DAVOS, Switzerland — Currency exchange rate manipulation undermines global trade and competition, French President Nicolas Sarkozy said here Wednesday, in a veiled attack aimed at China’s alleged undervalued yuan.
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“We cannot put finance and the economy back in order if we allow the disorder of currencies to persist,” Sarkozy said in a keynote address to 2,500 business and political leaders attending the annual World Economic Forum. “We cannot, on the one hand, preach free trade and, on the other, tolerate monetary dumping.”
He argued for a new Bretton Woods global monetary system and alluded to the fact that there was a need for an alternative to the dollar for underwriting the global financial system.
“We cannot have, on the one hand, a multipolar world, and on the other, a single benchmark currency across the globe,” the French president said.
Sarkozy said France will place reform of the international monetary system “on the agenda” when it chairs the powerful G-8 and G-20 groupings in 2011.
Stuart Eizenstat, a former deputy Treasury secretary in the Clinton administration, said of Sarkozy’s remarks, “I don’t agree with overhauling the dollar as a benchmark. I think you have to have an international benchmark and there is no other substitute.”
Eizenstat, head of international trade and finance at the Washington law firm of Covington and Burling, said he agreed with Sarkozy’s call for the need to enforce international rules and noted that monetary manipulation and dumping are inappropriate.
“What he’s saying is that as countries reach the level of development of China, when they’re no longer poor developing countries, they have to play by international rules, and the notion that they’re getting an additional competitive advantage, controlling their currency is not appropriate, and I agree with that,” Eizenstat said in an interview.
Sarkozy also said President Obama “is right” that banks must be dissuaded from engaging in proprietary speculation or financing speculative funds, but indicated this debate cannot be confined to one nation but must be settled within the G-20.