US stops short of currency manipulation accusations

The Treasury Department in Washington, April 14, 2020. (Photo: NYTimes)
WASHINGTON — The US Treasury Department on Friday said Vietnam, Switzerland and Taiwan tripped its thresholds for possible currency manipulation under a 2015 US trade law, but refrained from formally branding them as manipulators.اضافة اعلان

In the first semi-annual foreign exchange report issued by Treasury Secretary Janet Yellen, the Treasury said it will commence “enhanced engagement” with Taiwan and continue such talks with Vietnam and Switzerland after the Trump administration labeled the latter two as currency manipulators in December.

The Treasury said Taiwan, Vietnam and Switzerland exceeded 2015 currency thresholds during 2020 — a more than $20 billion bilateral trade surplus with the United States, foreign currency intervention exceeding 2 percent of gross domestic product and a global current account surplus exceeding 2 percent of GDP.

Despite the finding, it found insufficient evidence under an earlier 1988 law to conclude that Vietnam, Switzerland or Taiwan are manipulating exchange rates to gain a trade advantage or prevent balance of payments adjustments.

“For calendar year 2020, we have not made a finding regarding the manipulation designation,” a Treasury official told reporters, adding: “We don’t view this as a mixed message.”

The move takes some pressure off Switzerland and Vietnam by lifting the manipulator designation for at least six months.

The Swiss National Bank (SNB) denied it manipulates the franc and said the report will not alter its monetary policy. “In view of the economic situation and the ongoing high value of the Swiss franc, the SNB remains ready to intervene in the foreign exchange market if necessary,” it said.

An official at Taiwan’s central bank said the U.S. decision against applying the manipulator label showed continued good communication between Taipei and Washington on the issue and that U.S. authorities understood Taiwan’s “special situation.”

Taiwan’s tech-focused exports to the United States, including laptops and semiconductors, soared in 2020 due to the work-from-home boom sparked by the coronavirus pandemic.

Flexible policy

In a statement on Saturday, the State Bank of Vietnam said it will continue to pursue a flexible exchange rate policy that is managed in a way to contain inflation, ensure macro-economic stability and not to create an unfair trade advantage.

Vietnam’s foreign ministry said in a later statement it welcomed the Treasury’s decision, adding: “Vietnam will maintain dialogues and consultancy with the US over this issue.”

A Treasury official said it was possible for countries to meet the tests under the “mechanical” 2015 law and not be manipulating their currency to boost exports.

He said the report’s findings took into account the massive trade and capital flow distortions of the pandemic and the fiscal and monetary policy choices governments took in response.

Without the pandemic, the results would have likely been quite a bit different, including for the three economies that hit the engagement triggers, the official added.

The Treasury report also said the COVID-19 crisis was likely to continue to affect current account positions over the next year as recoveries accelerated in some economies and lagged in others, adding that these changes were cause for concern.

“Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,” Yellen said in a statement.

The enhanced engagement includes formal talks to urge Vietnam, Switzerland and Taiwan to develop plans with specific actions to address underlying causes of currency undervaluation and external imbalances, the Treasury said.

The talks will also help the Treasury determine the reasons for the three trading partners to make substantial currency market interventions.

For Taiwan, it said it would initiate enhanced engagement in line with the Trade Facilitation and Trade Enforcement Act of 2015. It expects those talks to help determine if Taiwan manipulated its currency under the 1988 law.

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