Diplomatic Bluebook 2001
Chapter III. REGIONAL DEVELOPMENTS
2. NORTH AMERICA
1. U.S. Domestic Politics
On January 27, 2000, President Clinton, who had maintained a strong approval rating of around 60 percent owing to the booming U.S. economy, gave his last State of the Union address, presenting numerous policy proposals and demonstrating his eagerness to continue to actively pursue his political agenda through to the last minute of his term. However, domestic politics centered on the presidential election right from the beginning of the year.
In early January, a series of debates started among Democratic and Republican presidential candidates within their respective party, while the presidential primary to narrow down the candidates in each party began with a State party caucus in Iowa on January 24 and the New Hampshire primary on February 1. However, by mid-March, with more than two months still remaining in the presidential primary season, it was clear that in the Democratic Party Vice President Al Gore defeated his only rival, former Senator Bill Bradley, while in the Republican Party, Texas Governor George W. Bush de facto won his party's nomination despite initial setbacks in several states. The result was an extended general election campaign period which lasted up until national election day on November 7. Because of the strong economy and the absence of urgent diplomatic issues facing the U.S., the campaign was focused primarily on domestic issues. Key issues included the use of the budget surplus to be generated by a buoyant economy, education, and reform of the Social Security (public pension) system as well as Medicare (public medical insurance for the elderly), with the retirement of approximately 80 million "baby boomers" imminent.
During the campaign, Bush, calling for "compassionate conservatism," stressed reforms and obtaining results through bipartisanship, while Vice President Gore campaigned for the continuance of the current administration's political agenda under the slogan of "progress and prosperity." While their respective popularity ratings continued to fluctuate, both candidates remained in a neck-and-neck tie in what was the closest race since 1960. Trends in the "swing" states, particularly those in the Midwest, were closely watched as they were to determine the outcome of the election.
As the ballot counting continued, it became evident that the result was far closer than had even been expected, with the final outcome resting on the vote in Florida. However, determining the Florida vote took an unusual path, following the Gore camp demand of a manual re-count, which lasted for 36 days and even involved the judicial authorities. Eventually, a decision by the Federal Supreme Court settled the matter, making Bush the President-elect by securing Florida's electoral votes, although it was Vice President Gore who drew more popular votes nationwide, resulting in a phenomenon for the first time in 112 years.
The Congressional elections took place concurrently with the presidential election. It had been predicted that the Republicans would maintain their majority in the Senate, while the Democrats would capture extra seats in the House of Representatives, with the possibility of regaining their majority. It turned out that both parties share the same number of seats in the Senate for the first time in 120 years, and the Democrats made only a slight gain in the House of Representatives. In the new Congress, how the two parties will deal with the close balance in each chamber and how the new Republican administration will form and handle relationships with Congress are to be seen. In the 2000 election, Hillary Rodham Clinton, who ran for the Senate from the State of New York, became the first ever First Lady to be elected to Congress.
2. U.S. Foreign Policy
Even as the end of his term approached, President Clinton remained actively involved in foreign policy issues.
Considerable efforts were made toward improving U.S.-China relations. Military exchange had ceased since the accidental bombing of the Chinese Embassy in Yugoslavia in 1999, but was resumed in 2000, while in June, State Secretary Albright visited China to reaffirm commitment to the creation of a constructive strategic partnership. Legislation providing for permanent normal trade relations (PNTR) was passed by the U.S. Congress and enacted in October upon President Clinton's signature. On the other hand, the Taiwan Security Enhancement Act, which had been passed by the House of Representatives in February, was scrapped when the Congress adjourned. Issues such as Taiwan and human rights did not become major focuses between the U.S. and China in 2000.
In relations with Russia, the U.S. National Missile Defense (NMD) program and the proposal for related revisions to the Anti-Ballistic Missile Treaty had been a major concern. While the escalation of bilateral tension on this matter was avoided by the U.S. government's September announcement that the U.S. would postpone the decision on NMD deployment (refer to Chapter II, Section 1-B-3), the development on that matter remains to be seen as the new Bush administration has already announced its positive stance to ballistic missile defense.
U.S.-North Korea relations in 2000 were marked by the October visit to the U.S. by First Vice Chairman of North Korea's National Defense Commission Jo Myong Rok, and U.S. State Secretary Madeleine Albright's visit to North Korea, representing contact at an unprecedentedly high level. In this process, the U.S. partially relaxed its economic sanctions toward North Korea, and the two sides released the Joint Statement on International Terrorism and the U.S.-Democratic People's Republic of Korea (DPRK) Joint Communiqué, which referred to the improvement of the bilateral relations between the U.S. and North Korea and the missile issue.
In terms of the Middle East peace process, President Clinton actively involved himself toward the realization of peace and achieved major progress in some areas by, among other things, holding a Summit meeting amongst U.S., Israeli, and Palestinian leaders in July at Camp David. However, the Summit ultimately failed to produce concrete results (refer to Chapter I, C-2).
President Clinton also visited South Asia in March, appealing to India and Pakistan to reduce the tension between them and to ensure nuclear and missile non-proliferation. In November, he became the first U.S. President to visit Vietnam since the Vietnam War.
3. U.S. Economy
By December 2000, the U.S. economic growth, which began in March 1991, had lasted for an unprecedented 117 months. Among the primary causes of this economic growth were the rapid increase in productivity as a result of the Information and Communications Technology (IT) revolution, the income effect of high stock prices, the promotion of deregulation, and the implementation of appropriate fiscal and monetary policy. The resulting low unemployment rate and stable prices contributed to the stunning U.S. economic performance. At the outset of 2000, there were signs of economic overheating from the high growth rate, but the economy, especially personal consumption, began to slow down drastically later in the year. In response to the evident deceleration, the Federal Open Market Committee (FOMC) meeting in December signaled a major shift in Federal Reserve Board policy from "risks continue to be weighted mainly toward conditions that may generate heightened inflation pressures" to "risks are weighted mainly toward conditions that may generate economic weakness." An emergency interest rate cut was also carried out in January 2001.
Due to the increased tax revenue produced by the booming economy and restraint on expenditure, the federal budget for FY 2000 (October 1999-September 2000) boasted a surplus of US$237 billion, which is the third consecutive year to record a surplus since 1998. The surplus was a record high.
From the second half of the year, it became apparent that the U.S. economy was slowing down. Stock prices had been trading at their highest-ever level; however, as fears of inflation became apparent, both the Dow Jones industrial average and the Nasdaq composite indexes recorded their largest decline ever. In April the Dow Jones index recovered to hover around the US$10,000 mark, but the Nasdaq continued to fall below half of its peak of March 2000, reflecting the string of downward revisions of the performance of high-tech companies and the collapse of the Net bubble. Economic fundamentals remain strong although the decline in stock prices could potentially further cool domestic demand and push up the current account deficit. In addition, there is still room to expand its fiscal expenditure or to further cut interest rates. The key issue will be whether or not the U.S. economy will manage a soft landing.
In Canada, a robust economic performance and a budget surplus allowed Prime Minister Jean Chrétien's Liberal Party to continue to maintain a high approval rating and keep the wheels of domestic politics running smoothly. The formation of the Canadian Reform Conservative Alliance was seen among the opposition, but the November Federal elections resulted in the victory of the ruling Liberal Party which won a majority that increased the number of seats held before the election, and entrusted Prime Minister Chrétien with his third consecutive term.
Canada sustained its strong economic performance again in 2000, recording a high real GDP growth rate averaging around five percent per annum. However, when the U.S. economy began to slump in the fourth quarter, the Canadian growth rate also slowed. The rate of increase in the consumer price index nevertheless maintained the two-percent mark, while the unemployment rate remained stable within the six-percent mark. In addition, the government has continued to record a budget surplus (a surplus of C$11.5 billion in FY 1999) since balancing the budget in FY 1997.
In the foreign policy arena, Canada continued to take an active role in UN peacekeeping operations (PKO) and the anti-personnel landmine issue, while also implementing its own human security and peace-building programs. 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 Asia-Pacific Economic Cooperation (APEC), the Free Trade Area of the Americas (FTAA), and the Transatlantic Economic Partnership (TEP); and the promotion of liberalization through the World Trade Organization (WTO).
As for Japan-Canada relations, Prime Minister Mori visited Ottawa in May. A Japan-Canada Summit was also held during Prime Minister Chrétien's visit to Japan in July for the G8 Kyushu-Okinawa Summit. At the foreign ministerial level, Canadian Foreign Minister Lloyd Axworthy and Minister for Foreign Affairs K no held talks in June in Damascus (at the time of the funeral for Syrian President Hafez Al-Assad) and at the G8 Kyushu-Okinawa Summit in July. Cooperation between Japan and Canada ranged in a number of areas, including the fourth meeting of the Japan-Canada Forum, an eminent persons' conference, in October in Tokyo, and the Second Japan-Canada Symposium on Peace and Security Cooperation in November in Tokyo.
Bilateral economic relations remained basically sound with no major concerns. Japan's 1999 trade with Canada witnessed a decline from the previous year in both export and import value, but the 2000 figures topped the same quarters the previous year, putting an end to the downward trend of recent years.
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