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Prestowitz Urges Koizumi To Call for "Plaza Accord II" at G8

 
To Call for 'Plaza Accord II' at G-8

From Kyodo News Agency
Tuesday, March 28, 2006

http://asia.news.yahoo.com/060328/kyodo/d8gki7284.html

Japanese Prime Minister Junichiro Koizumi should take the lead at a
Group of Eight meeting in calling for a "Plaza Accord II," former
U.S. trade negotiator Clyde Prestowitz said Tuesday.

"We all need to cooperate on diminishing the role of the dollar in
international trade," said Prestowitz, now the president of the
Economic Strategy Institute, which he founded, at a lecture at the
Foreign Correspondents' Club of Japan.

Even though Koizumi is going to step down from the premiership in
September, he is in a good position to suggest that G-8 leaders
adopt a new Plaza Accord to help reduce current global economic
imbalances similar to those seen in the mid-1980s, when the first
accord was struck, Prestowitz said.

The 1985 Plaza Accord was signed by the then Group of Five economic
powers to coordinate foreign exchange policies. Troubled by a large
trade deficit, particularly with Japan, the United States under the
administration of President Ronald Reagan aimed to bring down the
value of the U.S. dollar against other major currencies.

Since then the world economy has gone through a radical
transformation, with China and India emerging as major economic
powerhouses. The G-5 has now expanded to the G-8 grouping Britain,
Canada, France, Germany, Italy, Japan, the United States and Russia.

But the U.S. dollar is again in a situation in which many
economists, including Prestowitz, see it as overvalued and partly
responsible for increasing trade deficits in the United States.

The U.S. government recently said its current account deficit in
2005 totaled $804.95 billion, up 20.5 percent from the previous
year, to hit a record high for the fourth straight year due to a
bigger goods trade deficit on higher imports and oil prices.

"We are back (to a similar situation to the mid-1980s with a similar
global economic imbalance), except it's bigger and there are more
players," said Prestowitz, a trade negotiator in the Reagan
administration.

To help resolve this matter, he said the United States should raise
taxes and increase financial savings, while other countries should
stimulate consumption.

As a means of solving the problem, the world needs to begin pricing
oil "not in the dollar but in a basket of currencies," such as the
yen, dollar, euro, and yuan, he suggested.

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