WASHINGTON- The US Treasury added India to its watch list of countries withpotentially questionable foreign exchange policies, according to a reportissued on Friday. Treasury said the “monitoring list” includes those “majortrading partners that merit close attention to their currency practices.”
In addition to India, the semi-annual report to Congress names fivecountries that continue on the list from October: China, Germany, Japan,Korea and Switzerland. Countries remain on the list for two report cycles”to help ensure that any improvement in performance versus the criteria isdurable and is not due to temporary factors.”
While no major trading partner was found to be manipulating its currency,five of those on the list meet two of the three criteria, while China isincluded because “it constitutes a disproportionate share of the overall UStrade deficit.” The US has a deficit of $337 billion with China of a totalglobal trade deficit of $566 billion, according to government data.
“We will continue to monitor and combat unfair currency practices, whileencouraging policies and reforms to address large trade imbalances,” USTreasury Secretary Steven Mnuchin said in a statement. The Treasury reportis required by Congress to identify countries that are trying toartificially manage the value of their currency to gain a trade advantage,for example by keeping the exchange rate low to promote cheaper exports.
The report said India, which has a $23 billion trade surplus with theUnited States, “increased its purchases of foreign exchange over the firstthree quarters of 2017,” although the rupee still rose in value. And whileChina — which is at the center of a brewing trade dispute with Washington– remained on the watch list, Treasury said “the Chinese currencygenerally moved against the dollar in a direction that should” help reduceChina`s trade surplus with the United States.
Germany also remained on the watch list, even though it is part of theEuropean currency union, which means it cannot independently control theexchange rate for the euro. Even so, the report notes that Germany “has theworld`s largest current account surplus” and has made “little to noprogress in reducing this massive surplus the past three years.”