RESTRICTED  
  
WT/WGTDF/M/31  
 
8 February 2016  
(16-0833)  Page: 1/6  
Working Group on Trade, Debt and Finance    
 
REPORT OF THE MEETING OF 29 SEPTEMBER 2015 
The thirty-second meeting of the Working Group on Trade, Debt and Finance (WGTDF) was held on 
29 September 2015 under the Chairmanship of Amba ssador Xavier Carim (South Africa). In his 
introductory remarks, the Chairman detailed the proposed agenda for the meeting, contained in 
WTO/AIR/W/2. Under point one, it was proposed  that Members continue the discussion on the 
basis of the paper prepared by the Secretariat, circulated as WTO Document WT/WGTDF/W/78. 
Under point two, trade finance, the Secretariat was invited to provide an update on follow-up work 
after the WGTDF seminar that was held on March 26 and 27, 2015. Under point three, Members were invited to brainstorm on topics that they were willing to discuss in the future. Under point four, it was proposed that they discussed the draft annual report to the General Council. 
The Working Group adopted the agenda.  
1  AGENDA ITEM I: EXCHANGE RATES AND TRADE – FURTHER DISCUSSION ON THE 
BASIS OF THE SECRETARIAT PAPER, WT/WGTDF/W/78 
1.1.  The Chairman recalled that Members had commissioned in November 2014 a factual note to 
be drafted by the WTO Secretariat on the inst ances and cases in the history of the GATT/WTO 
system where Article II.6 had been invoked to address the impact of exchange rate movements on 
Members’ commitments regarding specific tariffs. It had been asked that the note be factual and 
historical.  
1.2.  The Representative of Brazil said that  his statement would be turned into a working 
document shortly.1 Regarding the Secretariat note, several historical documents indicated that 
Contracting Parties had already been aware of the challenges posed by currency movements on 
their rights and obligations under the GATT. Still, in examining this issue, it was not Brazil’s intention to pass any judgement on other Member’s economic policy or to extend the jurisdiction 
of the WTO to areas lying outside of its established purview. In April 2011, Brazil took the initiative 
of raising the issue of the relationship between exchange rates and international trade (WT/WGTDF/W/53), submitting a total of four cont ributions on the matter. Against the background 
of these contributions, the Secretariat’s document settled one point of contention: the impact of 
exchange rate misalignments on the level of prot ection was an issue well within the scope and 
purview of the GATT. Past concerns regarding the in troduction of the issue into the WTO had to be 
laid to rest. Exchange rate misalignments had been a concern since the inception of the 
multilateral trading system. Action had been ta ken and authorized on a number of occasions to 
address adjustments of specific duties because of currency depreciation. The effects of exchange rate depreciations on specific duties in the 1970’s were equivalent, in today's world of flexible 
exchange rates, to that of an exchange rate appreciation on ad valorem tariffs. Out of the 11 
instances in which Article II.6 had been invoked, 9 resulted in adjustments to specific duties to “neutralize” the erosion of protection due to exchange rate devaluations.  
1.3.  Important conclusions could be drawn from these episodes, which took place under a regime 
of fixed exchange rates supervised by the Internat ional Monetary Fund (IMF). First, the operation 
of Article II.6 was not automatic. Requests had to  be initially submitted to the Membership. Any 
proposal for raising duties was conditioned on the devaluation being consistent with IMF’s 
provisions. Second, the increase in specific duties could not impair the value of the Contracting 
Party’s concessions, that is to say that the duty adjustment could not exceed the level necessary to compensate for the new exchange rate. These conditions were always met; there seemed to be 
no record of Contracting Parties complaining about impairment of concessions. From an 
                                               
1 Brazil's submission was eventually issued as WTO Document WT/WGTDF/W/80. WT/WGTDF/M/31 
 
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  institutional viewpoint, the GATT and the IMF st ood within the limits of their respective 
jurisdictions: the GATT only acted once it was established that the new exchange rate had been set in agreement with IMF rules, while the IMF did not opine on trade or tariff matters. Article II.6 was used only when a country claimed to have lost its bound level of tariff protection as a result of 
a depreciation of its own currency. This would correspond, in today’s ad valorem tariff 
environment, to a currency appreciation. This point was made by the Contracting Parties in 1979 when answering the question as to whether “contracting parties whose currency appreciated 
should be required to reduce their specific duties” (paragraph 14 of document L/4858). It was 
concluded that “the Working Party agreed not to pursue this matter, noting that Article II:6(a) did not deal with appreciations and also noting that contracting parties could resort to Articles XXII and XXIII of the General Agreement if they considered that an appreciation impaired in a particular 
case the value of specific duty concessions” (p aragraph 14 of document L/4858). Questions also 
arose with the request by Israel to raise specific duties under a floating exchange rate regime, which added the challenge of distinguishing between transitory volatility and more structural 
currency movements. 
1.4.  Although this request by Israel did not result in an immediate tariff increase, it led to the 
creation, in 1978, of the Working Party on Specific  Duties and, later, to the adoption of the 
“Guidelines for Decisions under Article II:6(a) of the General Agreement”, in 1980 (document 
L/4938). The conclusions of the Working Party reveal ed the following. Firstly, Article II.6 of the 
GATT did not need to be re-drafted; the new circumstances of floating exchange rates required that the procedures regarding the implementation of that article be simply updated. Secondly, 
although focused on the problem of the impact of currency misalignment on specific (not ad 
valorem) duties, the aforementioned Guidelines  addressed very important technical questions 
previously raised in the Working Group. One ques tion was how to set a reference exchange rate 
against which misalignments could be assessed. The reply could be found in the records of the 
discussions of the Working Party (paragraph 11 of document L/4858), which said: “The Working Party noted that in the past practice of the GA TT the relevant period was the period that had 
elapsed since the specific duties were formally bound in a GATT schedule or since the last 
authorization of the CONTRACTING PARTIES to adju st the duties”. This meant that the reference 
exchange rate against which misalignment had to be assessed should be the one in place when the specific duties had been bound.  
1.5.  Another valuable input from those record s relates to the methodology used to calculate 
currency misalignments. Based on reports prepared by the IMF at the Working Party's request, Contracting Parties developed a methodology on how to assess currency misalignments, as 
described in item (b) of the Guidelines (L/4938). It suggested that the calculation should be made 
by comparing the import-weighted average exchan ge rate during the six months preceding the 
date of the legal instrument through which the specific duties to be adjusted were last bound or 
the date of the last authorization by the Contracting Parties to adjust the specific duties, whichever 
of the two came later, with the import-weighte d average exchange rate applied during the six 
months preceding the contracting party’s request. A misalignment of 20 per cent or more would be 
considered ground for a tariff adjustment. Some  key points deserve to be stressed. First, 
Contracting Parties felt that, for GATT purposes, there was a need for a special methodology for 
calculating exchange rate misalignments. Second , such a methodology needed to be developed 
with the input from the IMF. Third, it would fall  on the IMF – with its acquiescence – to apply the 
methodology to concrete cases, and to define  the magnitude of any currency misalignment.  
1.6.  The representative of Brazil made the following conclusion. First, the linkage between 
currency depreciation and the erosion of the protec tion of bound tariffs was specifically enshrined 
in the GATT, underpinning a number of concrete ac tions both within fixed and floating exchange 
rate regimes. Second, the effects of currency mo vements that effectively increased the level of 
tariff protection seemed to be more properly de alt with outside the realms of Article II.6 of the 
GATT. References had been made, in the past, to the use of GATT Articles XXII and XXIII. Third, it 
was unclear whether the procedural update brought by the 1980 Guidelines would perfectly fit the 
case of ad valorem duties. In this regard, it sufficed to say that persistent currency devaluations could increase the effective level of protection of ad valorem duties, while persistent currency 
appreciation could erode the protection granted by ad valorem duties. In any case, while technical 
adjustments to those Guidelines were needed, it was undeniable that the logic applicable to specific duties had also to prevail in the case of  ad valorem duties. Finally, the question remained 
about what should be done to counteract persistent currency misalignment from relevant trading 
partners. This was probably the area where most of the remaining work had to be done, since WT/WGTDF/M/31 
 
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  existing trade remedies, as already pointed out in Brazil’s 2012 submission, were in principle not 
adequate. 
1.7.  The Representative of Hong-Kong, China, found that the past cases invoking Article II.6 were 
not relevant for discussion of exchange rates and international trade by the Working Group on 
Trade, Debt and Finance as they failed to prov ide insights about the present dynamics of the 
relationship between exchange rates and international trade.  Nowadays, this relationship had been considerably complicated by much higher exchange rate volatility, amid the interplay of 
domestic policies and external factors such as international capital flows and speculation. She 
wished that these comments be fully taken into account when further considering this matter. 
1.8.  The Representative of India thanked the Secretariat for preparing the factual note on the 
past invocation of Article II.6 by GATT contracting parties. The note also surveyed the relationship 
between depreciation of exchange rates and trade, to the extent that adjustment in bound level of 
specific duties could be made by Members, taking  into account the provisions of the GATT and the 
1980 guidelines. As provided under various pr ovisions of the GATT/WTO, the WTO had to 
cooperate with the IMF with regard to exchange ra te questions that fell within the jurisdiction of 
the Fund. It was clear to the delegation of India that the examination of the relationship between exchange rate and currency misalignment on th e one hand, and trade on the other, involved 
multiple issues with no definitive conclusions. He reiterated that while pursuing discussions on this 
subject, the Working Group had to keep in focu s its mandate and respect the competencies of 
each international institution, as well as the overall contours of the coherence mandate of the WTO.   
1.9.  The Representative of Canada thought that the Secretariat note highlighted the longstanding 
cooperation between GATT/WTO and the IMF on exchange rate issues, cooperation that Canada 
was eager to maintain. Regarding this cooperation, he wondered whether the IMF had reviewed 
and commented on the Secretariat Note. He recalled that Brazil had agreed to such a review. 
Beyond attesting to longstanding WTO/IMF cooper ation, the paper highlighted how different the 
circumstances of the cases reviewed were from those motivating the Working Group's current 
work. Article II.6 (a) adjustments applied to specif ic duties (whose amounts were fixed), not ad 
valorem tariffs (whose amounts varied with the price of the goods to which they applied). All but one of the cases occurred under the par value system, not under flexible exchange rates. 
Adjustments were sought to address the adverse effects of exchange rate depreciations or 
devaluations, not appreciations or re-evaluations. This last point seemed to be in notable contrast 
with the concerns that prompted Brazil, a few years ago, to propose that the Working Group examine the relationship between exchange rates and trade. He was interested in the views of 
Brazil, and of others, on how these cases and thei r details could enrich the present discussion on 
the relationship between exchange rates and trade.  
1.10.  The Representative of China said that, as  other delegations, his delegation viewed the 
relationship between exchange rates and trade as  being a very complex one. His delegation was 
willing to discuss the matter further, but before mo ving to any further stage, there was a need to 
ensure that the mandate of the Working Group was respected, and to clarify the nature and 
purpose of any such discussion.  
1.11.  The Representative of the European Union welcomed the Secretariat note. She noted that 
Article II. 6 had been used only a few times overall, the last time being 40 years ago. This piece of 
research added useful elements to the discussion on the relationship between exchange rates and 
trade in the WTO. Therefore, her delegation was open  to continue the analysis of this topic in the 
Working Group. 
1.12.  The Representative of Japan understood from  the Secretariat paper that the application of 
Article II.6 only took place under the Bretton-W oods system of fixed but adjustable exchange 
rates. In the latest case of application, there ha d been some serious discussions as to the validity 
of this Article under the new flexible exchange rate system. This had resulted in a Working Party to be created, with a view to offer guidance as to ho w to interpret the provisions of Article II.6 in the 
light of the new circumstances. Under the guidel ines developed by the Working Party, potential 
users of Article II.6 were encouraged to require IMF advice about their currency situation, with a view to assess whether they could be eligible for the Article's use. The delegation of Japan 
wondered whether it was efficient to continue putting this topic on the Working Group's agenda, 
given no country was in urgent need to use this provision. At least the scope of discussion WT/WGTDF/M/31 
 
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  regarding exchange rates and trade had to be reduced. It was not clear to the delegation of Japan 
why currency appreciation had to be considered since it was outside the scope of application of Article II.6. Still, clarification brought by the IMF on exchange rates surveillance was useful, and the WTO Secretariat was encouraged to keep abreast of developments in this area with a view to 
sharing them with Members.       
1.13.  In reply to the question by the delegation  of Canada, the Representative of the IMF said 
that he had received the Secretariat note for co mments, and had indeed read it. However, given 
that the note was strictly factual and was referring to relatively old events, it had not been 
considered for a formal review by the IMF. 
1.14.  The Representative of Brazil replied to so me questions and interventions by other Members. 
He made the point that the issue raised by Brazil was strictly about WTO Members rights and 
obligations. This was about bound tariffs, commitme nts, and areas of daily concern for Members of 
the institution. The concern addressed by Article II.6 was about the erosion of the level of protection bound in the WTO, and mechanisms to restore such a level of protection. The concern 
about appreciation was the same in nature, alth ough it was not addressed by Article II.6, but 
rather by Article XXIII.   
1.15.  The Representative of Japan pointed out that many other economic factors, not only 
exchange rates, could erode the desired level of  protection and competitiveness of domestic 
products. Therefore, to continue the discussion on this very topic, it was necessary for Members to 
come up with concrete cases, otherwise the discussion remained too conceptual. If any specific concern had to be addressed, within the existing rights and obligation of WTO Members, it should 
be put forward to the other Members. 
1.16.  The Chairman gave a brief summary of his sense of the discussion on this item. Members 
had welcomed the Secretariat note. Generally, Members seemed to be prepared to continue the 
discussion on this topic, although it had been argued that the situation was now very different 
from the one that prevailed when Article II.6 ha d been invoked; the international economic and 
financial environment had become much more complex, and this had to be taken into account in 
any future deliberation. Another point that came up during the discussion was the need to respect 
the mandate and competency of the respective institutions participating in this debate. Therefore, it seemed that, as a matter of principle, the discussion could continue on the basis of further written submissions, although one Member specifically asked that greater specificity be applied in 
the course of that discussion. 
1.17.  The Representative of the IMF made a presen tation on recent progress of external sector 
surveillance. The power point presentation of the IMF was made available in paper form during the 
meeting, and had been sent electronically to Members who had requested it. A presentation was 
also made about a recent review by the IMF on its own work on trade, although some Members 
wondered whether this second presentation was consistent with the mandate of the Working 
Group. The Chairman and several Members thanked th e IMF, in particular for its first presentation, 
and welcomed the contribution of the IMF on the exchange rates topic.  
2  AGENDA ITEM 2: UPDATE ON TRADE FINANCE  2.1.  The Chairman introduced this agenda item  with a few remarks. According to him, the one-
and-a-half day seminar held in March 2015 had proved to be informative. It featured speakers 
from Members' governments, the private sector, and international institutions. In view of the large number of speakers and presentations during th e event, a dedicated webpage containing the 
presentations and audio recordings has been created within the WTO website. A number of points 
arose from the seminar. He mentioned a few: trad e financing gaps appeared to be large in some 
regions, up to $120 billion in Africa and $1 trillion in Asia, as recorded by international institutions; 
these gaps were due to a mix of structural and developmental factors (lack of know-how and 
capacity of the financial sectors in many developing countries), as well as to the falling appetite of some global banks to invest in developing countries after the financial crisis; developing local and regional  trade finance industries took time, as it required knowledge dissemination, the build-up 
of institution, and specific support of multilateral development agencies. He concluded by saying 
that the Director-General had clearly been invited to pay greater attention to these gaps, as access to trade finance was a key enabling condition for trade. WT/WGTDF/M/31 
 
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  2.2.  With this in mind, the Chairman welcomed that trade finance had been highlighted in the 
United Nation's "financing for development" agenda, post-2015. He had noted that the Director-General, in his keynote speech to the United Na tions Conference, held in Addis-Ababa in July 
2015, had committed to launch an initiative to tackle trade financing gaps. He asked the 
Secretariat whether there had been any new development since then. 
2.3.  The Representative of the Secretariat said  that the Director-General shared the view of 
Members that greater attention should be paid to the access of traders, in particular small and 
medium-size enterprises, to trade finance. This was a sensitive issue after the financial crisis. 
Access to trade finance was a key enabling condition for trading, and its absence could be a major non-tariff barrier to trade. The Director-General's involvement was a process, which had started with his implication in the Expert Group and the March seminar. Thus, the Director-General 
published an article in the Wall Street Journal on the matter, followed by the key note speech 
made at the opening of the United Nations Third Conference on Financing for Development in Addis Ababa. The Director-General was seeking input from traditional partners of the WTO in trade 
finance, such as multilateral development banks, as well as from Members. The Expert Group and 
the Working Group on Trade, Debt and Finance were likely to be associated to this forthcoming Director-General's initiative.  
2.4.  The Representative of Canada thanked the Director-General, the Secretariat staff and all 
participants of the trade finance seminar which he viewed as a successful event.  Canada has been 
a long supporter of the WTO’s analysis of trade finance flows as well as the efforts by multilateral development banks to ensure the availability of trade finance in developing countries, especially 
during times of crisis. Not only did the seminar help improve the understanding of the scale of the 
financing gaps and the factors behind such gaps, but it also help support the various initiatives underway by the private and public sectors to address these gaps. Canada appreciated the 
forward-looking nature of the seminar, and discussi ons about solutions to improve the capacity of 
developing countries to finance trade. Canada agreed with the Director-General's comments that the lack of trade finance could act as major trad e barriers, impeding the ability of the affected 
countries to integrate into the global trading system. For this reason, continued attention to this 
issue was important. Canada was a supporter of the efforts by multilateral development banks' efforts to narrow the financing gap, for example efforts by the European Bank for Reconstruction and Development (EBRD) to which Canada was a donor. Still, Canada' view was that resources for 
trade finance should be provided primarily by the private sector given the low level of risk 
involved. 
2.5.  The Representative of India thanked the Secretariat for its brief oral report on follow up work 
undertaken since the March 2015 seminar on trade finance. India has been supportive of WTO’s 
advocacy work on access to trade finance, particularly for businesses from developing countries as well as ongoing work within the ambit of the cons ultative expert group on trade finance. India had 
taken note of the reference made by the Director-General of the WTO at the third meeting for 
Financing for Development to a new initiative by the WTO on trade finance. As noted by the Secretariat, it was understood that the work on the Director-General's initiative was still underway. The delegation of India was looking forward to receiving further details on this new initiative, as 
and when these details were ready. 
2.6.  The Representative of China supported fu rther discussion on trade finance in the Working 
Group, and supported the initiative by the Director-General. He believed that the March seminar 
had been a useful event, and he was looking fo rward to further discussi on on trade finance. 
2.7.  The Representative of the European Unio n said that her delegation had appreciated the 
March seminar as a useful forum with representatives from international financial institutions as 
well as private sector financial institutions active in this area. She welcomed further discussion on 
trade finance in the Working Group based on information gathered during this seminar. 
2.8.  The Representative of Brazil thanked the Se cretariat for organizing the seminar and provided 
his delegation's full support for the Director-General's initiative in this area. 
2.9.  The Chairman summarized the discussion on this item. Members had highlighted the 
usefulness of March seminar on trade finance, and had expressed clear support for continued work 
on this topic in the Working Group. They look ed forward to hearing further details about the WT/WGTDF/M/31 
 
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  Director-General's initiative. They had heard the call from the Secretariat for ideas as the initiative 
was still work in progress at this stage. The continued implication of both the Expert Group and the Working Group were well received.  
3  INFORMAL DISCUSSION ON TOPICS THAT MEMBERS WOULD LIKE TO ADDRESS IN 
FUTURE MEETINGS 
3.1.  The Chairman said that agenda items 1 an d 2 had reflected the focus of the Working Group's 
attention in the past two years: trade and exchan ge rates; and trade finance. The discussion under 
this item was to consider topics that could be discussed in the next two years: whether there were 
new ideas and proposals, and whether there was any desire to add or subtract topics. As was the practice in the Working Group, for any new topic or work to be agreed, and in the spirit of a Member-driven organisation, any new topic or proposals needed a clear and substantiated 
proposal that could allow fellow Members to evaluate any new work proposed.   
3.2.  The Representative of the European Unio n expressed her delegation's satisfaction with 
regards to the factual evidence gathered by the Working Group on trade finance, the analytical 
work carried out by the Secretariat, and the progress made under the current agenda. However, 
as work should be primarily Member-driven, she was looking forward to examining further proposals or submission by Members in coming meetings. 
3.3.  The Chairman said that Members were indeed welcome to make submissions within the broad 
mandate of Paragraph 36 of the Doha Ministerial Declaration. According to what had emerged from 
the discussion, it seemed that Members had been  willing to continue current work on trade 
finance; on the relationship between exchange ra tes and trade, Members had also indicated that 
this was a question that they could continue to consider. One intervention had asked for more 
specificity in considering it. Already, this could form the basis for taking the work forward. This would be reflected in the draft report of the Work ing Group to the General Council. Certainly, this 
did not close the door to any other topic falling within the Working Group's mandate.   
3.4.  It was so agreed. 
4  THE DRAFT ANNUAL REPORT  TO THE GENERAL COUNCIL 
4.1.  The Chairman suggested that previous considerations be captured in a revised version of the 
draft report that had initially been circulated as WTO Document WT/WGTDF/W/79. He suggested 
that the concluding part of the report reflecte d the overall mandate of the Working Group, as 
expressed in the Doha Ministerial Declaration, and included trade finance and exchange rates and 
trade as specific topics for future work. 
4.2.  The Representatives of India and Brazil made drafting suggestions to make the revised report 
reflective of what had been expressed during the meeting.  
4.3.  The Chairman found consensus on this approa ch and instructed the Secretariat to revise the 
draft report accordingly. The report would to be re-circulated, to be approved on a no objection 
basis. It was so agreed.  
4.4.  With this, the Chairman closed the meeting. 
 
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