Seoul rejects U.S. conflation of FTA, FX

Economy

Seoul rejects U.S. conflation of FTA, FX

Published: 29 Mar. 2018, 20:26

Korea told the United States Thursday that it shouldn’t confuse free trade agreement issues with complaints about Seoul’s approach to the foreign exchange market.

“The FTA negotiation and currencies are completely separate issues,” said a high ranking Finance Ministry official, who requested anonymity. “We have made a strong complaint about an unnecessary misunderstanding in the process of the U.S. government announcing the Korea-U.S. FTA results.”

The government official emphasized that the currency issue cannot be dealt bilaterally but should be dealt within a multilateral frame.

“Since the beginning of the year, the United States has made attempts to relate the currency issue with the FTA,” the ministry official said. “But we have strongly resisted.”

He said the currency issue is a very sensitive area for a country like Korea that has experienced two foreign exchange crises - one in 1997 to 1998 and the other in 2008.

“We have strongly argued that a macroeconomic factor should not be in the negotiation of the FTA, which deals problems in executing tariffs on actual products,” the official said.

In a report released on Wednesday, the U.S. Trade Representative stated that the U.S. Treasury Department was in discussion with the Korean Finance Ministry on a currency agreement.

“An agreement [memorandum of understanding] is being finalized on robust provisions to prohibit competitive devaluation and exchange rate manipulation in order to promote a level playing field for trade investment,” it said, adding that transparency and accountability are being included in the provision.

A White House fact sheet entitled “President Donald J. Trump is fulfilling his promise on the U.S-Korea Free Trade Agreement and on National Security” issued on Wednesday said that the Treasury Department is finalizing a memorandum of understanding to prevent “unfair competitive advantages” by Korea including a commitment on exchange rate practices, robust transparency and a mechanism for accountability.

The Finance Ministry official said Washington seemed to be playing politics and bragging about the Trump administration’s successes to the American public.

“Unless it’s a multinational negotiation like the Trans-Pacific Partnership, there has been no precedent of negotiating over currency issues in a bilateral negotiation,” the official said.

The U.S. government will release a report on April 15 about how countries deal with foreign exchange rates. Korea was among countries that the United States was monitoring for currency manipulation.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]