Director-General Pascal Lamy says no:
The World Trade Organization should not take on the job of deciding whether China or any other country is following an appropriate currency policy, the head of the WTO said on Monday.
"This is something for the IMF (International Monetary Fund) and I would prefer this be left to them," WTO Director General Pascal Lamy said in a speech at Georgetown University's law school on the WTO's "surveillance" role in ensuring countries honor their trade commitments.
I've argued before on this blog that the WTO should play a role in this area. Here are three of my reasons:
1. Exchange rates can be manipulated to give domestic producers an advantage over their foreign competitors (I'm not saying that they have in any particular situation, just that theoretically they can be used this way). I think it's safe to say that one of the core goals of the WTO is fighting protectionism, and if currency manipulation is used for protectionism, it should be addressed.
2. Without effective international rules in this area (and I don't think the IMF can regulate very effectively here), there is a good chance that countries will take unilateral action to fight perceived currency manipulation, leading to increased trade friction. WTO rules on the issue could help prevent this.
3. In the absence of explicit rules on the subject, a WTO complaint might be brought based on existing rules, which will force panels and the Appellate Body to develop something on their own. Whatever they come up with could very possibly make all sides unhappy.
