Trade War? What's That???!!!!

Sarkozy Says Dollar Drop Risks Triggering Trade War
By Francois de Beaupuy

Nov. 7 (Bloomberg) -- French President Nicolas Sarkozy told a joint session of the U.S. Congress the Bush administration must stem the dollar's plunge or risk triggering a trade war.
``The dollar cannot remain `someone else's problem,''' Sarkozy said today on Capitol Hill. ``If we are not careful, monetary disarray could morph into economic war. We would all be its victims.''
Sarkozy's complaints that the U.S. currency's drop against the euro is undermining European competitiveness struck a discordant note in a summit intended to demonstrate an improving U.S.-French relationship. His comments came as the euro surged to a record high against the dollar. The currency touched $1.4731 today, a 65 percent gain since the end of 2001.
Concern that the euro is too strong has been a Sarkozy theme since his presidential campaign earlier this year. Since his May 6 election, he has urged European Central Bank officials to lower interest rates to weaken the currency.
``If anything, this is a signal to the ECB that the euro has accelerated and they need to bear that in mind and not rush to raise rates,'' said Laurence Boone, chief French economist at Barclays Capital in Paris. ``When the dollar is depreciating, French firms are more affected than those in Germany.''
Germany hasn't joined Sarkozy in his effort to weaken the currency. German Chancellor Angela Merkel isn't concerned by the euro's appreciation, a Finance Ministry spokesman said. Asked at a Berlin news conference today whether the government ``is concerned'' about the single currency's rise to a record, Finance Ministry spokesman Torsten Albig said: ``No.''
Airbus Costs
Sarkozy said yesterday that Toulouse, France-based Airbus SAS, the world's biggest planemaker, loses about 1 billion euros ($1.5 billion) for every 10-cent increase against the dollar.
``Those who admire the nation that has built the world's greatest economy and has never ceased trying to persuade the world of the advantages of free trade expect her to be the first to promote fair exchange rates,'' Sarkozy said. He repeated his concern that the Chinese yuan is unfairly undervalued.
Brookly McLaughlin, a spokeswoman for U.S. Treasury Secretary Henry Paulson, said today his position on the currency hasn't changed since Oct. 30 in Mumbai, when he told an audience that he was ``strongly committed to a strong dollar.''
Beyond economic policy, Sarkozy emphasized France's ``friendship'' with the U.S., drawing a standing ovation when he expressed gratitude for the liberation of Europe from the Nazis. He backed U.S. opposition to Iran's nuclear program and pledged to keep troops in Afghanistan as long as necessary.
Sarkozy's predecessor, Jacques Chirac, led international opposition to the U.S.-led invasion of Iraq in 2003. The new French leader has sought a clean break from Chirac's policies since he came to power in May. Chirac, in 1996, was the last French leader to address Congress. Sarkozy today omitted direct reference to the war in Iraq, which is now in its fifth year.