Seoul pleads with U.S. over currency

Korea’s top finance official urged his American counterpart not to label Korea a currency manipulator as the United States prepares to release a major report later this month.

According to the Ministry of Strategy and Finance on Thursday, Kim Dong-yeon, Korea’s finance minister, spoke to U.S. Treasury Secretary Steven Mnuchin for about 15 minutes over the phone. The Finance Ministry explained that Kim and Mnuchin decided during a bilateral meeting on March 19 in Buenos Aires that they would closely communicate with each other on important issues through frequent phone calls.

During the phone call, Kim told Mnuchin, “Korea does not meet the requirements of a currency manipulator in the U.S. currency report” and that he hopes “this would be reflected in the currency report for April [2018],” according to the Finance Ministry.

The U.S. Department of the Treasury releases a report on international economic and exchange rate policies in April and October of every year. The semi-annual report includes a monitoring list that includes countries the treasury department views as possible currency manipulators.

A country is branded a currency manipulator by the U.S. government when it meets three requirements: having a trade surplus with the United States exceeding $20 billion; a current account surplus exceeding 3 percent of the country’s GDP; and consistent intervention by the government to shore up foreign currency worth a minimum 2 percent of the country’s GDP for a year or longer.

Although Korea has not been designated a currency manipulator, it was put on the monitoring list in the October 2017 report along with China, Japan, Germany and Switzerland.

The U.S. government placed Korea on the monitoring list on the grounds that Korea has current account surplus of over 5 percent of its GDP and that it has had “a significant bilateral trade surplus…of $22 billion over the four quarters through June 2017.”

Kim reportedly explained to Mnuchin that Korea’s trade surplus with the United States decreased throughout 2017. Korea’s trade surplus with the United States was around $18 billion last year.

Another topic in the conversation was Washington’s recent statement that it was in discussion with Korea’s Finance Ministry “to prohibit competitive devaluation and exchange rate manipulation” as a side deal to the revised free trade pact between the two countries. Seoul said a discussion of exchange rates was not supposed to be part of the free trade agreement talks.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]