Thursday, June 30, 2016

Joint statement by the Prime Minister of Canada and the President of the United States on softwood lumber

OTTAWAJune 29, 2016 /CNW/ - Given the great importance of the softwood lumber industry to the economies of the United States and Canada, on March 10, 2016, we instructed the United States Trade Representative and the Canadian Minister of International Trade to intensively explore all options and report back on the key features that would address the issue.
In response to these instructions, our Ministers and their teams have been meeting diligently on softwood lumber over the past three months. These discussions have been challenging but productive.
A Vital Sector
The softwood lumber industry is a vital sector for both the United States and Canada, and bilateral trade and investment in softwood lumber is key to the competitiveness of our industries. The U.S. and Canadian federal governments have made significant advances in understanding our industries' sensitivities and priorities since March. The United States and Canada are working together to find a path forward that reflects our shared goals and that results in durable and equitable solutions for softwood lumber producers from both countries. 
Canada has long been the largest source of imports of softwood lumber to the U.S. market and the United States is by far Canada's most important customer. Extensive cross-border investment also exists, with U.S. firms operating lumber mills in Canada and Canadian firms making investments in the United States.  Firms in both countries also have worked jointly and in parallel to develop markets for softwood lumber.
Common Goals for Pursuing a New and Durable Agreement
A new softwood lumber agreement will need to reflect the realities of Canadian timber management policies and the U.S. domestic market. A new agreement must be equitable and provide a predictable business environment that gives producers on both sides of our border the ability to react confidently to changing market conditions. Any agreement must deliver a durable and equitable solution and benefit softwood lumber producers from Canada and the United States, related industries and consumers, and support the overall economic well-being of both countries. On the basis of discussions to date, our governments are committed to working to achieve such an agreement.
Key Features
Efforts to achieve such an outcome will be facilitated by focussing on the following key features: 
  • an appropriate structure, designed to maintain Canadian exports at or below an agreed U.S. market share to be negotiated, with the stability, consistency and flexibility necessary to achieve the confidence of both industries;
  • provisions for region or company exclusions if justified;
  • provisions promoting regional policies that eliminate the underlying causes of trade frictions, including a regional exits process that is meaningful, effective and timely, recognizing that should an exit be granted, it would be reversible if the circumstances justifying the exit change;
  • provisions to ensure information collection and exchange to create meaningful transparency;
  • institutional arrangements to administer the agreement;
  • effective enforcement tools that are neutral, transparent, binding, expeditious, and well-timed to address concerns as they arise;
  • associated commitments regarding the use of trade remedies;
  • provisions for appropriate duration and flexibility to anticipate and adapt to a range of market situations, industry innovations, and shifting demand patterns;
  • provisions to address other issues, such as product scope, remanufacturers and joint market development.
Next Steps
The United States and Canada have made important progress in our negotiations, but significant differences remain regarding the parameters of the key features. Our governments will explore approaches to ensure effective management of the agreed market share. We are encouraged that both industries remain committed to working toward an agreement and will continue to consider ideas for achieving that objective. Our dialogue will continue and, building on the progress achieved to date, our Ministers will maintain an intensive pace of engagement with a view to achieving a mutually-acceptable agreement this fall, bearing in mind the expiration of standstill after October 12, 2016.
This document is also available at http://pm.gc.ca

BELOW IS AN EXPANDED VERSION OF THE DELIVERED REMARKS WHICH WAS SUBMITTED FOR THE RECORD TO THE EUROPEAN PARLIAMENT

Statement submitted to the European Parliament.
George Soros. 30 June, 2016.
                                   
When I was invited to address this joint hearing, the refugee crisis was the greatest problem Europe faced. Since then it has played a crucial role in what could prove to be an even greater calamity — Brexit.

The vote for Brexit was a great shock to me and, I imagine, to most people in this room. Last Friday morning, the disintegration of the European Union seemed practically inevitable.

But as the initial disbelief wore off, something unexpected happened, and the tragedy no longer looks like a fait accompli.

Over the past week, buyer’s remorse has begun to set in, as the hypothetical became very real: sterling plunged, Scotland threatened to break away, and some of the working people who supported the “leave” campaign started to realize the bleak future that both the country and they personally face. Even the champions of leave are retracting their dishonest pre-referendum claims about Brexit.

In a spontaneous response, over four million people petitioned Parliament to hold a second referendum. By the time the Parliamentary debate on this petition takes place, it is not inconceivable that more people will have signed the petition than voted for Brexit.

Just as Brexit was a negative surprise, the spontaneous response to it is a positive one. People on both sides of the referendum, and most importantly those who did not vote—particularly young people under 35—have become mobilized. This is the kind of grass roots involvement that the European Union has never been able to generate.

The referendum has highlighted for people in Britain just what they stand to lose by leaving the EU. If this sentiment spreads not only in Britain, but also in the rest of Europe, what seemed like the inevitable disintegration of the EU could instead create positive momentum for a stronger and better Europe.

The process could start in Britain. The popular vote cannot be reversed but a signature collecting campaign could transform the political landscape by revealing a newfound enthusiasm for EU membership. This approach could then be replicated in the rest of the European Union by forming a movement that would seek to save the EU by profoundly restructuring it. I am convinced that as the consequences of Brexit unfold in the months ahead, more and more people will be eager to join this movement.

What the EU should not do is penalize British voters while ignoring their legitimate concerns about the deficiencies of the European Union.

European leaders should recognize their own mistakes and acknowledge the democratic deficit in the current institutional arrangements. Rather than seeing Brexit as the negotiation of a divorce, they should seize it as an opportunity to fundamentally reform the EU. Their goal should be the creation of a reinvented EU that the UK and other countries at risk of exit would want to join.

Will disaffected voters in France, Germany, Sweden, Italy, Poland and elsewhere see the EU benefitting their lives? If the answer is yes, the EU will emerge stronger.  If the answer is no, it will eventually blow apart.

***

Unfortunately, Brexit has not only created an opening to reinvent the European Union, it has also aggravated two looming dangers.

First, it unleashed a crisis in the financial markets comparable in severity only to that of 2007/8. This has been unfolding in slow motion, but Brexit has accelerated it. It is likely to reinforce the deflationary trends that were already prevalent.

The Eurozone has been lagging in the global recovery because of restrictive fiscal policies; now it has to contend with an impending slowdown. The orthodoxy of the German policymakers stands in the way of the only effective response:  having a Eurozone budget that could adopt counter-cyclical policies.

Meanwhile, the banking system of continental Europe has not recovered from the earlier crisis; it will now be severely tested. We know what needs to be done. Unfortunately, political and ideological disagreements within the Eurozone have stood in the way of using the European Stability Mechanism (ESM) as a backstop for banks as well as sovereigns.

Second, the EU faces growing military threats. Our external enemies have been emboldened. They pose new, as-yet unfathomable dangers in various parts of the wider region that are also liable to aggravate the refugee crisis.

It is against this background that I propose to discuss the refugee crisis, with special emphasis on the financial needs it presents.

***

The European response to the refugee crisis was riddled with flaws even before the present turn of events.

Chancellor Merkel showed great moral leadership when she opened Germany’s doors wide to refugees. Unfortunately, her initiative was not well thought through; it ignored the pull factor. When the sudden influx of migrants overwhelmed the capacity of the authorities, public opinion turned against her. That is when she struck her ill-fated deal with Erdogan.

I have identified the flaws of that deal in detail.

First, it was not truly European; it was imposed on Europe by Chancellor Merkel.

Second, it was severely underfunded.

Third, it was not voluntary: it imposed quotas that many member states opposed and required refugees to take up residence in countries where they were not welcome, while forcing others who reached Europe by irregular means to be returned to Turkey.

Finally, it transformed Greece into a de facto holding pen with inadequate facilities.

Since then, the situation has only deteriorated. Member states have become increasingly unwilling to cooperate with one another, and are pursuing discordant policies. While migrant flows to Greece have eased considerably, they have surged in the Central Mediterranean.

In these circumstances, a comprehensive and coherent European asylum policy is not possible. The trust needed for cooperation is lacking. It will have to be rebuilt through a long and laborious process.

***

This process should start by addressing the dire lack of financial resources.

Without sufficient funding, the EU cannot perform the functions it was designed for nor meet the expectations of the European people. And because it fails to achieve the objectives it has set for itself, the Union loses its legitimacy and the support of its citizens.

The refugee crisis illustrates the problem. At least €30 billion a year will be needed both inside the Union—to build effective border and asylum agencies, to ensure dignified reception conditions, fair asylum procedures and opportunities for integration—as well as outside its borders—to support refugee-hosting countries and to spur job creation throughout Africa and the Middle East. This does not include the costs borne by member states, which are on track to spend upwards of €200 billion between 2015 and 2020 on refugee reception and integration.

The refugee crisis should not pervert our relationships with neighboring countries as it has with Turkey. I am concerned that in its latest communication on migration and external relations, the Commission calls for making development funds contingent on the implementation of migration controls by African partners. This violates decades of practice in development funding and risks a race to the bottom in the treatment of migrants and refugees. The grand bargain with African and other countries cannot simply be that, if you stop migrants from coming to Europe, you will receive financial aid. A meaningful grand bargain would focus on real development in Africa that over a generation would actually address the root causes of the crisis. This means free trade, massive investment, and a commitment to rooting out corruption.  Leaders in Europe have called for a Marshall Plan for Africa. This is an admirable ambition. But when it comes to the details, Europe is a far away from such a vision. The United States invested 1.4% of its GDP to help rebuild Europe—every year for four years. An investment on the scale of the original Marshall Plan would require around €271 billion a year for the next four years.

The political and economic costs of inaction would be even greater. Brexit is the starkest example of these consequences. But we also have compromised the Schengen system, driving up the economic costs.

Given that its very survival is at stake, the EU should be putting all of its available resources to use. And yet the triple-A credit of the Union has barely been deployed. This is the height of irresponsibility.

The current approach is based on reallocating minimal resources from the EU budget and then asking Member States to contribute to various dedicated vehicles, such as the Turkish Facility and the Trust Fund for Syria. This can only be a temporary solution, as it is neither sustainable and nor large enough to finance efforts that must grow in size and scope (such as a European border force). These trust funds are powerful instruments in the short term to redeploy resources and allow member states to commit more resources to a particular endeavor, but they also illustrate the fundamental deficiency of the EU budget, i.e. that it remains dependent on the good will of the member states at each step.

In order to raise the necessary funds in the short term, the EU will need to engage in what I call “surge funding.” This entails raising debt by leveraging the EU’s relatively small budget, rather than scraping together insufficient funds year after year. During the financial crisis, the EU has repeatedly put its borrowing capacity on display, establishing financial instruments capable of quickly borrowing tens of billions of euros on attractive terms.  Once Europe’s leaders make a political decision to act, they can move quickly.

There is a strong case to be made for using the EU’s balance sheet. Tapping into the triple-A credit of the EU has the additional advantage of providing a much-needed economic stimulus for Europe. With global interest rates at historic lows, now is a particularly favorable moment to take on such debt.

In the short term, reforms of the EU’s existing instruments would allow a far more effective mobilization of resources than the creation of new ones. Two sources of money in particular—the European Financial Stability Mechanism (EFSM) and the Balance of Payments Assistance Facility (BoP)—should be put to the task. These sources complement each other: the EFSM was designed for loans to euro-area members, whereas the BoP is for EU members that do not belong to the Eurozone. Both kinds of loans will be necessary for a comprehensive approach to the crisis. Both also have similar institutional structures, and both are backed entirely by the EU budget—and therefore do not require national guarantees or national parliamentary approval.

The Macro Financial Assistance facility (MFA) is yet another source of borrowing specifically designed for actions outside of the EU. It has proven an important instrument in countries like Ukraine but it needs a new framework agreement. (This is urgent because a framework agreement takes a long time to enact and the current Ukrainian government deserves more support than the EU is currently able to offer.)

The combined gross borrowing capacity of the EFSM and the Balance of Payments assistance facility is €110 billion. The borrowing power of the latter is almost completely unused. The EFSM has made some €46.8 billion worth of loans to Portugal and Ireland and its spare capacity grows each year as those loans are repaid.

All the instruments mentioned add up to a substantial unused borrowing capacity.

Spending a large amount at the outset would make it much easier to manage immigration and will allow the EU to respond more effectively to some of the most dangerous consequences of the crisis.

These include the kind of anti-immigrant sentiment that fueled Brexit and is poisoning other states; support for authoritarian political parties; and despondency among those seeking refuge in Europe who now find themselves marginalized in Middle East host countries or stuck in transit in Greece.

Making large initial investments will help tip the economic, political, and social dynamics away from xenophobia towards constructive outcomes that benefit refugees and host countries alike.

***

Of course, raising more debt with the current budget will eventually pose deeper questions in light of the limited revenues of the EU budget. The situation has gotten worse over the years as the real own resources of the EU budget (such as customs duties) have shrunk. It is now time to drastically reshape how the EU’s own resources are raised.

The reduction of the EU’s resources in 2014 to 1.23% of GDP was a tragic mistake and we are paying the price for it now. The EU cannot survive with a budget of this size. I was greatly encouraged last year when Minister Schauble raised the idea of a pan-European gasoline tax. The European Parliament should seriously consider this idea.

The proper route for such a tax increase would be for the European Commission to propose new legislation to be adopted with the unanimous support of all members. This would likely fail, given unanimity rules in budgetary matters. But if a “coalition of the willing” of at least nine countries could be assembled, the Commission could act without unanimity. The proposed European financial transaction tax (FTT) sets an important precedent even if it is still a work in progress. A stable source of revenues would greatly increase the amount that the EU can borrow and would allow it to finance new initiatives.

In any case, the EU and its member states must find new sources of tax revenue. Another approach would be to levy special EU-wide taxes. The new tax revenue could come from a variety of sources, including the existing EU-wide VAT; or a new tax on travel into the EU and on visa applications, which would shift some of the burden onto non-EU citizens wishing to travel to the EU.

I accept the difficulty of raising additional tax revenue but there are encouraging precedents for instance, the Single Resolution Board that raises a levy on the banks could in principle borrow money against that levy. There are many instances where, despite institutional obstacles, the creativity of lawmakers and the Commission has allowed new instruments to emerge.

The euro area also needs a budget of its own, as a subset of the European Budget. The European Stability Mechanism created during the crisis can be seen as the embryo of such a budget but it is an intergovernmental construct subject to the vetoes of national parliaments. Member states should be encouraged to bring the ESM under the control of the European Commission and the European Parliament. In practical terms, this would amount to a transfer by the member states of the €80bn of paid-in capital they have invested in the ESM. This would also allow extending its use to other purposes like the creation of a European unemployment scheme.

Finally, I come to the legacy expenditures that have crippled the EU budget. Two items stand out: cohesion policy, with 32% of expenditures, and agriculture with 38%. These will need to be sharply reduced in the next budget cycle starting in 2021.

With these changes related to its finances, the European Union would be much stronger. It would be in a position to respond to a destructive economic slowdown, it would have the means to address the corrosive consequences of the refugee crisis both in Europe and abroad and finally it would recognize the institutional existence of the euro area and its specific fiscal and financial needs.

To sum up, the refugee crisis poses an existential threat to Europe. As I said before, it is the height of irresponsibility to allow the EU to disintegrate without utilizing all its resources. Throughout history, governments have issued bonds in response to national emergencies. When should the triple-A credit of the EU be put to use if not at a moment when the European Union is in mortal danger?

How Many People Have Been Killed By US Drone Strikes?

“Between January 2012 and February 2013,” The Intercept reported, “U.S. special operations airstrikes [Drone strikes] killed more than 200 people. Of those, only 35 were the intended targets. During one five-month period of the operation, according to the documents, nearly 90 percent of the people killed in airstrikes were not the intended targets.

UPDATE (via Mother Jones)

The Obama administration announced on Friday {July 1, 2106] that the United States has killed a much lower number of civilians in drone strikes in Pakistan, Yemen, Libya, and Somalia than have been previously estimated by outside researchers.

The Obama administration announced on Friday that the United States has killed a much lower number of civilians in drone strikes in Pakistan, Yemen, Libya, and Somalia than have been previously estimated by outside researchers.


A report from the Office of the Director of National Intelligence said that airstrikes (overwhelmingly by drones) killed between 64 and 116 civilians in those four countries from 2009 to 2015. The numbers excluded "areas of active hostilities" such as Afghanistan, Iraq, and Syria.

Tuesday, June 28, 2016

U.S. Trade Policy in the Wake of Doha: Why Unilateral Liberalization Makes Sense

By Daniel J. Ikenson

Presented at a Cato Hill Briefing in Washington, DC on July 20, 2006.
Introduction
I want to talk about a controversial subject: unilateral trade liberalization.
Some people would say it’s akin to unilateral disarmament—that we’d lose all of our leverage to encourage others to liberalize.
Others would say it’s a nice theory, but impossible politically. Perhaps. I’m not dissuaded from advocating it yet.
While there is still a small glimmer of hope that trade negotiators will achieve a major breakthrough in the languishing Doha talks, I rather doubt that will happen in a timely manner.
There is a lot of finger pointing as to who is to blame for the Round’s failures. Look, there’s plenty of blame to go around, if you want to call it blame.
The bottom line is that there simply isn’t enough interest across enough countries in real trade liberalization at this point in time. Or perhaps more precisely, there isn’t enough interest in trade liberalization that commits countries to new rules and requirements.
Doha’s likely failure does not reflect a wholesale rejection of the merits of trade liberalization. I think many countries are willing to reduce their barriers, but to varying degrees and with greater flexibilities.
It’s not a secret that countries that are more open to trade grow faster than those that are relatively closed. This is not some abstract economic theorem in search of adherents; economists of all political persuasions will agree to that. Most countries recognize that commercial engagement with the rest of the world is an economic imperative.
Just look at the trends: there were only 23 original contracting parties to the GATT in 1947, but 127 members of the WTO in 1995 (that figure is now 149).
In 1995 there were about 70 bilateral and regional agreements in effect; today there are more than 225.
In the nearly 60 years since the original GATT, industrialized countries have lowered their tariffs from 40 to 4 percent. Developing countries have followed a similar trajectory.
Most countries appreciate the necessity of international engagement. There is just a vast disparity of ambition at this point. I believe many governments don’t want to relinquish their prerogatives to change course, if the political pressure to do so becomes too strong.
So, how do we deal with this disparity of ambition? This is a major problem that besets the whole concept of multilateral reciprocity, which is the premise of the Doha Round.
When we’re dealing in this construct of a single undertaking, where liberalization in ag is conditioned upon liberalization in industrial tariffs, which is conditioned on services liberalization, which is conditioned on changes to antidumping and other rules, there is no escaping an outcome that at best reflects the lowest common denominator of ambition and at worst produces nothing—or worse than nothing, which would be a deterioration in respect for the current rules of trade and growing disdain for decisions of the WTO dispute settlement system.
Why should more ambitious countries accept an outcome that reflects the lowest common denominator of ambition? And for that matter, why should countries that are reluctant, for whatever reasons, to undertake ambitious liberalization be pressured to do so? Well, it doesn’t have to be that way! It’s not an all or nothing exercise.
These precise conditions, where countries recognize the benefits of trade liberalization but a disparity of ambition makes meaningful commitments impossible, are precisely the conditions that call for leadership from a big country. Not rhetorical leadership. Not cheerleading. But leadership through action.
But We Don’t Need Negotiations to Liberalize Trade
We don’t need negotiations to liberalize trade. We don’t need the consent of other countries to remove our own trade distortions and energize the U.S. economy.
Trade barriers and subsidies are foremost matters of domestic budgetary and economic policy. Domestic reform does not require international trade agreements.
All by itself—without need of foreign consent—the U.S. Congress can show its support for American businesses, consumers, and taxpayers by pursuing a policy of unilateral trade liberalization.
Tariffs and quotas and other protection and distortions are not assets to be relinquished only in exchange for better access abroad. They are not assets at all. They are liabilities that raise the costs of production for U.S. producers and the cost of living for American consumers, and they are especially burdensome for lower-income families.
Thus, the most compelling case for dismantling protectionist barriers and subsidy programs is not that they are “concessions” that will buy U.S. exporters access to foreign markets.
The best reason is that it would be incontrovertibly good for the U.S. economy, regardless of what other countries do with respect to their own trade barriers.
In other words, we don’t need a Doha Round to achieve the U.S. objectives of the Doha Round. Unilateral liberalization will bring better opportunities for U.S. business, greater choice and lower prices for consumers, and greater opportunity for the developing world to partake of the benefits of the global economy.
Removing barriers unilaterally could also go a long way toward advancing foreign policy objectives by breaking the links—both real and perceived—between U.S. trade policies and economic hardship in the developing world. Unconditional access to the U.S. market could foster goodwill toward the United States at a time when antipathy toward U.S. policies is growing.
Pros and Cons of Reciprocity
I am not arguing that reciprocity-based agreements have no place. They have obviously played an important role in the story of trade liberalization.
Multilateral or bilateral reciprocity can produce widespread benefits. Agreements to dismantle more barriers in more countries can be more liberalizing than the commitment of one country to unilateral reform.
The fewer obstacles there are to the free flow of goods and services throughout the world, the greater the potential for economic growth. Agreements can facilitate the consolidation of domestic reform and lock countries into commitments that become difficult to reverse (NAFTA example).
They can also help prevent backsliding. U.S. WTO commitments, for example, might prove the prevailing argument against protectionist considerations like the Schumer-Graham bill, which calls for a 27.5% tariff against all Chinese imports unless and until China revalues its currency to Congress’s liking.
Also, international trade negotiations can carry a certain gravitas that can be tapped by reform-minded constituencies to overcome resistance to liberalization on the part of entrenched domestic interests. Prospects for reform that are in a country’s best interest, but are opposed by politically powerful domestic constituencies, can improve when external pressure is harnessed and brought to bear.
My point is that reciprocity-based negotiations are not costless and can run into deadends, as I believe is the case with Doha.
First, reciprocity reinforces the fallacy that import barriers are assets to be dispensed with only in exchange for similar measures abroad. That misperception can and does retard the liberalization process in countries that are already inclined toward liberalization.
The idea that elimination of barriers already under consideration might be viewed as desirable by current or prospective negotiating partners can change the perception of those barriers from burdensome liability to negotiating chit.
Although agreements might help to consolidate and buffer domestic reforms from subsequent political motivation to backtrack, negotiations could cause countries to recoil from reforms they might otherwise undertake. Countries may be more willing to liberalize when they do it on their own terms, knowing that if push comes to shove they can reverse course.
Trade negotiations also feature an asymmetry of negotiating power between and among participants. While there are important benefits to having more leverage, there are also responsibilities and burdens.
As the world’s largest economy, the United States has a lot of negotiating leverage. But its positions are often perceived—or can be distorted to be perceived—as heavy-handed.
We’ve heard from developing countries and the NGO’s that purport to represent their interests throughout the Doha negotiations, accusations of U.S. arm-twisting and bullying.
Many have alleged that the negotiating process is the exclusive domain of a few rich countries, and that proposals are presented on a take-it-or-leave-it basis, and do not reflect concerns of smaller countries.
This asymmetry requires—in perception if not in reality—that the United States assume a greater share of the responsibility for the consequences of any agreement. So, if a trade agreement fails to deliver the advertised benefits expeditiously to the smaller, poorer countries—even if that failure may be attributable to purely domestic policy errors unrelated to the agreement, then the agreement, and by extension the United States, is to blame.
Whether that is a fair conclusion is irrelevant. The point is that by insisting on reciprocity, the United States exposes itself to the fallout from any adverse consequences or short-term adjustment costs that are likely to be incurred.
That to me can seriously undermine U.S. foreign policy and security objectives.
Trade policy is potentially a shiny carrot in a quiver full of foreign policy sticks. By opening our markets unconditionally, we not only reap the economic rewards but we might engender some good will toward the U.S. But by insisting on even a small degree of reciprocity, trade policy is no longer perceived as that shiny carrot, but rather as another bludgeon through which the U.S. expresses its hegemony.
Economic Benefits of Openness
Much research on the benefits of trade liberalization affirms a conclusion of a 2001 IMF paper, which states: “Although there are benefits from improved access to other countries’ markets, countries benefit most from liberalizing their own markets.”
I site several studies from different sources in my paper, and I believe Will has his own figures to share with you.
Import competition boosts productivity and living standards by inspiring a shift in resources away from activities in which Americans are less productive toward activities in which we are relatively more productive. It also extends family budgets, increases quality and choice, raises average productivity, and reduces the costs of production for U.S. manufacturers.
This year’s Economic Report of the President contains data comparing trends in overall consumer prices (including prices of non-traded goods and services) to the trend in import prices.
Real prices for highly traded goods fell considerably between 1997 and 2004: audio equipment (-26%), TV sets (-51%), toys (-34%), clothing (-9%). In contrast, real prices for largely nontraded products increased: whole milk (+28%), butter (+23%), ice cream (+18%), peanut butter (+9%), and sugar (+9%).
In addition to their suppressing effects on prices, imports allow consumers to benefit from a wider variety and better quality of products and services.
Americans also benefit as producers, investors, and workers when access to imports in improved. U.S. producers need imported raw material and components to lower their own costs of production. And competition for their final goods inspires greater efficiencies, exposes them to international best practices, and ultimately helps to raise productivity. When productivity rises, wages and profits tend to follow suit, benefiting workers and investors.
Through all these channels, imports help U.S. industries remain competitive at home and abroad and help the economy to grow and living standards to rise.
The benefit of better access to imports for U.S. producers translates into better access to foreign markets. Trade liberalization at home reduces costs in the supply chain, which renders businesses more competitive abroad. And when foreigners have better access to the U.S. market, they have the opportunity to earn more dollars.
The income effect on their sales in the U.S. has a measurable impact on their demand for U.S. products. As imports have increased year-after-year over the past several years, so have exports. Last year, more than $900 billion of U.S. production was exported.
In my paper, there are some charts that reflect a correlation between import growth and export growth. We tend to export more to countries from which we import more. That should make sense.
Import restrictions raise the costs of production to U.S. producers and are ultimately akin to restrictions on exports.
By raising the costs of production and by depriving foreigners of sales opportunities in the U.S., import barriers force U.S. exporters to try and sell at higher prices to foreign customers with less income.
Lower input prices mean lower production costs, which enable U.S. companies to sell more competitively abroad to customers who have greater income because of their access to the U.S. market.
But you may say, as members of Congress like to say, that the U.S. economy is already wide open. What more is there to liberalize?
Overview of U.S. Trade Barriers
Sure, average tariff is only 1.4%, which is relatively low. And, about 70 percent of all U.S. imports entered the market duty-free in 2005.
But those averages obscure certain facts—as averages tend to do.
The 1.4% average reflects the fact that products with low or no duties tend to be imported more than products subject to higher duties. That skews the average lower.
The average nominal tariff, which is just a straight average of all the product-specific tariff lines is closer to 4.9%, reflecting a range of 0-350%.
Many of the products subject to above-average tariffs are necessities, like clothing, footwear and food products (including ag products).
Products in Chapters 61 and 62 of the tariff schedule, which covers all imports of apparel and clothing accessories are the most heavily taxed at around 11.5%, which is a rate 8-times higher than the overall average.
While imports of apparel and clothing accessories accounted for only 4.3 percent of total import value in 2005, duties collected on these products accounted for nearly 35 percent of all duties collected by U.S. Customs.
Lobbyists for the U.S. textile industry and their representatives in Congress like to claim that our trade agreements and preference programs provide the world’s clothing producers with duty-free access to the U.S. market.
But the fact is that fewer than one-third of those shipments entered the U.S. duty-free last year. That’s a pretty strong indictment of the rigid rules of origin and the exorbitant costs of complying with the terms of those agreements.
Table 1 in my paper highlights some of the other products that are subject to high tariffs: other textile products, footwear, and food products feature prominently.
The costs of those duties are borne most significantly by lower-income Americans because many of those products are necessities for which demand is not very price elastic. Accordingly, lower income families devote higher proportions of their budgets to these items.
Products subject to high rates of duty are also the products that are most likely to be produced and exported by developing countries. And that burden is also reflected in the tariff and trade data.
It is of know relevance to exporters in Macau, Cambodia, Bangladesh, Sri Lanka, Pakistan, and Vietnam that the average applied tariff in the U.S. is 1.4%.
What matters to them is that their exports are subject to duties ranging from 6 to 12 times higher than that average.
What matters to them is that, although their exports constitute a small fraction of total U.S. imports, their shares of U.S. duties collected are substantial. Combined, those six poor countries account for 1 percent of total U.S. import value, but 9 percent of total duties collected.
Table 2 in my paper provides the breakout. There you will see that the average rate of duty applied to OECD countries is 0.8%, and nearly three-quarters of rich country exports enter the U.S. duty free.
But Macau’s duty rate is almost 17 percent, and only 2.7% of her exports enter the U.S. duty free.
Cambodia’s exports are subject to almost 16 percent duties, and less than 2 percent enter the U.S. duty free. The story is the same for many developing countries.
The U.S. tariff system is regressive. Lower-income Americans and workers in poor countries bear the biggest brunt of its bite.
U.S. protectionism goes well beyond perverse tariff peaks to include import quotas, antidumping measures, anti-subsidy measures, government subsidies, rules-of-origin requirements, “Buy American” provisions, and more.
All of these forms of protectionism are costly and unfair.
There has been a lot of attention focused on the trade distortions and other adverse consequences of America’s agricultural policies for developing countries. These programs are indeed egregious. Abolishing or significantly reducing U.S. ag tariffs and subsidies would help farmers in developing countries make ends meet. But they would also go a long way toward reducing wasteful government spending.
The U.S. antidumping law, which operates in a manner that clearly stacks the deck in favor of domestic petitioners, is also quite notorious for raising input prices for U.S. producers and final prices for consumers. Many of the products subject to excessive trade remedy duties are important inputs consumed by U.S. industries, like sugar, lumber, cement, structural steel, sheet steel, and paint. These duties make it more difficult for the using industries to compete at home and abroad.
Others antidumping measures drive up the prices of everyday consumables like honey, salmon, pasta, mushrooms, tomatoes, garlic, apple juice, orange juice, and more.
And the costs of this protectionism go well beyond the direct impact on prices. A study from the Federal Reserve Bank of Dallas in 2002 found that the average cost to save a single U.S. job from import competition amounted to $231,289 (and my paper contains citation and table from that study).
Leadership by Example
The U.S. does not need reciprocal agreements to remedy the costs of its protectionist policies. In fact, reciprocal agreements might ultimately prove c,ostly.
The fact is that there are now 149 members in the WTO at disparate levels of economic development with different negotiating priorities and asymmetric negotiating resources attempting (presumably) to reach consensus on a diversity of issues in an increasingly contentious environment.
Even if agreement were reached, it would likely tax U.S. credibility further, as naysayers would inevitably allude—rightly or wrongly—to U.S. arm-twisting and blackmail. The U.S. should not expose itself to such assertions because it just might get blamed for disruptive adjustments to, or ill effects from, greater import competition in developing countries.
If the U.S. were to take the lead and remove its remaining trade barriers without demands for reciprocity abroad, not only would it reap the economic benefits of greater openness at home, but others might be inclined to follow suit. It could trigger a reciprocal response, what Professor Bhagwati calls “sequential reciprocity.”
Others may be inspired to emulate U.S. policies because we have demonstrated them to be successful or simply because they recognize it is in their best interests to do so.
In this new world of just-in-time supply chains and relentless competition among developing countries for investment and markets, developing countries really have no alternative but to open up.
Most developing countries already understand this. According to a World Bank study, most comprehensive trade reforms in developing countries were undertaken unilaterally to increase productivity in the domestic economy. Between 1983 and 2003, developing countries reduced their weighted average tariffs by 21 percentage points. Unilateral reforms accounted for 66 percent of the cuts.
More trade liberalization around the world is needed. But the U.S. should allow other countries to reform at their own pace. By not insisting on anything in return for its own liberalization, the U.S. can lead by example, reap the benefits of greater openness, and start rebuilding trust.
Making the Case at Home / Correcting the Mercantilist Misconception
I know that, even though you are all convinced of the merits, selling unilateral liberalization to Congress is a long-term project. Vested interests and entrenched ways of thinking about trade will take time to overcome. But the effort can begin now by attempting to change the rhetoric:
We need to stop demonizing imports. Imports have more than tripled over the past 25 years, while the number of net new jobs has increased by 32 million. And as imports rose, so has GDP—nearly continuously, with the exception of two relatively small recessions.
The record increase in imports in 2005 occurred alongside the creation of 2 million net new jobs, a decline in the unemployment rate to 4.7%, and 3.5% increase in GDP.
Likewise, the USTR’s office needs to stop touting the export benefits of every trade agreement and downplaying or rationalizing the improved access to our own market.
We have a ways to go to get a critical mass on board, but the time to begin is now.

Daniel J. Ikenson is associate director of the Center for Trade Policy Studies at the Cato Institute.

Donald Trump 'U.S. Economic Independence' Speech

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Thursday, June 23, 2016

Bernholz Line

Economic historian Peter Bernholz has identified that inflation starts to take on hyperinflationary characteristics some time after the deficits of a country as a share of government expenditure rise above a third and stay there for several years.

According to Bernholz, the great hyperinflations of France, Germany, Poland, Brazil, and Bolivia all occurred after deficits reached that magic percentage or higher (In Bolivia, it reached 91%).

Crossing the Bernholz Line does not mean that hyperinflation is immediately around the corner. It's an early warning signal. What it does indicate is that a government is having trouble raising money outside of borrowing it. This results in tremendous supplies of new debt that the markets must absorb, pushing interest rates higher, and thus putting enormous pressure on a central bank to monetize the debt.

The specifics of how long after passing the Bernholz Line a hyperinflation kicks in varies greatly.

-RW

Backroom Globalism

Current globalism, in reality, does not promote free trade and open markets as the name would suggest. It is much more accurately called backroom globalism, where crony deals are made by elitists in control of the power levers that provide elitist advantaged trade and where barriers are erected against trade by those who desire to trade but who are far from the epicenter of the global backroom plotting .

-RW

Wednesday, June 22, 2016

Farage’s Final Rallying Call: ‘It’s Us versus the Establishment - Go and Vote for Britain'

DONALD J. TRUMP ON THE STAKES OF THE ELECTION

Today I‘d like to share my thoughts about the stakes in this election.

People have asked me why I am running for President.

I have built an amazing business that I love and I get to work side-by-side with my children every day.

We come to work together and turn visions into reality.

We think big, and then we make it happen.

I love what I do, and I am grateful beyond words to the nation that has allowed me to do it.

So when people ask me why I am running, I quickly answer: I am running to give back to this country which has been so good to me.

When I see the crumbling roads and bridges, or the dilapidated airports, or the factories moving overseas to Mexico, or to other countries, I know these problems can all be fixed, but not by Hillary Clinton – only by me.


The fact is, we can come back bigger and better and stronger than ever before --Jobs, jobs, jobs!

Everywhere I look, I see the possibilities of what our country could be. But we can’t solve any of these problems by relying on the politicians who created them.

We will never be able to fix a rigged system by counting on the same people who rigged it in the first place.

The insiders wrote the rules of the game to keep themselves in power and in the money.

That’s why we’re asking Bernie Sanders’ voters to join our movement: so together we can fix the system for ALL Americans. Importantly, this includes fixing all of our many disastrous trade deals.

Because it’s not just the political system that’s rigged. It’s the whole economy.

It’s rigged by big donors who want to keep down wages.

It’s rigged by big businesses who want to leave our country, fire our workers, and sell their products back into the U.S. with absolutely no consequences for them.

It’s rigged by bureaucrats who are trapping kids in failing schools.

It’s rigged against you, the American people.

Hillary Clinton who, as most people know, is a world class liar –

just look at her pathetic email and server statements, or her phony landing in Bosnia where she said she was under attack but the attack turned out to be young girls handing her flowers, a total self-serving lie.

Brian Williams’ career was destroyed for saying far less.

Yesterday, she even tried to attack me and my many businesses. But here is the bottom line: I started off in Brooklyn New York, not so long ago, with a small loan and built a business worth over 10 billion dollars. I have always had a talent for building businesses and, importantly, creating jobs. That is a talent our country desperately needs.

I am running for President to end the unfairness and to put you, the American worker, first.


We are going to put America First, and we are going to Make America Great again.




This election will decide whether we are ruled by the people, or by the politicians.

Here is my promise to the American voter:


If I am elected President, I will end the special interest monopoly in Washington, D.C.

The other candidate in this race has spent her entire life making money for special interests – and taking money from special interests.

Hillary Clinton has perfected the politics of personal profit and theft.

She ran the State Department like her own personal hedge fund – doing favors for oppressive regimes, and many others, in exchange for cash.

Then, when she left, she made $21.6 million giving speeches to Wall Street banks and other special interests – in less than 2 years – secret speeches that she does not want to reveal to the public.

Together, she and Bill made $153 million giving speeches to lobbyists, CEOs, and foreign governments in the years since 2001.

They totally own her, and that will never change.

The choice in this election is a choice between taking our government back from the special interests, or surrendering our last scrap of independence to their total and complete control.

Those are the stakes.

Hillary Clinton wants to be President. But she doesn't have the temperament, or, as Bernie Sanders' said, the judgement, to be president.

She believes she is entitled to the office.

Her campaign slogan is “I’m with her.”

You know what my response to that is? I’m with you: the American people.

She thinks it’s all about her.


I know it’s all about you – I know it’s all about making America Great Again for All Americans.




Our country lost its way when we stopped putting the American people first.

We got here because we switched from a policy of Americanism – focusing on what’s good for America’s middle class – to a policy of globalism, focusing on how to make money for large corporations who can move their wealth and workers to foreign countries all to the detriment of the American worker and the American economy.

We reward companies for offshoring, and we punish companies for doing business in America and keeping our workers employed.

This is not a rising tide that lifts all boats.

This is a wave of globalization that wipes out our middle class and our jobs.

We need to reform our economic system so that, once again, we can all succeed together, and America can become rich again.

That’s what we mean by America First.

Our country will be better off when we start making our own products again, bringing our once great manufacturing capabilities back to our shores.

Our Founders understood this.

One of the first major bills signed by George Washington called for “the encouragement and protection of manufactur[ing]” in America.

Our first Republican President, Abraham Lincoln, warned us by saying:

“The abandonment of the protective policy by the American government will produce want and ruin among our people.”

I have visited the cities and towns across America and seen the devastation caused by the trade policies of Bill and Hillary Clinton.

Hillary Clinton supported Bill Clinton’s disastrous NAFTA, just like she supported China’s entrance into the World Trade Organization.

We’ve lost nearly one-third of our manufacturing jobs since these two Hillary-backed agreements were signed.

Our trade deficit with China soared 40% during Hillary Clinton’s time as Secretary of State -- a disgraceful performance for which she should not be congratulated, but rather scorned.

Then she let China steal hundreds of billions of dollars in our intellectual property – a crime which is continuing to this day.

Hillary Clinton gave China millions of our best jobs, and effectively let China completely rebuild itself.

In return, Hillary Clinton got rich!

The book Clinton Cash, by Peter Schweitzer, documents how Bill and Hillary used the State Department to enrich their family at America’s expense.

She gets rich making you poor.

Here is a quote from the book: “At the center of US policy toward China was Hillary Clinton…at this critical time for US-china relations, Bill Clinton gave a number of speeches that were underwritten by the Chinese government and its supporters.”

These funds were paid to the Clinton bank account while Hillary was negotiating with China on behalf of the United States.

She sold out our workers, and our country, for Beijing.

Hillary Clinton has also been the biggest promoter of the Trans-Pacific Partnership, which will ship millions more of our jobs overseas – and give up Congressional power to an international foreign commission.

Now, because I have pointed out why it would be such a disastrous deal, she is pretending that she is against it. She has even deleted this record of total support from her book – deletion is something she is very good at -- (at least 30,000 emails are missing.)

But this latest Clinton cover-up doesn’t change anything: if she is elected president, she will adopt the Trans-Pacific Partnership, and we will lose millions of jobs and our economic independence for good. She will do this, just as she has betrayed the American worker on trade at every single stage of her career – and it will be even worse than the Clintons’ NAFTA deal.

I want trade deals, but they have to be great for the United States and our workers.

We don't make great deals anymore, but we will once I become president.




It’s not just our economy that’s been corrupted, but our foreign policy too.


The Hillary Clinton foreign policy has cost America thousands of lives and trillions of dollars – and unleashed ISIS across the world.

No Secretary of State has been more wrong, more often, and in more places than Hillary Clinton.

Her decisions spread death, destruction and terrorism everywhere she touched.

Among the victims is our late Ambassador, Chris Stevens. He was left helpless to die as Hillary Clinton soundly slept in her bed -- that's right, when the phone rang at

3 o'clock in the morning, she was sleeping.

Ambassador Stevens and his staff in Libya made hundreds of requests for security.

Hillary Clinton’s State Department refused them all.

She started the war that put him in Libya, denied him the security he asked for, then left him there to die.

To cover her tracks, Hillary lied about a video being the cause of his death.

Here is what one of the victim’s mothers had to say:

“I want the whole world to know it: she lied to my face, and you don’t want this person to be president.”

In 2009, before Hillary Clinton was sworn in, it was a different world.

Libya was cooperating.

Iraq was seeing a reduction in violence.

Syria was under control.

Iran was being choked by sanctions.

Egypt was governed by a friendly regime that honored its peace treaty with Israel.

ISIS wasn’t even on the map.

Fast forward to 2013: In just four years, Secretary Clinton managed

to almost single-handedly destabilize the entire Middle East.

Her invasion of Libya handed the country over to the ISIS barbarians.

Thanks to Hillary Clinton, Iran is now the dominant Islamic power in the Middle East, and on the road to nuclear weapons.

Hillary Clinton’s support for violent regime change in Syria has thrown the country into one of the bloodiest civil wars anyone has ever seen – while giving ISIS a launching pad for terrorism against the West.

She helped force out a friendly regime in Egypt and replace it with the radical Muslim Brotherhood. The Egyptian military has retaken control, but Clinton has opened the Pandora’s box of radical Islam.

Then, there was the disastrous strategy of announcing our departure date from Iraq, handing large parts of the country over to ISIS killers.

ISIS threatens us today because of the decisions Hillary Clinton has made.

ISIS also threatens peaceful Muslims across the Middle East, and peaceful Muslims across the world, who have been terribly victimized by horrible brutality – and who only want to raise their kids in peace and safety.

In short, Hillary Clinton’s tryout for the presidency has produced one deadly foreign policy disaster after another.

It all started with her bad judgment in supporting the War in Iraq in the first place.

Though I was not in government service, I was among the earliest to criticize

the rush to war, and yes, even before the war ever started.

But Hillary Clinton learned nothing from Iraq, because when she got into power,

she couldn’t wait to rush us off to war in Libya.

She lacks the temperament, the judgment and the competence to lead.

In the words of a Secret Service agent posted outside the Oval Office:

“She simply lacks the integrity and temperament to serve

in the office…from the bottom of my soul, I know this to be true…Her leadership style – volcanic, impulsive…disdainful of the rules set for everyone else – hasn’t changed a bit.”

Perhaps the most terrifying thing about Hillary Clinton’s foreign policy is that she refuses to acknowledge the threat posed by Radical Islam.

In fact, Hillary Clinton supports a radical 550% increase in Syrian refugees coming into the United States, and that's an increase over President Obama's already very high number.

Under her plan, we would admit hundreds of thousands of refugees from the most dangerous countries on Earth – with no way to screen who they are or what they believe.

Already, hundreds of recent immigrants and their children have been convicted of terrorist activity inside the U.S.

The father of the Orlando shooter was a Taliban supporter from Afghanistan, one of the

most repressive anti-gay and anti-women regimes on Earth.

I only want to admit people who share our values and love our people.

Hillary Clinton wants to bring in people who believe women should be enslaved

and gays put to death.

Maybe her motivation lies among the more than 1,000 foreign donations Hillary failed to disclose while at the State Department.


Hillary Clinton may be the most corrupt person ever to seek the presidency.

Here is some more of what we learned from the book,

Clinton Cash:

A foreign telecom giant faced possible State Department sanctions for providing technology to Iran, and other oppressive regimes. So what did this company do? For the first time ever, they decided to pay Bill Clinton $750,000 for a single speech. The Clintons got their cash, the telecom company escaped sanctions.
Hillary Clinton’s State Department approved the transfer of 20% of America’s uranium holdings to Russia, while 9 investors in the deal funneled $145 million to the Clinton Foundation.
Hillary Clinton appointed a top donor to a national security board with top secret access – even though he had no national security credentials.
Hillary Clinton accepted $58,000 in jewelry from the government of Brunei when she was Secretary of State – plus millions more for her foundation. The Sultan of Brunei has pushed oppressive Sharia law, including the punishment of death by stoning for being gay. The government of Brunei also stands to be one of the biggest beneficiaries of Hillary’s Trans-Pacific Partnership, which she would absolutely approve if given the chance.
Hillary Clinton took up to $25 million from Saudi Arabia, where being gay is also punishable by death.
Hillary took millions from Kuwait, Qatar, Oman and many other countries that horribly abuse women and LGBT citizens.
To cover-up her corrupt dealings, Hillary Clinton illegally stashed her State Department emails on a private server.

Her server was easily hacked by foreign governments – perhaps even by her financial backers in Communist China – putting all of America in danger.

Then there are the 33,000 emails she deleted.

While we may not know what is in those deleted emails, our enemies probably do.

So they probably now have a blackmail file over someone who wants to be President of the United States.

This fact alone disqualifies her from the Presidency.

We can’t hand over our government to someone whose deepest, darkest secrets may be in the hands of our enemies.



National security is also immigration security –

and Hillary wants neither.

Hillary Clinton has put forward the most radical immigration platform in the history of the United States.

She has pledged to grant mass amnesty and in her first 100 days, end virtually all immigration enforcement, and thus create totally open borders in the United States

The first victims of her radical policies will be poor African-American and Hispanic workers who need jobs. They are the ones she will hurt the most.

Let me share with you a letter our campaign received from Mary Ann Mendoza.

She lost her amazing son, Police Sergeant Brandon Mendoza, after he was killed by an illegal immigrant because of the open borders policies supported by Hillary Clinton.

Sadly, the Mendoza family is just one of thousands who have suffered the same fate.

Here is an excerpt from Mrs. Mendoza’s letter:

“Hillary Clinton, who already has the blood of so many on her hands, is now announcing that she is willing to put each and every one of our lives in harms’ way – an open door policy to criminals and terrorists to enter our country. Hillary is not concerned about you or I, she is only concerned about the power the presidency would bring to her. She needs to go to prison to pay for the crimes she has already committed against this country.”

Hillary also wants to spend hundreds of billions to resettle Middle Eastern refugees in the United States, on top of the current record level of immigration.

For the amount of money Hillary Clinton would like to spend on refugees, we could rebuild every inner city in America.

Hillary’s Wall Street immigration agenda will keep immigrant communities poor, and unemployed Americans out of work. She can’t claim to care about African-American and Hispanic workers when she wants to bring in millions of new low-wage workers

to compete against them.




Here are a few things a Trump Administration will do for America in the first 100 days:

 Appoint judges who will uphold the Constitution. Hillary Clinton’s radical judges will virtually abolish the 2nd amendment.
Change immigration rules to give unemployed Americans an opportunity to fill good-paying jobs
Stand up to countries that cheat on trade, of which there are many
Cancel rules and regulations that send jobs overseas
Lift restrictions on energy production
Repeal and replace job-killing Obamacare -- it is a disaster.
Pass massive tax reform to create millions of new jobs.
Impose tough new ethics rules to restore dignity to the Office of Secretary of State.
There is one common theme in all of these reforms.

It’s going to be America First.




This is why the stakes in November are so great.


On election day, the politicians stand trial before the people.

The voters are the jury. Their ballots are the verdict. We don’t need or want another Clinton or Obama.

Come November, the American people will have a chance to issue a verdict on the politicians that have sacrificed their security, betrayed their prosperity, and sold out

their country.

They will have a chance to vote for a new agenda with big dreams, bold ideas and enormous possibilities for the American people.

Hillary Clinton’s message is old and tired. Her message is that can’t change.

My message is that things have to change – and this is our one chance do it. This is our last chance to do it.

Americans are the people that tamed the West, that dug out the Panama Canal, that sent satellites across the solar system, that built the great dams, and so much more.

Then we started thinking small.

We stopped believing in what America could do, and became reliant on other countries, other people, and other institutions.

We lost our sense of purpose, and daring.

But that’s not who we are.

Come this November, we can bring America back – bigger and better, and stronger than ever.

We will build the greatest infrastructure on the planet earth – the roads and railways and airports of tomorrow.

Our military will have the best technology and finest equipment – we will bring it back all the way.

Massive new factories will come roaring into our country – breathing life and hope into our communities.

Inner cities, which have been horribly abused by Hillary Clinton and the Democrat Party, will finally be rebuilt.

Construction is what I know -- nobody knows it better.

The real wages for our workers have not been raised for 18 years -- but these wages will start going up, along with the new jobs. Hillary’s massive taxation, regulation and open borders will destroy jobs and drive down wages for everyone.

We are also going to be supporting our police and law enforcement -- we can never forget the great job they do.

I am also going to appoint great Supreme Court Justices.

Our country is going to start working again.

People are going to start working again.

Parents are going to start dreaming big for their children again – including parents in our inner cities.

Americans are going to start believing in the future or our country.

We are going to make America rich again.

We are going to make America safe again.

We are going to make America Great Again – and Great Again For EVERYONE.