US removes India from Monitoring list of major trading partners that merit close attention to their currency practices. US Treasury department found that nine major trading partners continue to warrant placement on the list– China, Germany, Ireland, Italy, Japan, Korea, Malaysia, Singapore, and Vietnam. Along with India, Switzerland was also removed from the list.
The U.S. Department of the Treasury on Tuesday delivered to Congress the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.
The report said that in both Switzerland and India, there was a notable decline in 2018 in the scale and frequency of foreign exchange purchases. Neither Switzerland nor India met the criteria for having engaged in persistent, one-sided intervention in either the October 2018 Report or this Report. Both Switzerland and India have been removed from the Monitoring List.
The report said that China continues to be on the list and Treasury urged China to take the necessary steps to avoid a persistently weak currency. The report said that while China does not disclose its foreign exchange intervention, Treasury estimates that direct intervention by the People’s Bank of China in the last year has been limited. The report said that China needs to aggressively address market-distorting forces, including subsidies and state-owned enterprises, enhance social safety nets to support greater household consumption growth, and rebalance the economy away from investment. Improved economic fundamentals and structural policy settings would underpin a stronger RMB over time and help to reduce China’s trade surplus with the United States, report added.
The report added that “India has been removed from the Monitoring List in this Report, having met only one out of three criteria – a significant bilateral surplus with the United States – for two consecutive Reports. After purchasing foreign exchange on net in 2017, the central bank steadily sold reserves for most of 2018, with net sales of foreign exchange reaching 1.7 percent of GDP over the year. India maintains ample reserves according to IMF metrics for reserve adequacy.”
Treasury reviewed and assessed in this Report the policies of an expanded set of 21 major U.S. trading partners. Additionally, Treasury revised and updated the thresholds it uses to assess where unfair currency practices or imbalanced macroeconomic policies may be emerging.
“The Treasury Department is working vigorously to achieve stronger growth and to ensure that trade expands in a way that helps U.S. workers and firms and protects them from unfair foreign trade practices. Treasury takes seriously any potentially unfair currency practices, and Treasury is expanding the number of U.S. trading partners it reviews to make currency practices fairer and more transparent,” said U.S. Treasury Secretary Steven T. Mnuchin.
“Additionally, Treasury will continue its enhanced bilateral engagement with China regarding exchange rate issues, given that the RMB has fallen against the dollar by eight percent over the last year in the context of an extremely large and widening bilateral trade surplus,” said Mnuchin.
The Report concluded that while the currency practices of nine countries were found to require close attention, no major U.S. trading partner met the relevant 2015 legislative criteria for enhanced analysis during the period covered by the Report. Further, no trading partner was found to have met the 1988 legislative standards during the current reporting period.