Jessica: I want you to know — we will never stop fighting for justice. Your loved ones will never be forgotten, we will always honor their memory.

Finally, to keep America Safe we must provide the men and women of the United States military with the tools they need to prevent war and — if they must — to fight and to win.

I am sending the Congress a budget that rebuilds the military, eliminates the Defense sequester, and calls for one of the largest increases in national defense spending in American history.

My budget will also increase funding for our veterans. Our veterans have delivered for this Nation — and now we must deliver for them.

The challenges we face as a Nation are great. But our people are even greater. And none are greater or braver than those who fight for America in uniform.

We are blessed to be joined tonight by Carryn Owens, the widow of a U.S. Navy Special Operator, Senior Chief William “Ryan” Owens. Ryan died as he lived: a warrior, and a hero — battling against terrorism and securing our Nation.

I just spoke to General Mattis, who reconfirmed that, and I quote, “Ryan was a part of a highly successful raid that generated large amounts of vital intelligence that will lead to many more victories in the future against our enemies.” Ryan’s legacy is etched into eternity.

For as the Bible teaches us, there is no greater act of love than to lay down one’s life for one’s friends. Ryan laid down his life for his friends, for his country, and for our freedom — we will never forget him.

To those allies who wonder what kind of friend America will be, look no further than the heroes who wear our uniform.

Our foreign policy calls for a direct, robust and meaningful engagement with the world. It is American leadership based on vital security interests that we share with our allies across the globe.

We strongly support NATO, an alliance forged through the bonds of two World Wars that dethroned fascism, and a Cold War that defeated communism.But our partners must meet their financial obligations.

And now, based on our very strong and frank discussions, they are beginning to do just that.

We expect our partners, whether in NATO, in the Middle East, or the Pacific — to take a direct and meaningful role in both strategic and military operations, and pay their fair share of the cost.

We will respect historic institutions, but we will also respect the sovereign rights of nations.

Free nations are the best vehicle for expressing the will of the people — and America respects the right of all nations to chart their own path. My job is not to represent the world. My job is to represent the United States of America. But we know that America is better off, when there is less conflict — not more.

We must learn from the mistakes of the past — we have seen the war and destruction that have raged across our world.

The only long-term solution for these humanitarian disasters is to create the conditions where displaced persons can safely return home and begin the long process of rebuilding.

America is willing to find new friends, and to forge new partnerships, where shared interests align. We want harmony and stability, not war and conflict.

We want peace, wherever peace can be found. America is friends today with former enemies. Some of our closest allies, decades ago, fought on the opposite side of these World Wars. This history should give us all faith in the possibilities for a better world.

Hopefully, the 250th year for America will see a world that is more peaceful, more just and more free.

On our 100th anniversary, in 1876, citizens from across our Nation came to Philadelphia to celebrate America’s centennial. At that celebration, the country’s builders and artists and inventors showed off their creations.

Alexander Graham Bell displayed his telephone for the first time.Remington unveiled the first typewriter. An early attempt was made at electric light Thomas Edison showed an automatic telegraph and an electric pen.

Imagine the wonders our country could know in America’s 250th year. Think of the marvels we can achieve if we simply set free the dreams of our people.

Cures to illnesses that have always plagued us are not too much to hope. American footprints on distant worlds are not too big a dream.

Millions lifted from welfare to work is not too much to expect. And streets where mothers are safe from fear — schools where children learn in peace — and jobs where Americans prosper and grow — are not too much to ask.

When we have all of this, we will have made America greater than ever before. For all Americans. This is our vision. This is our mission. But we can only get there together. We are one people, with one destiny. We all bleed the same blood. We all salute the same flag.And we are all made by the same God.

And when we fulfill this vision; when we celebrate our 250 years of glorious freedom, we will look back on tonight as when this new chapter of American Greatness began.

The time for small thinking is over. The time for trivial fights is behind us. We just need the courage to share the dreams that fill our hearts.

The bravery to express the hopes that stir our souls. And the confidence to turn those hopes and dreams to action. From now on, America will be empowered by our aspirations, not burdened by our fears —inspired by the future, not bound by the failures of the past and guided by our vision, not blinded by our doubts.

I am asking all citizens to embrace this Renewal of the American Spirit. I am asking all members of Congress to join me in dreaming big, and bold and daring things for our country. And I am asking everyone watching tonight to seize this moment and —

Believe in yourselves. Believe in your future. And believe, once more, in America.

Thank you, God bless you, and God Bless the United States.

Senator (Vermont) Bernie Sanders’ Response to President Donald Trump’s Address to Congress

The State of Asia Pacific Free Trade


February 11, 2017

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Number 370 | February 10, 2017
ANALYSIS

The State of Asia Pacific Free Trade

By Eduardo Pedrosa

On January 23, three days after taking office, President Donald Trump issued a memorandum to permanently withdraw the United States from the Trans-Pacific Partnership (TPP), fulfilling one of his campaign promises. The decision came amidst rising concerns about the future of globalization. Since 2006, the Pacific Economic Cooperation Council (PECC) has been undertaking an annual survey of policy experts to provide insights into the debate about free trade and globalization. The belief that the best route to growth is through freer trade is under siege, with accusations from seemingly opposite poles of the political spectrum, that globalization only benefits the top ten or even 1 percent of citizens of a particular country.

Trade-skeptic sentiments are strongest in high income economies. As seen in the PECC survey, respondents from high income economies like the United States gave the lowest assessment of the political environment for freer trade with a net favorability rating of only +16 percent, compared to +41 percent in emerging economies. While the decision to withdraw the US from the TPP may have been driven by opposition to this particular trade deal rather than free trade generally, it will nonetheless hamper attempts to modernize trade rules already out of synch with commercial reality.

In place of the TPP, the Trump administration has said that it will pursue a series of bilateral deals, an approach that runs counter to a trend to consolidate multi-member trade deals in the Asia-Pacific region.  The Regional Comprehensive Economic Partnership (RCEP) negotiations, for example, are an attempt to consolidate ASEAN’s existing bilateral agreements, and the Pacific Alliance (PA) consolidates a series of bilateral agreements among Latin American economies.

The reason for this consolidation was that the “spaghetti bowl” of bilateral agreements was making it harder and more costly to do business, especially for smaller firms. Much of the increase in global trade in recent years has come from the emergence of global value chains. These international chains of production require components to cross borders multiple times. Global value chains have led to a significant reduction in the prices of goods such as cars and mobile phones, making them more affordable for consumers. However, complex rules of origin in bilateral deals made them hard to use and hence costs were passed on to the consumer.

The introduction of more border taxes will raise costs for consumers, and is unlikely to create the kinds of jobs people hope for. Where businesses choose to base production depends on a variety of factors – proximity to the market, availability of skills, ease of doing business, and the applicable tax regime. The current uncertainty over policy is adding to the economic volatility evident since the 2008 Global Financial Crisis, with businesses taking a ‘wait and see’ attitude towards hiring and capital expenditure. One reason for this attitude is uncertainty and negative expectations for future global growth. Increased trade frictions are likely to lead to even greater caution from members of the corporate sector, encouraging them to keep even more cash on their balance sheets. Concerns about protectionism are rising dramatically, with 32 percent of respondents to the PECC survey selecting it as a top five risk to economic growth compared to 16 percent two years ago. North Americans were the most worried about the impact of rising protectionism on their economies with 52 percent of respondents picking it as a top five risk to growth (making it the 2nd highest risk).

“If progress is made on trade deals such as the RCEP and PA, businesses will view the economies involved as beneficial locations to operate.”

If progress is made on trade deals such as the RCEP and PA, businesses will view the economies involved as beneficial locations to operate because of lower costs, a predictable trade environment, and proximity to the world’s fastest growing markets. A fifth of North American respondents to the PECC survey thought that the RCEP would have a negative impact on their economy – echoing a concern from an earlier era about ‘drawing a line down the Pacific.’ This uncertainty about transpacific cooperation comes at a critical juncture – over the next 5 years the Asia-Pacific is expected to account for almost two-thirds of all global growth.

The PECC survey results also give some indication of the challenges to freer trade today. Respondents were asked to rate different factors that influence attitudes toward freer trade: income inequality, job security, failure to communicate the benefits of trade, slower global economic growth, and sustained political leadership. Two findings stand out: First, North American respondents were much more concerned about all factors compared to all other survey respondents; and second, there are problems with perceptions about trade (the failure to communicate) and other deeper problems such as rising income inequality and job insecurity.

While a lot of energy and time will be expended on the future of globalization, the critical question is: where are jobs and growth going to come from? Over the past 4 years two-thirds of the region’s growth has come from the services sector, compared to 28 percent from the manufacturing sector. At an average of 57 percent of total output, the services sector in the region’s emerging economies is smaller compared to 80 percent of total output in more advanced economies. Moreover, the way in which services are being delivered is changing – 70 percent of respondents to PECC’s survey thought that digital trade, e-commerce, and the internet economy would be very or extremely important to the future growth of their economies.

While tariffs and border taxes have come down from an average of 17 percent to less than 6 percent, many of the barriers that remain are regulatory in nature. Two-thirds of respondents to PECC’s survey selected transparency, multiple layers of authority, and predictability of regulations as serious or very serious impediments to services trade. These issues are not easily dealt with in the context of trade negotiations – for the most part they are not designed with foreign trade in mind, but are put in place to protect other concerns such as consumer safety. A forward-looking trade agenda needs to find ways to reduce the burden on businesses to allow them to grow – creating jobs and lowering prices.

The Asia-Pacific is undergoing a period of historic change and its trajectory, now more than ever, is unclear. Given the large populations and rising incomes, it is most likely to remain the center of global growth for decades. While the Asia-Pacific policy community remains committed to freer trade, there are significant differences on the domestic political economy of freer trade. A trade agenda that addresses the concerns of those negatively impacted by trade will be critical to continuing the forward momentum in making free trade more desirable and sustainable.

About the Author

Eduardo Pedrosa is the Secretary General of the Pacific Economic Cooperation Council (PECC). He can be contacted at Eduardo.Pedrosa@PECC.org
The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

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Shock End to TPP from Trump


January 25, 2017

Mr. Trump don’t antagonise the rest of us with new unilateral tariffs and thuggish threats

by Philip Bowring

http://www.asiasentinel.com/econ-business/shock-end-tpp-donald-trump/

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HE Prime Minister Hun Sen and HE President Xi of China–Partnership for Peace and Development

Buy Korea, buy Japanese, buy Taiwanese, buy Australian, buy Singaporean, buy Thai, buy Vietnamese, even buy Chinese. Forget about Apple, McDonalds, Goldman Sachs, Citibank, Ford, Boeing – there’s always an alternative.

That is the message that President Donald Trump has sent around the world and most of all to America’s supposed allies in Asia. The withdrawal from the Trans-Pacific Partnership, the 12-nation omnibus trade pact under development for the past seven years, was expected but the manner in which it was done in Trump’s first full day in office was salt on the wounds for the countries that had done so much themselves to push the idea of this extension of trans-Pacific cooperation.

It was accompanied by more generalised threats of new unilateral tariffs and thuggish threats against US companies which invest abroad for export to the US, with Mexico first in the firing line. Quite how much of this 180-degree reversal of bipartisan US trade and foreign policies will become reality remains a matter for conjecture.

Meanwhile, conspicuous by its absence is a roar of outrage from the US business community in Asia which for years has been pressing for more open trade and always quick to condemn Asian governments for backsliding on trading and investment commitments.

AMCHAMS: explain your silence. Are your business leaders so dominated by Republican loyalists that you now treat as dispensable the values you have been preaching for decades? For the US to have gripes against specific countries or products is one thing. They can be addressed on a case by case basis. But Trump is waving a sword which cuts indiscriminately.

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It may be true that the US originally gave China too easy a ride into its markets and the WTO and got inadequate access in return under the illusion that economic success would make China more liberal and democratic, as well as more open to US products. But that was then. Now crude anti-China measures simply endanger the very global trading system that the US has, mostly to its benefit, wrought over the past 60 years. If the US can treat its TPP friends in that way he has done, one shudders at what he may want to do with China.

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Retaliation is premature but at least must be considered for the not so distant future. Australia, perhaps surprisingly, has made a good start by urging that TPP go ahead anyway without the US. The key now must be to prevent US protectionism from becoming generic. That does not mean no retaliation but that any retaliation is specific. Meanwhile individuals can have their own trade policies, starting with any business named after Trump or which supplied any of the leading figures in his administration.

The US could start by getting away from the fantasy that its economic problems are the fault of its trade deficit. Once the US-owned brand and intellectual property costs, and returns on its investment in overseas manufacture, are factored into the overall trade picture, the deficit shrinks. The official current account deficit is only about 2% of GDP, very much less than countries such as Australia and the UK have been exceeding for decades. Include all the profits of thousands of US-owned companies, held in offshore tax havens and there may well no current account deficit at all.

The delusions about trade are even more marked in the case of China. The domestic value added in China’s exports to the US averages only about 65 percent compared with 85 percent in exports from Japan. In cases of items such as electronics the Chinese component is significantly less due to high value components from Japan and elsewhere. The US would be crazy to assume that labour-intensive, low value products like toys and sneakers, where the China valued-added percentage is highest, have a place in the US goal of reviving manufacturing employment.

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But now that the US electoral system has brought to power someone as detached from reality as Trump, craziness seems set to triumph, at least for a while.

 

Donald Trump could be the best thing that’s happened to China in a long time


January 15, 2017

Donald Trump could be the best thing that’s happened to China in a long time

by Fareed Zakaria*

https://www.washingtonpost.com

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Donald Trump has perhaps attacked no country as consistently as China. During his campaign, he thundered that China was “raping” the United States, “killing” us on trade and artificially depressing its currency to make its goods cheap. Since being elected, he has spoken to the leader of Taiwan and continued the bellicosity toward Beijing. So it was a surprise to me, on a recent trip to Beijing, to find Chinese elites relatively sanguine about Trump. It says something about their view of Trump, but perhaps more about how they see their own country.

“Trump is a negotiator, and the rhetoric is all part of his opening bid,” said a Chinese scholar, who would not agree to be named (as was true of most policymakers and experts I spoke with). “He likes to make deals,” the scholar continued, “and we are good dealmakers as well. There are several agreements we could make on trade.” As one official noted to me, Beijing could simply agree with Trump that it is indeed a “currency manipulator” — although it has actually been trying to prop up the yuan over the past two years. After such an admission, market forces would likely make the currency drop in value, lowering the price of Chinese goods.

Chinese officials point out that they have economic weapons as well. China is a huge market for U.S. goods, and last year the country invested $46 billion in the U.S. economy (according to the Rhodium Group). But the officials’ calm derives from the reality that China is becoming far less dependent on foreign markets for its growth. Ten years ago, exports made up a staggering 37 percent of China’s gross domestic product. Today they make up just 22 percent and are falling.

China has changed

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China has changed. Western brands there are rare, and the country’s own companies now dominate almost every aspect of the huge and growing domestic economy. Few businesses take their cues from U.S. firms anymore. Technology companies are innovating, and many young Chinese boasted to me that their local versions of Google, Amazon and Facebook were better, faster and more sophisticated than the originals. The country has become its own, internally focused universe.

This situation is partly the product of government policy. Jeffrey Immelt , the Chief Executive of General Electric, noted in 2010 that China was becoming hostile to foreign firms. U.S. tech giants have struggled in China because of formal or informal rules against them.

The next stage in China’s strategy is apparently to exploit the leadership vacuum being created by the United States’ retreat on trade. As Trump was promising protectionism and threatening literally to wall off the United States from its southern neighbor, Chinese President Xi Jinping made a trip through Latin America in November, his third in four years. He signed more than 40 deals, Bloomberg reported, and committed billions of dollars of investments in the region.

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Chinese global leadership on trade gaining support from ASEAN, Australia and New Zealand

The centerpiece of China’s strategy takes advantage of Trump’s declaration that the Trans-Pacific Partnership is dead. The trade deal, negotiated between the United States and 11 other countries, lowered barriers to trade and investment, pushing large Asian economies such as Japan and Vietnam in a more open and rule-based direction. Now China has offered up its own version of the pact, one that excludes the United States and favors China’s more mercantilist approach.

Australia, once a key backer of the TPP, has announced that it supports China’s alternative. Other Asian countries will follow suit soon.

At the Asia-Pacific Economic Cooperation summit in Peru in November, John Key, who was then New Zealand’s prime minister, put it simply: “[The TPP] was all about the United States showing leadership in the Asia region. . . . We really like the U.S. being in the region. . . . But in the end if the U.S. is not there, that void has to be filled. And it will be filled by China.”

Xi’s speech at the summit was remarkable, sounding more like an address traditionally made by an American President. It praised trade, integration and openness and promised to help ensure that countries don’t close themselves off to global commerce and cooperation.

Next week, Xi will become the first Chinese President to attend the World Economic Forum at Davos, surely aiming to reinforce the message of Chinese global leadership on trade. Meanwhile, Western leaders are forfeiting their traditional roles. Angela Merkel and Justin Trudeau announced last-minute cancellations of their plans to speak at the Swiss summit. Trump has only made sneering references to globalism and globalization, and no senior member of his team currently plans to attend.

Looking beyond Trump’s tweets, Beijing seems to have concluded that his presidency might well prove to be the best thing that’s happened to China in a long time.

*Fareed Zakaria writes a foreign affairs column for The Post. He is also the host of CNN’s Fareed Zakaria GPS and a contributing editor for The Atlantic. Follow @FareedZakaria

2016–The Harbinger of Troubled and Uncertain Times in 2017


December 20, 2016

2016–The Harbinger of Troubled and Uncertain Times in 2017

by Martin Khor@www.thestar.com.my

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‘It Is Our Soul’: The Destruction of Aleppo, Syria’s Oldest City : Information Clearing House: ICH
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The year 2016 will be remembered for the West ending its romance with globalisation, and its impact on the rest of the world.

JUST a few days before Christmas, it is time again to look back on the year that is about to pass. What a strange year it has been, and not one we can  truly celebrate!

The top event was Donald Trump’s unexpected victory. It became the biggest sign that the basic framework and values underpinning Western societies since the Second World War have undergone a seismic change.

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The established order represented by Hillary Clinton was resoundingly defeated by the tumultuous wave Trump generated with his promise to stop the United States from pandering to other countries so that it could become “great again”.

Early in the year came the Brexit vote shock, taking Britain out of the European Union. It was the initial signal that the liberal order created by the West is now being quite effectively challenged by their own masses.

Openness to immigrants and foreigners is now opposed by citizens in Europe and the US who see them as threats to jobs, national culture and security rather than beneficial additions to the economy and society.

The long-held thesis that openness to trade and foreign investments is best for the economy and underpins political stability is crumbling under the weight of a sceptical public that blames job losses and the shift of industries abroad on ultra-liberal trade and investment agreements and policies.

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Thus, 2016 which started with mega trade agreements completed (Trans-Pacific Partnership) or in the pipeline (the Transatlantic Trade and Investment Partnership between the US and Europe) ended with both being dumped by the President Elect, a stunning reversal of the decades-old US position advocating the benefits of the open economy.

2016 will be remembered as the year when the romance in the West with “globalisation” was killed by a public disillusioned and outraged by the inequalities of an economic system tilted in favour of a rich minority, while a sizeable majority feel marginalised and discarded.

In Asia, the dismantling of the globalisation ideal in the Western world was greeted with a mixture of regret, alarm and a sense of opportunity.

Many in this region believe that trade and investment have served several of their countries well. There is fear that the anti-globalisation rebellion in the West will lead to a rapid rise of protectionism that will hit the exports and industries of Asia.

As Trump announced he would pull the US out of the TPP, China stepped into the vacuum vacated by the US and pledged to be among the torchbearers of trade liberalisation in the Asia-Pacific region and possibly the world.

The change of direction in the US and to some extent Europe poses an imminent threat to Asian exports, investors and economic growth. But it is also an opportunity for Asian countries to review their development strategies, rely more on themselves and the region, and take on a more active leadership role.

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China made use of 2016 to prepare for this, with the Asian Infrastructure Investment Bank taking off and the immense Belt and Road Initiative gathering steam. Many companies and governments are now latching on to the latter as the most promising source of future growth.

The closing months of 2016 also saw a surprising and remarkable shift in position by the Philippines (and Malaysia too for a different set of reasons), whose new President took big steps to reconcile with China over conflicting claims in the South China Sea, thus defusing the situation – at least for now.

Unfortunately, the year also saw heart-rending reports on the plight of the Rohingya in Myanmar, and the deaths of thousands of Syrians including those who perished or were injured in the end-game in Aleppo.

On the environmental front, it is likely 2016 will be the hottest year on record, overtaking 2015. This makes the coming into force in October of the Paris Agreement on climate change all the more meaningful.

But there are two big problems. First, the pledges in the agreement are grossly insufficient to meet the level of emissions cuts needed to keep the world safe from global warming, and there is also insufficient financing to support the developing countries’ climate actions, whether on mitigation or adaptation.

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And second, there is a big question mark on the future of the Paris agreement as Trump had vowed to take the US out of it.

The biggest effect of 2016 could be that a climate skeptic was elected US President.In the area of health, the dangers of antibiotic resistance went up on the global agenda with a declaration and day-long event involving political leaders at the United Nations in September.

There was growing evidence and stark warnings in 2016 that we are entering a post-antibiotic era where medicines will no longer work and millions will die from infection and ailments that could once be easily treated by antibiotics.

The world will also be closing in a mood of great economic uncertainty. In 2016 the world economy overall didn’t do well but also not too badly, with growth rates projected at 2.4 to 3%.

But for developing economies like Malaysia, the year ended with worries that the high capital inflows of recent years are reversing as money flows back to the US. The first in an expected series of interest rate increases came last week.

All in all, there was not much to rejoice about in 2016, and worse still it built the foundation for more difficulties to come in 2017.

So we should enjoy the Christmas/New Year season while we can. Merry Christmas to all readers!

Martin Khor (director@southcentre.org) is executive director of the South Centre.