Regionalism and Globalism (1991- 2000s)

USAs economic recovery

USA economy underwent rapid growth and expansion during this period. USAs GDP
expanded in the Clinton years by 38%

By 1988, the USA had posted its first budget surplus in 30 years and by 2000, it had its
lowest unemployment for 30 years. It also had a Gross National Income of US$9.7
trillion.

USA benefited immensely from the high technology, innovation heavy industries and the
dot.com booms.

Clintons main priority was to ensure eliminating the budget deficit, keeping interest
rates low, and spurring private-sector investment.
- Investing in people through education, training, science, and research.
- Opening foreign markets so American workers can compete abroad

Bill Clinton inherited from his predecessor, George H. W. Bush, a deficit of 4.7% of
GDP. Clinton made the reduction a chief priority. Clinton cut federal spending and also
raised taxes of the rich to lower the deficit.

Clinton, unlike most other post-war Democrats, worked to keep the inflation rates low,
and succeeded. The mean inflation rates of Bill Clinton were at 2.3%, which was rather
low when considering the fact that that is about half of the rates of Republican
Presidents

Clinton managed to achieve lower unemployment rates. Some have criticize him for
causing loss of jobs because of his support for free trade policies.

Even if Clinton did cost Americans some jobs because of free trade support, he allowed
for more jobs than were lost because the unemployment rate of his presidency, and
especially his second term, were the lowest they had been in thirty years

Japan, USAs economic competitor, on the other hand, had gone into a prolonged
recession.

Even though USAs global production of goods had declined since the golden years,
USA still produced one quarter of the worlds goods. Hence USA was still economically
dominant in leading the Capitalist world.
Regional integration
i) The European Union approved the Single European Act in 1986 and put it in place
gradually between then and 1992. Plans for a single market moved more rapidly than
anticipated. The union harmonized the regulation if investment, migration, product and
production standards and many other economic activities. By 1993, the EU was in
some ways more of an integrated unit than the American states of Canadian provinces.
In 1999, the new Common European Central Bank introduced a new common currency,
the Euro. The EU had a single market, a single currency and central bank, a common
trade policy and common economic regulations on such matters as the environment.
Western Europe was now one economic unit; larger than United States and twice the
size of Japan.
ii) In 1994, North America formed NAFTA (North American Free Trade Agreement); which
included Canada and Mexico. Over the next ten years, NAFTA removed virtually all
barriers to the movement of goods, capital and services among the three countries. Bill
Clinton (1993-2000) wanted to lower trade barriers globally, believing that it would be
beneficial to all countries. He proposed the formation of NAFTA, a free trading bloc
between USA, Canada and Mexico. NAFTA was formed in Jan 1994.

Clinton even convinced the USA Congress that it would create more jobs and expand
US exports. So USA took the lead in spearheading economic co-operation.
iii) The worlds third largest trading bloc was formed in South America. Between 1985 and
1990, Brazil and Argentina negotiated a trade area that eventually included Uruguay
and Paraguay as full members and Chile and Bolivia as associates. By 1994, the
Southern Common Market was in place.
Note: All these trading blocs helped combine markets to provide a larger home base from
which compete on world markets.
iv) World Trade Organization- Uruguay Round 1994
This agreement was concluded where there was trade liberalization to new issues and
this drew in new and future members from the developing and formerly Communist
nations.
Also, the Round created a new institution, the World Trade Organization, to replace
GATT. The WTO, unlike GATT, is a permanent organization with powers of its own, to
largely mediate trade disputes.
Clinton met up with Congress and proposed the formation of WTO to replace GATT in
1995.

The new WTO had stronger authority to enforce trade agreements and covered a wider
range of trade than did GATT. While GATT consisted only of guidelines whose success
was completely reliant on the cooperation of the participating nations, WTO, on the
other hand, was an organisation with member states and a complete formalised
structure on how to negotiate international trade issues; together with a dispute
resolution mechanism contained within to settle various trade disputes between
members.

WTO, under USAs leadership, would help to liberalise the economies of the world
globally. This would mean that markets would open up their doors to American goods
and services; which would then expand the American economy and its influence.

Rise of China
Clinton foresaw that China would be a formidable economic rival. At the same time,
USA could benefit immensely from trade with China.

Hence in 1999, Clinton signed a landmark trade agreement with China. This agreement
would lower many trade barriers between the two countries, making it easier to export
USA products such as automobiles, banking services and motion pictures to China.

For this to take place, China had to be accepted into WTO as a member and granted
permanent normal trade relations (PNTR) status by the US congress. So the USA
supported Chinas entry into WTO. Clintons leadership convinced Congress to grant
PNTR to China. In 2000, China entered WTO.

Although there were disadvantages to this agreement; such as China continuing with its
trade protectionist measures and the increasing US trade deficit with China, USA was
still taking the lead in pointing the direction to global trade and mutual prosperity.

All was fine? Not so!
In 1999, Clinton passed the Financial Services Modernization Act, which allowed banks,
insurance companies and investment houses to merge. Some point to this as the cause
of the Financial meltdown of 2008.

Increased integration of financial institutions could also mean that negative
repercussions could be felt more rapidly and widely.