WORLD TRADE  
ORGANIZATION   
WT/WGTDF/W/56 
20 September 2011 
 (11-4525) 
Working Group on Trade, Debt and Finance Original:   English 
 
 
 
THE RELATIONSHIP BETWEEN EXCHANGE RATES AND  
INTERNATIONAL TRADE  
 
Submission by Brazil 
 
 
I.    BACKGROUND  
 
1. In a submission made earlier this year to th e Working Group on Trade, Debt and Finance 
(WGTDF)1, Brazil has proposed a debate on the relations hip between exchange rates and international 
trade. The submission was generally well-received at  the WGTDF, and Brazil consequently wishes to 
contribute further to that debate and to provide inputs thereto.  2. As mentioned in the previous submission, even  though the interplay between exchange rates 
and trade is not a new issue to the world trading system, it has been receiving greater attention in 
recent years, in light of the significant fl uctuations of relative exchange rates among 
trading partners 
(“currency fluctuations”).   3. One of the most evident trade-related effects of  currency fluctuations is their impact on the 
effectiveness of tariff rates. The protection grante d by a tariff rate in any importing country can be 
either enhanced or diluted depending  on how devalued or appreciated its exchange rate is relative to 
that of the exporting country.   4. Article II.6(a) of GATT/47 and GATT/94 provides for the possibility of adjusting specific 
duties and charges and margins of preference incl uded in WTO Members’ Schedules, under certain 
conditions: 
 
“The specific duties and charges included in the Sc hedules relating to contracting parties members of 
the International Monetary Fund, and margins of p reference in specific duti es and charges maintained 
by such contracting parties, are expressed in the appropriate currency at the par value accepted or 
provisionally recognized by the Fund at the date of th is Agreement. Accordingly,  in case this par value 
is reduced consistently with the Articles of Ag reement of the Internatio nal Monetary Fund by more 
than twenty per centum, such specific duties and c harges and margins of preference may be adjusted 
to take account of such reduction; provided t hat the CONTRACTING PARTIES (i.e., the contracting 
parties acting jointly as provided for in Article XXV)  concur that such adjustments will not impair the 
value of the concessions provided for in the appropr iate Schedule or elsewhere in this Agreement, due 
account being taken of all factors which may influence the need for, or urgency of, such adjustments.” 
 
5. The application of this provision was clarified under the “guidelines for decisions under 
Article II.6(a) of the General Agreement”, da ted 15 January 1980 and adopted by the Council on 
29 January 1980
2. 
 
                                                      
1 WT/WGTDF/W/53 – 13 April 2011 
 2 Document L/4938. 
. / . WT/WGTDF/W/56 
Page 2  
 
6. The provisions of Article II.6(a) and its related guidelines seem to indicate that: (i) there is a 
recognition that significant currency fluctuations can have a direct impact on the value of 
concessions provided for in Member’s Schedules a nd (ii) currency fluctuations may represent, 
under certain conditions, a justification to adjust tariff commitments . 
 
7. Concerns over the impact of currency fluctuations  on international trade were also present in 
discussions at the United Nations Conference on Trade and Employment, in 1947
3, concluded in the 
following year with the signing of the Havana Char ter – the first step towards the creation of the 
multilateral trading system. The Draft Charter adopt ed by the Preparatory Committee as a basis for 
discussion at that Conference states, in the note to paragraph 2 of Article 33 (Anti-Dumping and 
Countervailing Duties)4, that: 
 
“Multiple currency practices may in  certain circumstances constitute a subsidy to exports which can 
be met by countervailing duties under paragraph 2 or ma y constitute a form of dumping by means of a 
partial depreciation of a country's currency which can be met by action und er paragraph 1 of this 
Article. By multiple currency practices is meant  practices by governments or sanctioned by 
governments.”  
 
8. The reports of those negotiations as well as th e draft text above confirm further that: (i) the 
willingness to tackle certain currency practices and their consequences for international trade is 
at the  origin of the multilateral trading system and (ii) those practices may warrant trade 
remedies and measures to countervail their adverse impact.  
 
II.  A PROPOSED APPROACH 
 
9. The bearing of wide currency fluctuations on the delicate balance of commitments and 
concessions resulting from negotiations at the WTO must be better understood and be properly dealt 
with. Brazil is suggesting that the WGTDF examines available tools and trade remedies in the existing 
multilateral system, if any, to compensate for or othe rwise redress those currency fluctuations that may 
impair commitments undertaken by Members in successive rounds of nego tiations. In addition, 
addressing that issue may help prevent the overstret ching of multilateral trade rules as regards, for 
instance, provisions on safeguards, antidumping, s ubsidies and countervailing measures, as well as 
bound tariffs. 
 10.  In line with its first submission presented l ast April, Brazil suggests that the WTO should 
focus only on the trade-related elements of the qu estion. Other international institutions, such as the 
IMF, could examine the finance and exchange-rat es side of the equation, including methodologies to 
identify possible currency misalignments.  This cour se of action converges fully with the “coherence 
mandate” of the WTO, as established by the “Decl aration on the Contribution of the World Trade 
Organization to Achieving Greater Coherence in Gl obal Economic Policy Making” that is part of the 
Uruguay Round Final Act.  11. The first step proposed by Brazil to examine th e specific topic covered in this submission is a 
workshop that could take place in the first quarter of 2012.  The report of the workshop could be sent 
to other relevant bodies of the WTO.  
__________  
                                                      
3 Report of the Drafting Committ ee of the Preparatory Committee of the United Nations Conference on 
Trade and Employment (document E/PC/T/34, dated 5 March 1947). 
4 Report of the Second Session of the Preparatory Committee of the United Nations Conference on 
Trade and Employment, adopted by the Preparatory Committee on 22 August 1947 (document E/PC/T/186, 
dated 10 September 1947.