After the Trump administration on Tuesday issued a regulation detailing how Commerce can levy countervailing duties if other countries devalue their currencies, the head of the World Trade Organization warned that WTO rules are not designed to handle exchange rate policy.
“If you’re going to get [the WTO] to fix currency, it’s going to fail,” Director-General Robert Azevêdo said on Tuesday in response to a question about whether the Commerce regulation violates WTO rules. “You have the [International Monetary Fund], you have the World Bank, you have central banks, the Financial Stability Board — they’re all talking about this. And to expect that the WTO will fix this? That would be a bit ambitious, I would say, to place that on the shoulders of the organization. It was not built for that.”
Azevêdo was speaking at the Washington International Trade Association’s annual conference in Washington, DC.
Commerce’s final rule will take effect in April.
Critiques of the Commerce regulation claim currency devaluation does not constitute a “financial contribution,” as required by Article 1.1(a)(1) of the Agreement on Subsidies and Countervailing Measures. They also question whether Commerce’s rule meets the specificity requirements of Article 2.1 of the ASCM. According to WTO rules, a party may impose countervailing measures only if a subsidy is “specific” as defined by Article 2.1.
On the issue of whether currency devaluation is a “financial contribution,” Commerce said the new rule does not directly address the issue, but neither do any other existing Commerce countervailing duty regulations. On specificity, Commerce said “if a subsidy is limited to enterprises that buy or sell goods internationally, or if enterprises that buy or sell goods internationally are the predominant users or receive disproportionately large amounts of a subsidy, then that subsidy may be specific.”
Source: Inside Trade