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WT/WGTDF/M/27  
 
18 June 2013  
(13-3137)  Page: 1/6  
Working Group on Trade, Debt and Finance    
 
 REPORT OF THE MEETING OF 7 MAY 2013 
1.  The twenty seventh meeting of the Working Group on Trade, Debt and Finance (WGTDF) was 
held on 7 May 2012 under the Chairmanship of Amba ssador F. Ismail (South Africa).  The Working 
Group adopted the agenda.  
2.  In his introductory remarks, the Chairman recalled that, at the last meeting, Members had 
expressed their willingness to continue the discussi on started at the November 2012 meeting. This 
discussion had been summarized in WTO Docume nt WT/WGTDF/M26. Some Members wished to 
continue such a discussion after having consulted their capitals regarding the substance of Brazil's proposal, laid out in WTO Document WT/WGTDF/W/68. Other Members found merit in deepening Brazil's suggestions. Some other Members had sh own interest on continuing the discussion on 
exchange rates and trade, but mainly from an an alytical point of view and not with a focus on 
rules. The chairman had suggested that such discussion be held on the basis of the five questions 
that were part of his own summary of the No vember 2012 meeting. Also, Members had requested 
in November 2012 that the WTO and IMF be "more coherent", both at the operational and 
institutional levels. As a result, the Chairman had invited the International Monetary Fund (IMF), on behalf of the WGTDF, to make a presentation  on (1) the way by which the IMF exercises the 
monitoring of its Members' exchange rates polic ies, and (2) the methodologies behind the terms 
"equilibrium" and "misaligned" exchange rates. The IMF had nominated Mrs Taline Koranchelian, the IMF's expert on surveillance issues, to make that presentation under Agenda item 1. The Secretariat would report on the recent meeting of  the Director-General's Expert Group on Trade 
Finance, under Agenda item 2. 
3.  It was so agreed. 
1  AGENDA ITEM I: EXCHANGE RATES AND TRADE  
4.  The IMF Representative made a presentation  on "IMF Surveillance and Exchange Rates", 
developing three sub-titles; "strengthening the IMF surveillance: key issues"; "the new legal framework for surveillance (2012); and an "improved external sector assessment." This 
presentation was posted on the WTO Members' website and can be consulted accordingly at : 
http://docsonline:81/members/ . The IMF Representative answered a number of requests for 
clarifications by delegations.  
5.  The Chairman opened the floor for discussion, encouraging Members to give views on how to 
move the agenda forward on this issue. 6.  The Representative of Brazil thanked the Ch airman for circulating a set of questions. He 
recalled that currency misalignments had produced trade-distorting effects since the outbreak of 
the financial crisis in 2008. There were disagreements on how - and to what extent - currency 
asymmetries and instability had been transmitte d to trade. Certain countries – and, within 
countries, certain sectors and firms – had been more adversely affected than others.  
7.  Regarding the questions by the Chair, the Representative answered "yes" to question 1. 
Notwithstanding the role played by technical analysis in the IMF and in the WTO, it was inaccurate to underestimate the importance of political compromise in the choice of the best policies and methodologies among an array of options. It was not within the usual business of the WTO to 
diagnose the causes of misalignments or to define  equilibrium real exchange rates. However, the 
WTO was the main institution responsible for handling the effects of exchange rate misalignments and fluctuations on trade. Yet, the precise boundary between the IMF and the WTO in such WT/WGTDF/M/27 
 
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  matters had still to be fully established. In a hy pothetical scenario, one could think that the IMF 
could rely on more than one methodology in assessing exchange rates. Deciding which option was the most suitable for analysing the effects of exchange rates on trade was within WTO’s competency. A deepening of the WGTDF discussi on was necessary to elucidate how the two 
organizations would interact, bearing in mind the need to fulfil the “coherence mandate”. The 
complexity of these questions could not be used as  an excuse for failing to fulfil the “coherence 
mandate”.  
8.  Regarding question 2, the short answer was also  "yes", albeit only insofar as it was necessary 
for the IMF to assess misalignments, and to the extent that the role of the WTO was not minimized. Irrespective of the mandate of the IM F, the WTO had an important role to play in 
addressing the impact of exchange rate fluctu ations on trade. The “Coherence Declaration” 
emphasized the importance of “avoiding the imposition on governments of cross-conditionality or 
additional conditions” when fulfilling the “coherence mandate”.  
9.  Questions 3 and 4 could be taken together. The short answer was also "yes". Members had to 
bear in mind that national monetary policies were by no means impervious to international 
restrictions. In an increasingly financially integrated world, monetary policies specifically and economic policies in general were conditioned by the interplay of markets and decisions taken by 
other monetary authorities. An unrestrained international monetary environment could give rise to 
a “race to the bottom”, with governments seeking ever more competitive exchange rates, impacting other countries' economies. Regulating internationally the effects of exchange rates fluctuations and misalignments on trade could foster a more stable economic environment.   
10.  With regard to question 5, the mandate of the WGTDF had been established by the Doha 
Ministerial Declaration. So, addressing the issue of exchange rates and trade would contribute to 
fulfilling that mandate, not detract from it. The WGTDF was not a negotiating body, and it could 
only be turned into one by the decision of its Members. The issue of exchange rates and trade was 
important to the present international economic order. An appropriate discussion of the matter 
could contribute to a greater understanding by Members of their priorities and challenges in the 
current Doha negotiations. Members had generally agreed with Brazil on the importance of this 
topic and had exhibited a great degree of open-min dedness, as evidenced by recent work of the 
Working Group. The presence of an IMF offici al was also encouraging. No review of the 
implementation of the coherence mandate had been undertaken to date, in particular with respect 
to the exchange rates and trade relationship. In the light of this, some elements in Brazil's 
submission W/68 deserved further consideration. Brazil's "bottom line" was that Members should remain engaged in this debate and feel comforta ble with its pace and direction. Going forward, 
Brazil expected to reach the stage of "exploring possible solutions and recommendations within the 
mandate of this Working Group", ideally in coordination with other relevant Organizations with jurisdiction over this topic, such as the IMF. 
11.  The Representative of China expressed his gratitude to the representative of the IMF for her 
presentation on exchange rates and surveillance wo rk on exchange rate policies. The WTO and its 
predecessor, the GATT, have had for a long time an agreement with the IMF on exchange arrangements, which was embodied in GATT Articl e XV. The division of labour between the two 
institutions was his delegation's starting point when considering the five questions posed by the 
Chairman. The lingering effects of the global financial crises had made some WTO members blame exchange rate volatility or currency misalignments for their weak export growth and sluggish 
economic recovery. As a counter-measure, they wish ed to resort to existing WTO rules or even 
formulating new ones, to offset the impact of the alleged “undervalued currencies” on their 
domestic economy and exports.  
12.  Regarding the questions by the Chair, he ma de the following comments: without clear policy 
and methodologies in the IMF on the misalignment of exchange rates, the WTO should not seek 
solutions or remedies for so-called “apparent misalignments”. Solutions to apparent misalignments were within IMF remit and relied on its advice and management, such as band management and 
managed floating systems. In any case, the less exchange rate volatility, the better for global 
trade. Defining the equilibrium exchange rate was the task of the IMF, not that of the WTO. The 
IMF’s ruling on currency misalignment was the precondition for any subsequent WTO discussion of 
its possible trade impact.  WT/WGTDF/M/27 
 
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  13.  Exchange rate policy was one of the main macroeconomic tools in governments' economic 
policy arsenal. No WTO Member would tie its hands by giving a mandate to the WTO that would limit its ability to run the necessary macroeconomic policies. In the past five years, the expanded 
use of quantitative easing monetary policies by some major economies had resulted in significant 
depreciation of their currencies, with a serious negative impact on global trade and investment. 
This impact could not be dealt within the WTO. The WTO was neither the appropriate multilateral body to discuss the problem, nor was it capable of finding the correct solution to it. No WTO 
Member would leave an international organization to prioritize its macroeconomic goals such as job 
creation, or economic growth, exports, foreign di rect investment promotion, etc. Hence, it was 
unlikely that any WTO member would allow its Trade Ministry to penalize its Central Bank for an expansionary monetary policy. Coordination and re conciliation of Members’ monetary policies at 
the international level was clearly the task of the IMF and the G20. The WTO was not mandated for 
it. It could only make things worse. The Working Group should hence focus its attention on more pressing and fruitful issues, such as achieving a Bali package of deliverables and to conclude the 
Doha Round. 
14.  The Representative of Saudi Arabia said th at the relationship between exchange rates and 
trade deserved an open and objective discussion among Members in order to build further 
knowledge on this relationship. The IMF recognized the complexity of exchange rates and its 
relationship with trade, and was certainly the best equipped institution to assess misalignments. It was therefore important for the WTO to concen trate on its mandate and avoid conflicts of 
jurisdictions with other multilateral organizations at the expense of its own mandate.  
15.  The Representative of Turkey said that, a ccording to his understanding, the Membership did 
not show much appetite for a new mandate in the area of exchange rate-related remedies. Such 
new rules would tie the hands of central banks and treasuries in the definition and implementation 
of macroeconomic policies, including monetary policy. However, his delegation had so far enjoyed 
the discussion from an analytical point of view and was interested to continue in this mode. From this point of view, he had found the Chair's questi ons a bit too legalistic and the preference of his 
delegation was for an economic, analytical discussion, held in a flexible way. Such a discussion 
would help connect the IMF and WTO, and would hence contribute to fulfilling the "coherence" mandate.     
16.  The Representative of the European Union believed that the WTO had a role in considering the 
relationship between exchange rates and trade. Me thodological issues play an important role in 
this debate. The IMF presentation had shown that headway had been made recently on methodologies and analyses, and that surveillance had been strengthened at the IMF, notably in 
the context of Article IV consultations. It also emerged that the analysis of exchange rates and the 
definition and implementation of exchange rate  policies were clearly within IMF competency. 
Apparently, the trade impact of exchange rate policy was being considered to a degree in Article IV 
consultations. However, he viewed the WTO's role  on the trade-related impact of exchange rates 
as legitimate. He also viewed the questions by th e chairman as helpful, with the questions perhaps 
more interesting than the answers. He also considered that there was a clear division of labour between the IMF and the WTO, as well as an arrangement for the two institutions to work together 
under the "coherence mandate". This division of labour and coherence mandate should be the 
bedrock on which any future work could be considered. Domestic monetary policies were clearly outside the remit of the WTO and should not be  discussed in that institution. Still, useful 
discussions could be held, particularly on the impact of global value chains on the relationship 
between exchange rates and trade. In summary, he  reiterated that one should leave exchange 
rate policies and their macroeconomic impact with the IMF, while questions regarding their 
relationship with trade could be discussed in the Working Group. 
17.  The Representative of Chinese Taipei an swered the questions raised by the Chairman. 
Regarding question one, the answer was “no”. Before thinking of any solutions or remedies for 
apparent misalignments, the WGTDF should be su re that there was a causal link between an 
exchange rate misalignment and the damage or injury – for example, as provided for in the Anti-
dumping or the SCM Agreements, where the necessary trade measures to be taken were clearly specified. As far as the misalignment of exchan ge rates was concerned, the WTO had simply no 
expertise to provide a determination in such a case.  And, if the IMF did not have any clear policy 
or methodologies to rely upon, what kind of rules or provisions could there be in the WTO rule-book to guide Members? WT/WGTDF/M/27 
 
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  18.  Concerning questions 3 and 4, the question was whether Members wanted to create rules, in 
the WTO, that could restrain the policy space of central banks and treasuries, in pursuit of their 
legitimate objectives, such as macroeconomic and financial stability, as well as economic development. The Representative was generally su pportive of the principle of the IMF and the WTO 
taking countermeasures to maintain the stability of international financial markets, but before 
taking such action, due consideration should be given to Members’ policy space in maintaining their own economic and financial stability. For exam ple, actions by individual central banks could 
be necessary in situations of massive inflows or outflows of short-term capital, leading to volatility 
in exchange rates and negative spill-overs on trading partners. In this case, measures may be needed to restore order in the foreign exchange market of the Member concerned. Also, in line 
with the views expressed by the IMF in December  2012, capital controls and prudential measures 
may be necessary to restore the macro-economic and financial capital stability of a particular 
Member. 
19.  The Representative of India thanked the Ch airman for guiding the discussion on exchange 
rates and trade, as well as the IMF representative for her presentation. Of particular interest was 
how the IMF had been trying to tackle the question of external imbalances, which were not affected by exchange rates alone, but also by a mi x of domestic and external policies. In the light 
of this, and as demonstrated by past discussions in the Working Group, before embarking on any 
further work in the area of exchange rates and tr ade, one needed to address first the underlying 
question about the nature and extent of the re lationship between exchange rates and currency 
misalignments, on the one hand, and trade on the other. Without a clear understanding of this 
relationship, it was difficult to venture into the complex realm of rule-making. From the IMF 
presentation, it was evident that the Fund, whic h had the primary mandate for surveillance of 
exchange rate policies and practices of its member s, was doing extensive work on this subject. 
Therefore, as provided under Article XV of GA TT, the WTO ought to cooperate with the IMF and 
pursue a coordinated policy with regard to exchange questions that fell within the jurisdiction of the Fund. This would ensure that the WTO avoids duplication of work already being handled by the 
IMF. Lastly, the present timing seemed inopport une for entering into substantive discussions, 
given current preoccupation with negotiations on a package of deliverables for the Bali Ministerial meeting. 
20.  The Representative of Canada thought that the IMF presentation included important 
developments in the way the Fund monitored and measured exchange rates, and asked that the 
Fund keep the group appraised of such developments in a way that would improve coherence between the two institutions. Canada supported the WTO making a positive contribution to the 
debate on exchange rates and trade. In considering the Chair’s questions, it was clear that the IMF 
needed to play a key role in any discussion of macroeconomic policy issues such as exchange rates, since such policies were beyond the WTO’s ma ndate.  Some of the questions appeared to go 
beyond what was implied by the discussion.  For example, whether the Working Group wanted to 
create WTO rules that constrained central banks, and whether the Working Group wanted to strengthen the IMF’s mandate, were perhaps outside the WTO’s core area of expertise. The IMF and WTO could improve the coherence of their a pproaches with respect to exchange rates and 
trade. In that respect, the Fund's presentation wa s a useful first step.  Regarding next steps, as 
WTO discussions on this topic had progressed over the past two years or so, several Members had shown more openness to discussing the institutional coherence aspect of this issue, while others 
had made clear their difficulty in developing new WTO rules.  Given the controversial nature of this 
subject, his delegation believed that any way forward should be Member-driven, and should perhaps revisit the second pillar of Brazil’s original proposal, relating to institutional coherence and 
cooperation, as the most promising direction for advancing discussions.  In this regard, one way to 
move forward was for Brazil to submit a modified version of Pillar two of its original proposal, taking into account the IMF’s presentation and the Members’ comments.  
21.  The Representative of the United States shared the view that the persistent misalignment of 
exchange rates created serious difficulties for international trade, growth, and the global financial 
system. The United States welcomed the attention brought to the topic of the relationship between 
exchange rates and trade, and thought that the WTO was the appropriate venue for a discussion of 
trade and trade-related issues.  Generally, his delegation supported further work on this topic.  
However, before moving to deciding whether the development of new trade rules was needed, further work must be done to more precisely de fine the problem. As other Members had noted, 
one needed to be mindful of the various competencies and jurisdictions of relevant multilateral 
institutions, including the International Monetary F und (IMF). In this regard, the presentation on WT/WGTDF/M/27 
 
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  the IMF Surveillance Mechanism was most appreciated. Also, any work plan in the WTO should 
involve the active participation of the IMF to address the definitional macroeconomic policy and legal questions at hand. The United States also believed that work on this topic should be, as 
suggested by other Members, Member-driven and focused on trade aspects in order to be 
consistent with the WTO's institutional mandate.  Any additional paper prepared should preferably 
be written by Members. His delegation looked forward to Brazil’s incorporation of the IMF’s 
presentation into its proposed work programme. Any further work programme needed to recognize 
the respective mandates of the WTO and the IMF. 
22.  He appreciated the Chair’s attempt to focus the group’s discussion by providing a series of 
questions. Many of the Chair’s questions were  thoughtful, but some were premature.  For 
example, recasting the discussion of exchange ra tes and trade as a discussion under the aegis of 
“policy space” unnecessarily distracted the Group from understanding an already complex issue. 
Moreover, with regard to question 5, the existence of other challenges such as the Doha Round and strengthening the WTO should not a priori derail discussions of other important issues such as 
exchange rates and trade. He looked forward to continued discussion on this topic and further 
consultations on how best to proceed. 
23.  The Representative of Singapore said that hi s delegation remained open to further analytical 
discussion on the relationship between exchange rates and trade. However, one needed to be 
careful about the direction of such discussions.  Singapore remained of the view that trade 
remedies could not be the answer to non-trade policy concerns. Also, the WTO system was not able to solve or mitigate macroeconomic or exchange rate issues alone. It could be that the WTO 
was not the appropriate forum to discuss exchange rate misalignments.  The WTO’s core function 
was to serve as a forum to achieve trade liberalization. The WTO was also intended to act as a bulwark against the use of trade restrictions for protectionist purposes. The use and abuse of  
trade remedies for perceived exchange rate misalignments could be disguised barriers to trade and 
result in tit-for-tat responses – a lose-lose proposition not only for the Members involved but also for the WTO as an organization. The issue in it self went beyond the mandate of the WTO. WTO 
Members should be mindful of the jurisdictions of other international organizations. Exchange rate 
and currency issues came under the competency of the International Monetary Fund. In this regard, the presentation by the IMF was welcome, the technical details of which were not always easy to understand for trade officials. This further served to underline why separate jurisdictions 
existed. It was also important to underline how difficult it was to calculate exchange rate 
misalignments, as evidenced by the numerous ways  of doing it, at the IMF and elsewhere.  
24.  Ultimately, trade remedies against a perceived exchange rate misalignments provided only 
short-term stopgaps alleviating the symptom (trade distortions) without tackling the cause 
(exchange rate misalignments caused by macroeconomic imbalances).  Resolving macro imbalances was a more fundamental issue that required long-term, multilateral resolution efforts 
by the major economies.  As for the way forward,  Singapore supported creative solutions already 
expressed in the room.  The Doha Mandate Paragraph 36 on finding a durable solution to coherence issues was broadly worded and flexible enough to discharge the mandate of the WGTDF without necessarily pursuing the rules-based option.  
25.  The Representative of Hong Kong, China, thought that the IMF presentation demonstrated 
that the relationship between exchange rate s and trade was a complex one, affected by 
macroeconomic factors. The IMF’s jurisdiction over  exchange rate arrangements was indisputable.  
The IMF had the expertise and knowledge to do th e proper analysis and provide recommendations 
to address the relationship between exchange ra tes and trade. After several rounds of discussion 
over the last few years, WTO Members had yet to reach a consensus on defining the relationship 
between exchange rates and trade, not to mention the more complicated issues of exchange rate 
misalignments, measuring their magnitude and agreeing on whether and how to deal with such misalignments.  All these issues required a mix of cooperation in the macro-financial field and proper domestic policies, and this was outside th e remit of the WTO. Without a clear consensus on 
the relationship between exchange rates and tr ade and how to proceed on the issue, further 
analytical discussion was certainly needed. 
26.  The Representative of Chile said that his delegation had made clear on where it stood on this 
issue at the November 2012 meeting. He shared comments on the Chair's questions. Regarding 
question 1, he said that no consensus existed ei ther on the methodology to ascertain the existence 
of real exchange rate misalignments or on the magnitude of their impact on trade. Thus, the WT/WGTDF/M/27 
 
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  introduction of remedies based on such criteria wa s dangerous. On question 2, he considered that 
any mandate had to come from the IMF. On questions 3 and 4, he said that there were good reasons for which foreign exchange policies had not been considered for negotiations in the multilateral trading system. His delegation did not support the creation of trade measures that 
could constrain the use of domestic financial policies. This was outside WTO competency. On 
question 5, he said that it was important for th e WTO to focus on its existing core mandate. The 
WTO was not the institution to make macroeconomic policy commitments.   
27.  Based on the above remarks, the Chairman summarized the meeting. Five suggestions had 
been made by Members on the way to move forw ard.  First, there was general interest in 
continuing an analytical discussion on the relationship between exchange rates and trade. Second, before any consideration of any work on rule-making, there was a need to better understand the 
issue itself. Third, the IMF presentation and participation in the meeting had been highly 
appreciated. Fourth, there was a need to build a stronger relationship between the IMF and the WTO on the topic, in the context of the existing WTO coherence mandate. Members could clarify 
what the strengthening of the institutional relationship implied, for example, for Brazil's proposal 
under the "second pillar". Fifth, Members were interested in receiving from the IMF the new surveillance reports on a regular basis, and possibly have a discussion on them from the 
perspective of trade policies. 
28.  The delegation of the European Union suggested  that the fourth and fifth points of the Chair 
be merged in substance, and perhaps lead to a new revised proposal by Brazil under its second 
pillar. 
29.  The delegation of Brazil said that it was in terested in going forward with the Chair's proposal, 
in particular on the strengthening of the institutional pillar. It suggested that Brazil's proposal 
under its "second pillar" be revised accordingly. One way to achieve this was, for example, to 
benefit from the regular presence and participatio n of the IMF in the Working Group's discussions. 
30.  On the second point of the Chair's conclusions, the representative of Chile asked for 
clarification. As stated, the second point seemed to subject a consideration of rule-making to a 
better understanding of the relationship between  exchange rates and trade. He said that, 
regardless of the better understanding of the meeting, the issue at stake was whether Members wished to make rules on an issue with serious domestic macroeconomic policy implications. His sense of the meeting was that it was not the case.  
31.  The Chair made the point that his second point was only procedural, and that it included 
Chile's concern  ipso facto . The second point was meant to say that before one even arrived at the 
point of considering whether rule-making was necessary or not, Members believed that there was 
a need to further understand the problem, not prejudging  whether any rules were needed. 
32.  This interpretation seemed to be acceptable to Members. As clarified, the chair's suggestions 
were so agreed.  
2  AGENDA ITEM II: REPORT ON TRADE FINANCE 
33.  The Chairman invited the Secretariat to repo rt on the meeting of the Expert Group on Trade 
Finance, held on 12 April, 2012, and on the state of progress on trade finance work for the G-20. 
The Chairman had attended the Expert Group meeting.  He had found the initiatives developed by 
the Director-General in context of the Expert Gr oup to be most useful, particularly work with 
multilateral development banks to achieve more affordable trade finance in low income countries.   
34.  The Secretariat reported on the meeting of th e Expert Group, and on the state of progress on 
trade finance work in the context of the G-20, along the lines of Document WT/WGTDF/W/70, 
which was circulated after this meeting of the WGTDF. 
35.  With this, the Chairman closed the meeting. 
 
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