–Tracking China Interventions ‘Closely’
By Denny Gulino
WASHINGTON (MaceNews) – The U.S. Treasury Department Wednesday signaled that Switzerland and to a much lesser extent Vietnam are manipulating their currencies, in part at least, for a competitive advantage in trade while China, having briefly been so designated up until January, was not included.
Switzerland renewed its denial that it is seeking to boost its trade and instead intervenes for a variety of other reasons, trying to withstand massive inflows based on its status as a premier haven currency. A senior Treasury official said the country spent more than $100 billion influencing the value of its currency in the year through June. After the announcement the Swiss franc strengthened to its strongest since 2015.
The department also added Taiwan, Thailand and India to its “monitoring list” of countries that have met only a portion of the criteria for the designation. Others on that list are China, Japan, Korea, Germany, Italy, Singapore and Malaysia.
The senior Treasury official who briefed reporters emphasized that the U.S. intends only consultations for up to a year with Switzerland and Vietnam and hope to resolve the issues “in a timely and cooperative manner” before increasing the intensity of U.S. complaints. The two laws that govern designations do not provide for the application of tariffs or trigger any Section 301 probes, which are the province of the U.S. Trade Representative.
China was designated a manipulator last year for the first time since the 1990s, reflecting the U.S. unhappiness with the large bilateral trade deficit. But the designation was quickly removed by January. Now the U.S. continues its objection to what it considers China’s lack of transparency about its foreign exchange policy.
Switzerland spent about 14% of GDP on its currency market interventions and Vietnam about 5%, above the Treasury’s trigger point of 2%.
“There’s several rationales that the Swiss may have in mind when they make their intervention decisions,” the senior official told reporters. “But part of what they’re doing leads to the continuation of an extremely large current account surplus.” He added, “The magnitude of their intervention is really quite large.”
As to next steps, he said, “I think it’s premature to talk about possible remedies,” he said. “We want to work with Switzerland to deal with the issues.”
As to China, the “main recommendation … is to become more transparent on their intervention practices and their policy,” he said. “If they are starting to intervene again to prevent RMB appreciation that would be a concern of ours and we are tracking that closely.”
U.S tariffs on China imports have helped boost imports from Vietnam which, in Treasury’s view, have also been helped by a currency that’s been undervalued since 2016. The report said that, “Over the four quarters through June 2020 … Vietnam conducted large-scale and protracted intervention, much more that in previous periods, to prevent appreciation of the dong in the context of a larger current account surplus.” Part of that intervention, the report continued, was to gain an advantage in trade.
The Treasury’s FX report is scheduled to be release in April and October, neither of which happened this year. The senior official said that since there was an update in January that removed China’s manipulator designation and the crush of department activity related to the pandemic, the October report was delayed until December.
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Contact this reporter: denny@macenews.com.
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