On April 9, 2015, the U.S. Department of the Treasury released its Semi-Annual Report to Congress on International Economic and Exchange Rate Policies. Once again, Treasury concluded that “no major trading partner of the United States met the standard of manipulating the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.”

There has long been a disconnect between the conclusions of the Treasury reports and the sense of many in the U.S. Congress, who hear daily about the challenges that U.S. companies face in competing with goods manufactured in countries that manipulate their currencies. China has long been a sore spot in this regard, but Korea’s well-known currency interventions are also becoming a major source of frustration.

Despite the conclusion of the U.S.-Korea Free Trade Agreement, U.S. businesses still struggle to access the Korean market, while facing increased competition from Korean exporters here. Korea’s currency interventions are partially to blame. Korea’s economy remains very export-focused. Weak internal demand, undervalued currency, sizeable current account surplus, and large reserves have forced Korea to intervene heavily in the foreign exchange market in 2014 to order to keep its exports competitive on a price basis.

Treasury acknowledged as much in its report, finding that after a reduced presence in the foreign exchange market in the fall of 2014, “Korean authorities appear to have substantially increased intervention in December and January, a time of appreciation pressure on the won.”  Even though the Korean government found heavy intervention in the market, Treasury did not conclude that its purpose was to manipulate – i.e., to prevent effective balance of payments adjustments or to gain unfair competitive advantage in international trade.  In fact, Treasury provided no conclusions on the purpose of Korea’s intervention, in spite of its obligation to identify currency manipulators.  Rather, Treasury merely noted different opinions on the issue:  “{m}arket participants believe that Korea typically intervenes when there is pressure in the market for the won to appreciate” and Korean “authorities intervene with the stated objective of smoothing won volatility.”

When Treasury finds heavy currency intervention, it should at least assess the reasons for that manipulation. Instead, the agency punted – as it has so often done in the past – rather than address Korea’s heavy-handed currency interventions head-on. While this approach may be “diplomatic,” it is unlikely to be viewed favorably by U.S. businesses, and by congressional representatives who view our trading partners’ currency tactics with growing alarm.