U.S. keeps S. Korea on 'monitoring list' of foreign exchange

All News 10:30 November 11, 2022

By Kang Yoon-seung

SEOUL, Nov. 11 (Yonhap) -- South Korea has again been placed on a list of countries to be closely monitored by the United States in terms of foreign exchanges, the U.S. Department of Treasury has said, due to its strong surplus in bilateral trade.

Asia's No. 4 economy has been placed on the list, along with China, Japan, Germany, Malaysia, Singapore and Taiwan, according to the Treasury's latest foreign exchange policy report Thursday (U.S. time).

Countries are put on the monitoring list when they meet two of the three criteria set by the U.S. Trade Facilitation and Trade Enforcement Act of 2015, also known as the 2015 Act.

The three criteria are a bilateral trade surplus of over US$15 billion with the United States, a material current account surplus of more than 3 percent of gross domestic product (GDP), and persistent, one-sided intervention in the foreign currency market in at least eight months of a year with net purchases of over 2 percent of an economy's GDP over a 12-month period.

When all three criteria are met, the U.S. conducts "enhanced analysis," with the latest report keeping Switzerland on the list.

South Korea's trade surplus with the U.S. came to $32 billion over a one-year period ending in June 2022 and posted a current account surplus of around 4 percent of the GDP, according to the Ministry of Economy and Finance.

South Korea has been on the list since April 2016, except for the first half of 2019.

"Treasury estimates that the Korean authorities sold foreign exchange at increasing amounts throughout the twelve-month report period in line with increasingly rapid won depreciation," the department said in its report.

"Korea has well-developed institutions and markets, and should limit currency intervention to only exceptional circumstances of disorderly market conditions," it added.

The U.S. Treasury advised South Korea to "encourage equitable and green growth policies that will raise incomes for vulnerable workers while undergirding energy security and economic resilience."

"Progress on structural reforms, such as encouraging broad-based participation in the labor market, strengthening social safety net programs, and integrating carbon reduction commitments into economic planning would help secure economic opportunity for disadvantaged workers, reduce old-age poverty, and insulate Korea from external energy shocks," it added.