Treasury closely watching five major US trading partners on currency policies

The Treasury Department is ramping up monitoring of exchange rate policies of several major U.S. trading partners including Japan and China.

Treasury said it will closely watch and assess the currency practices of five countries — China, Japan, Korea, Taiwan and Germany — over the next six months after the countries met two of three new criteria required under a new customs law, according to a new report sent to Congress.

{mosads}But no nations met the standard for more enhanced monitoring or to be labeled as currency manipulators. 

“These new tools significantly enhance Treasury’s ability to undertake a data-driven, objective analysis of a country’s foreign exchange policies and their impact on bilateral trade with the United States and the broader multilateral trade position,” the department said in a statement.

The law also provides new measures to address unfair currency practices.

The aim is to determine whether a country is lowering the value of their currencies that would provide them an unfair global trading advantage that makes U.S. exports more expensive overseas.

The three criteria are whether a country has a significant bilateral trade surplus with the United States, whether it has a material current account surplus with the rest of the world and whether it has engaged in persistent one-sided intervention in the foreign exchange market.

Taiwan was the only nation found to have engaged in persistent one-sided intervention. Treasury said that China, Japan, South Korea and Germany all had large bilateral trade surpluses — at least $20 billion with the United States — and material current account surpluses.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) said that the new law requires the president to “undertake robust analysis and strong action with respect to currency manipulators, Congress has made it clear that such behavior is unacceptable because it hurts American businesses and employees.”

Congressional lawmakers in both parties have regularly complained that countries such as China and Japan have manipulated their exchange rates and caused sweeping U.S. job losses.  

Many in Congress had called on the Obama administration to insist that the Trans-Pacific Partnership (TPP) include enforceable currency measures. Negotiators agreed on a side deal that they argue steps up the assessment process and will provide more avenues to stem currency manipulation.

Instead of labeling China a currency manipulator, Treasury has opted to remain in regular discussions with Beijing about moving to a more market-based exchange rate.

In February and again in April, the Group of 20 finance ministers agreed to adhere to International Monetary Fund exchange rate commitments stating that all countries “will use all policy tools — monetary, fiscal and structural — individually and collectively” to foster confidence and preserve and strengthen the recovery.”