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Provide answers the below two questions and provided topic below"Should Countries Be Allowed to Manipulate their

Currencies?".



1)When it comes to the role of international institutions, what are some arguments for their punishing currency manipulators?

2)What are some arguments against their doing so?





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CONTROVERSY
Should Countries Be Allowed to Manipulate
Their Currencies?
During his 2016 campaign for the presidency, Donald
they want to stimulate exports. East Asian countries, in
Trump promised that, as president, he would "label China
particular, have often kept their exchange rates artificially
a currency manipulator" within his first 100 days in office."
depreciated as part of their attempts to encourage domes-
In April 2017, however, just before the hundredth day of
tic manufacturers to produce for world markets. Japan,
his term, President Trump announced that he would not,
South Korea, and Taiwan have all pursued this strategy at
in fact, follow through on this threat. Why had then can-
different points in their histories.
didate Trump been concerned about China manipulating
Most governments oppose currency manipulation
its currency? What did his threat to label them manipu-
by their trading partners. Although their own consum-
lators imply? Why did he not carry out his promise? More
ers benefit, they usually face a backlash from domestic
generally, what is currency manipulation, and should it
producers, who, when confronted with cheaper imports,
be discouraged, even punished, by other countries or by
demand that their government do something to relieve the
international institutions?
competitive pressure on them. As a result, nations often
A country may have an
strongly criticize countries that manipulate their curren-
interest in "manipulating" its
cies. In some cases, these conflicts lead to threats of retal-
currency, or intervening in cur-
iation and other countermeasures.
rency markets to alter the cur-
After China opened to the world economy in 1979, and
Applying the
"ency's value, in order to give its
especially after 1990, there were many accusations that it
producers a competitive advan-
was manipulating its currency-the renminbi-in order to
Concepts
tage in international markets.
give Chinese manufacturers an advantage in world mar-
This policy often leads to bit-
kets. Most analysts would agree that Chinese govern-
ter Interactions between the
ment policy did artificially weaken the renminbi. Chinese
country and its trading partners, who resent the policy's
export manufacturers benefited from this policy because
impact on their own producers. There are domestic and
it enabled them to sell more of their goods abroad. Pro-
nternational institutions in place that are meant to
ducers who competed with Chinese exports-including
address currency manipulation. Nonetheless, the issue
many European and American manufacturers-believed
remains controversial: some leaders and analysts believe
they were harmed by China's policy. Chinese consumers
that national governments should be permitted to set their
were also hurt by a weak currency, because it reduced
currency's value as they wish.
their purchasing power, and European and American con-
Controversies over currency manipulation typically
sumers benefited because they could buy Chinese goods
arise when a government sells its own currency land
more cheaply.
buys other currencies) in order to weaken its exchange
rate. A weaker [depreciated] currency reduces the price of
domestic goods to foreigners and makes it more attractive
for foreigners to buy the country's goods. Many developing
countries purposely keep their currencies weak because
N & T
"Donald Trump's Contract with the Voter," https://assets.
donaldjtrump.com/ landings/contract/0-TRU-102316-Contractv02
.pdf (accessed 10/10/17).
AN 110636
4DO
MADE IN CHINA
L.

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YUAN
In an effort to avoid conflicts over currency manipula-
tion, the IMF and the World Trade Organization (WTO] have
rules against it. Despite the importance of these international
institutions, however, they have little enforcement power in
this realm. These issues are usually dealt with in bilateral
interactions between the country accused of manipulating
its currency and that country's trading partners.
American interactions with countries that it considers
01
to be currency manipulators have often been conflictual.
China has faced accusations that it was artificially weakening the value
Under then existing U.S. law, the Treasury Department
of its currency, the renminbi.
found that Japan was a currency manipulator in 1988,
Taiwan in 1988 and 1992, and China between 1992 and
1994. In these cases, the United States put pressure on the
To some extent, currency manipulation is simply
countries to stop the practice, and eventually the Treasury
a clash of interests. It helps exporters in the country
Department found that the manipulation had ceased. But
whose currency is weak, and it helps consumers in other
complaints persisted, especially as China's exports to the
nations. These benefits come at the expense of produc-
United States continued to grow.
ers in other countries, and of consumers in the manip-
A 2015 law gave the U.S. government more tools to
ulating country. Normally, currency manipulation might
punish alleged manipulators, including the ability to cut
simply be the source of conflictual interactions within and
off some government funds to the country in question and
between countries. However, when the country accused
the option to reevaluate existing trade agreements. When
of manipulating its currency plays a large role in interna-
Donald Trump promised to label China a currency manip-
tional trade-such as China, or Japan in earlier years-
ulator, he was threatening to impose these, and potentially
conflicts over currency manipulation can spill over into
other, sanctions on a country that he regarded as harming
trade conflicts. To the extent that these disagreements
American economic interests.
become a source of friction in international trade and
Why didn't Trump follow through? For one thing, by
other economic relations, they may be of broader inter-
the time President Trump took office, most economic
national importance.
analyses indicated that China was not trying to weaken
its currency. In fact, the Chinese government appeared to
be trying hard to prevent weakening of the renminbi. For
another thing, the Trump administration felt that label-
ing China a currency manipulator would interfere with its
Thinking Analytically
own efforts to secure China's cooperation in dealing with
an increasingly troubling problem: North Korea's acqui-
1. Which groups within the United States are
sition of nuclear weapons. For both economic and diplo-
most likely to be harmed by Chinese currency
matic reasons, then, President Trump did not label China a
manipulation to lower the value of the
currency manipulator.
renminbi? Why? Are there U.S. groups that
The broader question remains: Should international
benefit when the renminbi is weaker relative to
institutions, or individual governments, try to punish a
the dollar?
government for manipulating its currency? After all, many
2. Why might China have decided at a certain
analysts believe that poor countries should have weak cur-
point that changing course and propping up
rencies to stimulate exports and production more gener-
the value of its currency was in its economic
ally, and consumers in rich countries benefit when they
interest?
can buy more inexpensive goods from weak-currency
3. When it comes to the role of international
countries. Others, however, argue that a government that
institutions, what are some arguments for their
artificially weakens its currency is putting unfair com-
punishing currency manipulators? What are
petitive pressures on producers in other nations, thereby
some arguments against their doing so'
potentially provoking protectionist retaliation.
401

Top Answer

1.) The main argument for punishing currency manipulators is that it reduces purchasing power, it also puts unfair... View the full answer

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Other Answers

Punishing currency manipulators by an international institution like the IMF is a very tricky task. Countries should have the... View the full answer

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