Economist Simon Johnson writes the following at the NY Times Economix blog:
But the mainstream consensus is starting to shift toward the idea that the World Trade Organization (W.T.O.), not the I.M.F., should have jurisdiction over exchange rates. The W.T.O. has much more legitimacy, primarily because smaller and poorer countries can bring and win cases against the United States and Western Europe in that forum. It also has agreed upon and proven tools for dealing with violations of acceptable trade practices; tailored trade sanctions are permitted.
No one wants to take precipitate action in this direction, but extending the W.T.O.’s mandate in the direction of exchange rates would take time — and presumably warrant discussion at the G-20 level. The United States has great influence over the G-20 agenda, and Mr. Obama’s staff members should hint, ever so gently, that this is where they see the process going.
It's interesting to hear that there is a consensus to give the WTO "jurisdiction" over exchange rates. I'm curious about what this means exactly. It could be (and has been) argued that the existing WTO rules already deal with various aspects of exchange rates. But I think it is true that if the WTO is to address these issues effectively, some more detailed rules could be useful.
For more on exchange rate issues, Alan Beattie of the FT had this to say:
"The Americans get the toys, the Chinese get the Treasuries and we get screwed." Thus a European Union official once characterised the pattern of Beijing accumulating US assets by selling renminbis for dollars, while nothing stood in the way of a rapid and destabilising appreciation of the euro.
It was this routine that led to the US running a huge current account deficit with counterpart surpluses in much of east Asia (including China) and parts of Europe, and among the oil exporters of the Middle East. A shift in exchange rates is almost certainly a necessary part of rebalancing the world economy, shifting the burden of consumption towards those surplus areas ...
