TWN Info Service on WTO and Trade Issues (Dec11/03)
20 December 2011
Third World Network

WTO to hold "seminar" on trade and exchange rates
Published in SUNS #7263 dated 18 November 2011

Geneva, 17 Nov (Kanaga Raja) -- The World Trade Organization (WTO) is expected to hold a "seminar" early next year to discuss the relationship between international trade and exchange rates.

According to trade officials, a meeting of the Working Group on Trade, Debt and Finance (WGTDF) was held on 24 October at which Brazil had said that it would like to have a "seminar" held on this issue.

No one had objected to this suggestion at that Working Group meeting, added trade officials.

While it will be organised by the WGTDF, it will not be an official meeting, as people from outside the WTO will be taking part in the discussions, said trade officials.

They noted that Brazil had said that the seminar could look at a variety of things including whether new rules should be developed.

The format or content of this seminar has not been decided yet, trade officials said.

Ambassador Roberto Azevedo of Brazil has been quoted in a Bloomberg news report on 16 November as saying that the relationship between trade and exchange rates will be discussed at a meeting planned for March next year.

"What we're looking for, in temporary circumstances, is the effect or the impact that certain currency misalignments may have on particular segments of one country's economy," the Brazilian envoy told Bloomberg.

Bloomberg also quoted him as saying: "In the future we may have an agreement on what the problem is, whether this kind of problem needs some kind of remedy, whether we already have the remedy in the WTO agreements."

Speaking at a meeting of the WGTDF on 24 October, Ambassador Azevedo, making reference to a Note produced by the Secretariat on the relationship between exchange rates and international trade (WT/WGTDF/W/57), said that Brazil agreed with the approach taken by the Secretariat in the sense that the focus should not be the factors behind the determination of exchange rates, such as the choice of exchange rate arrangements or regimes or the enactment/impact of policies that ultimately determine exchange rate levels in each particular country.
This type of analysis is better suited for other institutions, such as the IMF, he said, adding that the focus should take exchange rate levels as a given, and then focus on the relationship with trade.

He had noted that more recently, especially after the 2008 financial crisis, the emphasis of the debate has shifted towards the trade impact of the so-called "misalignment" of exchange rates in particular countries.

He told the WGTDF meeting that Brazil's key concern is the impact, in the short-run, that a particular "misalignment" may cause, not on aggregate values, but on individual firms and sectors.

He added that what Brazil is concerned about is the impact on the ground, at the level of firms or sectors. "In fact, the more complex and large an economy is, the more difficult it is to identify the impact of misalignments with statistics of aggregate trade," he told the WGTDF meeting in October.

Highlighting a second submission (WT/WGTDF/W/56) that has been tabled by Brazil on this subject, as a follow-up to its first submission earlier in the year, the Brazilian envoy recalled that members had decided to undertake a dedicated workshop in one of the sessions of the WGTDF.

He had suggested that this take place in the first quarter of 2012.

He had also suggested a workshop divided in several segments that could explore the different perspectives from the private and public sector, from economists, from the different international organizations, with a segment also on the identification of existing relevant WTO disciplines.

He said that it should be open to Member States, relevant international organizations and any other guests who may be invited to participate. The report of the workshop could then be sent to other relevant bodies of the WTO. It could also be published and made available to the public at large, he added.

"This could pave the way for later discussions on what kind of tools, if any, we could develop to address very specific situations of patent misalignment," he told the WGTDF meeting in October.

Some trade experts noted privately the several confusing reports earlier in some financial media, ranging from Brazil raising a "dispute" to a special discussion at the forthcoming Ministerial Conference in December, and said perhaps the current move (agreed at the WTO's WGTDF) could be the initial step in bringing exchange rate policies for disciplining within the WTO and thereby subject them to enforcement through the WTO Dispute Settlement (DS) mechanism.

Such a step (disciplines within the WTO) has however a long way to go before that happens, they said, adding that it could also be another way of piling pressure on the Chinese to let their currency float.

[The idea of bringing the exchange rates issue into the WTO ambit - with the IMF tasked to rule on an appropriate exchange value, and the WTO's Dispute Settlement System being used to enforce it - has been floated by some Washington-based financial "experts". However, the idea bristles with difficulties - with the IMF, whose governance is in the hands of the US and EU, giving a binding view, to be enforced by the WTO whose governance is based on equality of all members and decisions by consensus. Even a clear basis for agreeing on a correct exchange value for a currency bristles with difficulties. -- SUNS] +