Currency Manipulation Hardly An Invention Of China

Currency manipulation isn't like firecrakers. It wasn't invented by the Chinese to gain advantage over its global competitors. Even the trade partners the U.S. is on fairly good terms with are tempted to use the strategy to make their goods and services more attractive on the world market by artificially depressing their value through delfated currency.

Just recently, GM Korea CEO Sergio Rocha even called upon new Korean President Park Geun-hye to manipulate the Korean won to help manufactuers in the country compete with their Japanese and Chinese counterparts. "On our left and right side, they do things to support their own industry, to allow them to export -- both China and Japan," Rocha told the Financial Times, according to a recent blog by Foreign Policy magazine's Clyde Prestowitz, who is also an American Jobs Alliance board member.

Over the past year, South Korea's won became 6 percent and nearly 30 percent stronger against the U.S> dollar and Japanese yen, respectively, causing investment bank Societe General to conclude that the nation "stands on the front line of the Asian currency war."

Japan's weak yen policy, thanks to new Japanese Prime Minister Shinzo Abe, has helped put a huge dent in Korean auto exports to its important U.S. and European markets.

The irony of the whole situation, according to Prestowitz? That GM, the "quintessential American company" that was bailed out not long ago by U.S. taxpayers, would lend support to "the currency manipulation game."

But GM also has a huge stake in the Asian country, exporting 80 percent of what it manufactures there. Even more ironic about this situation? The U.S. government "implicitly" associates itself with the GM Korea CEO's remarks though it denies any currency manipulation is going on in Asia. Huh?

"What makes this so interesting is the posture of the U.S. government. As an owner of GM it is implicitly associating itself with Rocha's complaints. Yet at the official level, the U.S. Treasury, the White House, and the State Department all maintain that, Rocha to the contrary not withstanding, there is no currency manipulation going on in China or Japan. Indeed, for the past four years, the Secretary of the Treasury has carefully and steadfastly refrained from making any finding of currency manipulation by anybody even when countries have been accumulating enormous dollar reserves as a result of dollar buying in the global currency markets. Maybe Rocha and Jack Lew, the new U.S. Treasury Secretary, should Skype for a while -- I mean, nothing to lose," Prestowitz wrote in his recent Foreign Policy blog.

The Economic Strategy Institute president now wonders whether a more "aggressive currency intervention policy" in South Korea would be a good way of giving Japan and China a dose of their own medicine, perhaps prompting them to "talk seriously" about currency manipulation in free trade discussions. .


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