Chapter III.
Regional Developments
B. North America
a) United States
- U.S. domestic politics
Amid the continued robust economy, on the U.S. political front, the Republican-controlled House of Representatives voted in December 1998 to impeach the President, who was alleged to have given false testimony and obstructed justice in regard to his relationship with a former White House intern. The impeachment trial subsequently took place at the beginning of 1999 in the Senate, which concluded in mid-February that the President was innocent of the charges. However, the heightened tension between the Democrats and the Republicans as a result of the impeachment issue affected the deliberation of legislation in Congress to some extent, especially with Presidential and Congressional elections scheduled for 2000.
President Clinton gave his State of the Union address on 19 January in the middle of the trial. Displaying the achievements of his administration over the last six years, the President declared that rather than being lulled into complacency by peace and prosperity, now was the time for this generation to bear the historic responsibility toward the 21st century. As with last year, he identified Social Security (public pension) reforms, Medicare (medical insurance for the elderly) reforms and education as his priority policy agenda, and also referred to the Y2K issue. The President's plan for the use of the projected budget surplus attracted public attention, as he urged it to be used for Social Security maintenance, Medicare, education and national defense. The Republican Party, which holds a congressional majority, argued that an even greater portion of the budget surplus should be injected into Social Security, and presented a bill for major tax breaks amounting to around US$800 billion over the next decade. The President and the Congressional Republicans eventually agreed that the Social Security (public pension) trust fund surplus, which makes up the bulk of the budget surplus, would not be used to fund other Government spending, while the Republican tax bill failed to gain wide public support, and was effectively withdrawn due to the President's veto. Partisan squabbles in Congress prevented the passage of the FY2000 budget draft by 1 October, the beginning of the new fiscal year, frustrating the Republicans' initial expectations, and the passage of the budget bills was ultimately pushed back to late November. As a result, no progress was made on issues such as Social Security reform, Medicare reform and education, key domestic policy agenda items of considerable public interest.
The 2000 presidential election will be the first since 1988 without an incumbent president running for re-election. The field of presidential candidates firmed by mid-year, with election campaigns launched from around autumn toward party nomination.
- U.S. foreign policy
President Clinton gave a comprehensive foreign policy address in February in San Francisco, in which he listed the tasks facing the United States and called for the cooperation of Congress in boosting the national defense and foreign policy budget and paying the country's UN dues and arrears. The Kosovo issue was taken up in this address, and NATO began to bomb Yugoslavia on 24 March. The accidental bombing of the Chinese Embassy in Yugoslavia by NATO military planes occurred in May, hailing a storm of protest from the Chinese. However, some progress was subsequently made in U.S.-China relations due to the November conclusion of bilateral negotiations on China's WTO accession and December agreement on the payment of damages for the Embassy bombing.
President Clinton visited foreign countries energetically, and the destinations included Latin America (in February and March), Europe (in May, June, July, and November), New Zealand (in September), Canada (in October), and Norway (attendance at the funeral of the late Yitzhak Rabin, former Israeli Prime Minister, in November). Among his foreign policy achievements were the suspension of North Korean missile launches during the U.S.-North Korea consultations and the brokering of an agreement to reopen Israel-Syria negotiations.
On the down side, the Senate refused to ratify the Comprehensive Nuclear Test-Ban Treaty (CTBT) due to opposition from the Republicans.
- U.S. economy
Underpinned by private consumption, the U.S. economy sustained its momentum to record the country's longest economic expansion in peacetime history. The unemployment rate held toward the bottom of the four percent mark, a historic low, and prices were stable. Stocks traded at record highs, breaking through the US$10,000 mark in March and the US$11,000 mark in May. Anticipating a future rise in inflationary pressure, the Federal Reserve Bank raised interest rates three times as a preventative step.
Where the increased tax revenues made possible by a buoyant economy and spending cuts had led Government finances into the black in FY1998, the federal surplus reached a record US$123 billion in FY1999 (October 1998-September 1999).
The U.S. trade deficit topped the 1998 level to hit a new high in 1999. The trade deficit with Japan also reached a record high, but Japan's share in the total U.S. trade deficit is falling. As the U.S. current account deficit is also expanding, protectionist pressure may begin to increase within the United States in the days ahead.
b) Canada
Prime Minister Jean Chretien's Liberal Party maintained a high support rate and kept the wheels of domestic politics running smoothly. In terms of the economy, Canada recorded a real GDP growth rate of close to four percent (annual basis) averaged over the first three quarters of FY1999, responding to the robust U.S. economy and consequent growth in Canadian exports to the U.S., strong domestic demand, and in particular, rising private consumption. The unemployment rate is also gradually decreasing, reaching 6.9% in November compared to the 1998 average of 8.3%. Consumer prices have maintained a stable rate of growth since 1992, with the November year-on-year increase emerging as 2.2% (compared to 0.9% in 1998).
In the foreign policy arena, in addition to United Nations PKOs and anti-personnel landmines, issues in which the country has a history of active engagement, Canada has recently been focusing on the concept of peace-building and human security. The main pillars of Canada's economic diplomacy are the promotion of North American market integration through the North American Free Trade Agreement (NAFTA); active participation in the APEC forum, the Free Trade Area of the Americas (FTAA), and the Transatlantic Economic Partnership (TEP); and promotion of liberalization through the WTO.
Looking to Japan-Canada relations, Prime Minister Chrétien led a large economic mission, "Team Canada," to Japan in September. This mission comprised around 420 persons, including federal government ministers, provincial premiers and territorial leaders, and business representatives. The Prime Minister conducted a Summit Meeting with Prime Minister Obuchi, concluding with the joint press announcement of "Japan and Canada: A Global Partnership for the 21st Century." During Prime Minister Chrétien's visit to Japan, the two countries jointly hosted the Japan-Canada Peace-Building Symposium. Dialogue between the two countries' leaders and Foreign Ministers included a Summit Meeting and Foreign Ministers' Meeting during the G8 Cologne Summit in June and a Foreign Ministers' Meeting at the G8 Foreign Ministers' Meeting on conflict prevention in December. Areas of Japan-Canada cooperation were wide-ranging, including the third meeting of the Canada-Japan Forum, an eminent persons conference, in October in Ottawa. Bilateral economic relations are also basically sound. However, following on from the decline in Japanese imports from Canada in 1998, in the first half of FY1999, both Japanese exports to and imports from Canada undercut the same period the previous year.
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