US puts Germany on trade surplus watch list

The action, which was disclosed in a report to Congress on Friday, will see the Treasury increase its monitoring of trade partners with excessive budget and trade surpluses, which Washington suspects are behaving unfairly to support their economies.

While Germany is the only European country to appear on the list, East Asia accounts for the other four, including China, Taiwan, South Korea and Japan.

According to the Treasury, all five countries each met two of three criteria for assessing unfair play in international trade. None of them, however, met all three of the criteria, which include: maintaining a significant trade surplus with the United States, maintaining a current account surplus larger than 3.0 percent of the country's GDP, and repeated intervention in the foreign exchange market to keep its currency from appreciating.

'Consultations' for watch list members

China, Japan, Germany and South Korea were seen as guilty of the first two criteria but not the third. Taiwan was placed on the list due to its large current account surplus and persistent purchases of foreign exchange in 2015, keeping the New Taiwan dollar low against the US dollar.

Under the US' previous biannual "currency manipulator" review, any country found guilty of artificially holding down their currencies to boost their exports faced the threat of punishment.

In contrast, the new monitoring list will lead to consultations, but no economic penalties. If the consultations fail, however, the countries could face a greater threat of sanctions in the future.

Germany shows large budget surplus

Although Germany is unable to easily manipulate its shared currency in the eurozone, the US Treasury said the country's big trade surplus with the United States and Germany's large budget surplus "represent substantial excess saving."

That surplus, the Treasury reported, could be used to support German demand, and in turn reduce "the current account surplus and [contribute] markedly to the euro-area and global rebalancing."

China, on the other hand, has been on the Treasury's watch list for years for allegedly holding down its currency to gain trade advantage. The new report found, however, that since China's since its surprise devaluation last August, Beijing has intervened heavily in foreign exchange markets in recent months to support its yuan currency, instead of pushing it down.

Had the yuan continued to depreciate, it "would have had negative consequences for the Chinese and global economies," the Treasury said.

ksb/gsw (AP, AFP)