World Trade Organization chief Pascal Lamy said he was “extremely cautious” whether currency manipulation is a form of protectionism because a WTO rule on the issue has never been tested.
“Now, true, there is one specific article of GATT-WTO that says that a country should not frustrate its trade-opening commitments in using its exchange rate policies,” Lamy said during a discussion on the sidelines of the World Bank and International Monetary Fund’s annual spring meeting.
“The rule is there. It’s never been tested, which is why I’m extremely cautious on this,” Lamy said.
Many U.S. manufacturers believe China is acting in a protectionist manner by undervaluing its exchange rate, which they say subsidizes Chinese exports and taxes imports.
Over the years, there have been calls for the United States to challenge China’s exchange rate policies at the WTO, but neither the Republican administration of former President George W. Bush nor the Democratic administration of President Barack Obama has taken that step.
Asked if there was something the WTO could do about countries that manipulate their currency, Lamy said: “The politically correct answer is that it’s not a question for me, it’s a question for (IMF Managing Director) Dominique Strauss-Kahn. Not Geneva-WTO, but Washington-IMF. That’s where legally the mandate for currency surveillance is,” Lamy said.
In its semi-annual, World Economic Outlook report this week, the IMF repeated that the Chinese yuan is “substantially” undervalued. Critics say the IMF has been ineffective in pressuring Beijing to move. (Reuters)