The U.S. Treasury issued a report last February called: “Report to Congress on International Economic and Exchange Rate Policies.”
Korea continues to intervene in its currency markets. The Korean won is undervalued by anywhere from 5 to 20%. Treasury cites Korea’s excess currency reserves as evidence of its currency market intervention and says:
… given the strength of the Korean recovery, rebuilding of reserves, and the rebound of the current account surplus, there is room for a greater degree of exchange rate flexibility and less intervention. (p. 19).
This is Treasury-speak for saying Korea continues to manipulate currency. (Though they won’t even find that China is a currency manipulator).
Why sign a trade deal with Korea when they can negate any tariff decline through multiple non-tariff means like currency manipulation, which is their past and current practice. That’s how Mexico and China and other countries did/do it.
It’s like the U.S. negotiating the START treaty with the USSR, agreeing to bi-lateral reduction in intern-continental ballistic missiles with nuclear warheads. Then the USSR, after reducing the inter-continental missiles, replaces them with submarine and aircraft based nuclear warheads. The U.S. would have unilaterally disarmed.
That’s what free dumb trade agreements are. Unilateral U.S. trade disarmament. And the trade deficit shows the result.
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Excellent comment. This is a fundamental failure of American trade policy. The issue is hardly new. That’s why the Congress tried in 1988 to equip the Treasury with authority to determine that other countries were manipulating their currencies in ways that violated IMF Article 4. That authority was used to some effect until 1994, when then Treasury Secretary Bob Rubin stopped — cold turkey. None of his successors has dared to use the authority Congress granted 23 years ago — not even once!!- and all the Hill does about it is whine and posture.