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Tuesday March 28, 7:52 PMPrestowitz urges Koizumi to call for 'Plaza Accord II' at G-8(Kyodo) _ 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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