Treasury Report Finds No Unfair Currency Intervention Worldwide
No world economy raised the three red flags necessary to trigger increased U.S. bilateral engagement and possible sanctions to counter unfair currency manipulation through procedures outlined by the Trade Facilitation and Trade Enforcement Act (TFTEA), according to a Treasury report to Congress on the foreign exchange policies of major U.S. trading partners, released Oct. 17. However, Treasury has continued naming China, Japan, Korea, Germany and Switzerland on the "monitoring list." Treasury removed Taiwan from the monitoring list after the nation met only one out of three criteria -- a material account surplus -- for two consecutive reports. Countries meeting two out of all three criteria necessary to warrant classification as a currency manipulator are placed on the monitoring list.
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Under the customs reauthorization legislation, if a country has a significant trade surplus, a "material" current account surplus, and engaged in "persistent" intervention in currency markets, the administration must "commence enhanced bilateral engagement” with the country. If the country doesn’t adopt adequate policies to reverse its currency undervaluation and external surpluses within a year, the president must retaliate, including by excluding the country from U.S. government procurement and by taking the currency situation into account when considering free trade agreements.
Treasury's report covered the 12 largest U.S. trading partners, including economic, trade and exchange rate developments for the first six months of 2017, and where data was available, developments through the end of September 2017, the agency said. “Pursuant to the 2015 [TFTEA], Treasury has found in this Report that no major trading partner met all three criteria during the four quarters ending June 2017," the report says.