WORLD TRADE  
ORGANIZATION  RESTRICTED 
WT/WGTDF/M/22 
9 June 2011 
 
 (11-2862) 
Working Group on Trade, Debt and Finance  
  
 
REPORT OF THE MEETING OF 10 MAY 2011 
 
1. The twenty second meeting of the Working Group on Trade, Debt and Finance (WGTDF) 
was held on 10 May 2011 under the Chairmanship of Mr. Glass (Hong-Kong, China).  The Working 
Group adopted the agenda, with a slight modifica tion under Item 1 regarding the inclusion of WTO 
Document WT/WGTDF/W/55 for discussion. 
2. In his introductory remarks on Item 1 of the proposed agenda, the Chairman recalled that 
Members had agreed to continue monitoring trade fina nce availability, in particular for poor countries. 
This had been a key element of the Working Gr oup's activities, reflecting the particular trade 
challenges caused by the economic crisis.   
3. Emphasis on trade finance availability had in creased since the G-20 Summit in Seoul, which 
highlighted the importance of monitoring developments in this area.  In particular, the trade annex of 
the Summit's final declaration stated that, " the G-20 Trade Finance Expert Group, together with the 
WTO Expert Group on Trade Finance and the OECD Ex pert Credit Group, further assess the current 
need for trade finance in Low Income Countries (L ICs), and if a gap is identified, will develop and 
support measures to increase the availability of trade  finance in LICs. We call on the WTO to review 
the effectiveness of existing trade finance pr ograms for LICs and to report on actions and 
recommendations as for the consideration by the Sherpas through the G20 Development Working 
Group in February 2011."  
4. The Director-General had held a WTO expert group meeting on trade finance on 24 March, 
2011, in part to take stock of work in this area.  The Secretariat had subseque ntly circulated its report 
to Members as WT/WGTDF/W/52.  The report indicated that the Director-General of the WTO, on behalf of the Working Group on Trade, Debt, and Finance, had asked the International Financial 
Corporation of the World Bank Group to produce a short information note on the importance of trade 
finance programs in favour of low income countries.  This note had been circulated in WT/WGTDF/W/54.  The Director-General had also asked the International Chamber of Commerce to 
produce a short information note on the financing of  value added chains, which was circulated in 
WT/WGTDF/W/55.  Since W/55 was worth considerati on in conjunction with the other documents on 
trade finance, the Chairman suggested a modifica tion of the agenda to allow for documents W/52, 
W/54 and W/55 to be considered together.  
5. It was so agreed.  
6. The Chairman introduced the second item of the pr oposed agenda by recalling that at the last 
meeting of the Working Group, some members ha d expressed an interest in revisiting some 
previously identified issues under Paragraph 36 of the D oha Ministerial Declaration.  In this context, 
the delegation of Brazil had provided a written subm ission, in WT/WGTDF/W/53.  This was included 
in the meeting's agenda under Item 2, for presenta tion by the Brazilian delegation and reactions by 
Members. The Chairman requested ag reement on the full revised agenda. 
7. It was so agreed. WT/WGTDF/M/22 
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AGENDA ITEM I: DISCUSSION ON TRADE FINANCE  
8. The Secretariat based its report on Document WT/WGTDF/W/52.  Despite the confirmed 
overall improvement in trade finance markets, difficulties remained for the smaller actors in 
international trade, namely small and medium si zed enterprises, smaller banks and small and poor 
countries.  As a result of risk aversion by the banking sector and the prospects of higher regulatory 
costs on international banks, traders (particularly importers) in low income countries faced very high 
costs for trade finance.  These costs included annua l interest rates more than 10 percentage points 
above the policy rates, plus high cash and other colla teral requirements. Such measures reflected a gap 
between the perception of risk of operating in these countries and the actual (low) level of risk.  As a 
result, the demand for risk mitigation facilities provi ded by regional development banks and the IFC 
increased. However, the draft report requested by the G-20 Summit in Seoul on the effectiveness of 
these facilities indicated that only one third of low income countries benefited from such risk 
mitigation facilities.  The priority was hence to e xpand the coverage of such facilities in Africa and 
Asia.  The draft G-20 report was well received, and a final draft was being prepared for transmission 
to the G-20 Development Working Group.  The Secretariat also updated Members on regulatory 
issues pertaining to trade finance. 
9. The Chairman opened the floor to delegations wi shing to ask questions on the presentation by 
the Secretariat and/or make statements. 
10. The Representative of the European Union welcomed the Secretariat report.  The 
representative noted that the report emphasized both a return to normalcy for most segments of the 
market, as well as a sustained market gap in low-inco me countries.  This gap triggered an identifiable 
need for continued and improved actions, in particular by multila teral development banks (MDBs). 
While MDBs met some of the short-term needs of their customers, the trade finance discussion 
needed to be considered from a longer term pers pective which took into account the structural 
constraints against the development of local financ ial markets.  In this respect, the WTO work on 
trade finance was directly linked with the Ai d-for-Trade agenda, as suggested by the IFC's 
information note in WT/WGTDF/W/54.  Hence, th e question was whether and in what context the 
upcoming global Aid-for-Trade Review in July woul d address the issue of trade finance.  Finally, the 
representative asked for a follow-up analysis on the effectiveness of individual MDB measures to 
facilitate trade finance in their respective areas of operation. 
11. The Representative of Pakistan noted that the world's economic recovery had been generally 
positive, yet uneven.  He was satisfied to note the Expert Group Report's acknowledgement of the 
problems faced by low income countries and sma ll businesses against this backdrop.  Low income 
countries were faced with multiple challenges includi ng collateral damage to their markets, liquidity 
and credit squeeze, asymmetric information, exclus ion, and a large number of other externalities. 
Three main problems needed to be highlighted.  Firs t, the accumulation of external and internal debt 
was leaving little or no fiscal space for trade finan ce.  Second, low income countries were subject to 
problems of risk perception and the resulting lack or absence of cash flows towards their small and 
medium sized enterprises (SMEs).  Third, a majo r emphasis on global supply chains had resulted in 
the marginalization and exclusion of traditional su pply chain structures.  Th e latest edition of the 
World Bank's World Development Report, which focu sed on countries in conflict, was pertinent in 
this regard.  These countries suffered from poor risk ratings, which deterred foreign capital 
investments.  Increased risk was considered purel y on financial terms. and led to a preference for 
short-term, liquid assets instead of longer-term investment.  The LICs continued to encounter 
problems of accessing low-cost short term financing, while global buyers typically insisted on lengthening payment periods.  In view of the high fees and collateral requirements paid by local 
importers, only a third of the 60 poorest countries in the world benefitted regularly from the services 
offered under the MDB's trade finance programmes.   WT/WGTDF/M/22 
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  12. The Representative of Pakistan therefore strongly endorsed the Director-General’s support for 
the Report’s recommendations to "strengthen tr ade finance facilitation programmes where they 
existed, and create some where they did not ex ist".  He welcomed the discussion regarding the 
financing of global supply chains, as reflected in pa ragraph 7 of W/52.  He noted that extended supply 
chains and related financial infrastructures had reach ed high levels of technical sophistication, which 
were beyond the grasp of already overburdened low income countries.  While the developed world 
had enough liquidity to maintain higher levels of inventory, cash flows and ability to sustain orders 
over long periods for just-in-time deliveries, the una vailability of affordable capital, coupled with the 
existence of information asymmetries and lack of  technological know-how meant that low-income 
developing countries could not benefit from the sa me conditions.  The Representative of Pakistan 
supported recommendations that addr essed capacity and technological gaps.  Such recommendations 
included those that allowed low-income countries to participate in shared technology platforms 
covering end-to-end supply chains, to benef it from predictable and secure working capital 
optimisation through receivables financing, and to implement modern systems that met the sellers’ 
pre-shipment, shipment and post-shipment financi ng needs (including inventory finance and payables 
discounting as well as trade risk mitigation through credit, cargo and transaction dispute insurance).  
In light of this, a link with the Aid for Trade initiativ e was desirable, particularly in the context of the 
upcoming Global Review. 
13. The Representative of Turkey thought that the IFC's paper (W/55) had summarized the gist of 
the issue, and put trade finance at the heart of tr ade development strategies. Trade finance, together 
with trade promotion, trade facilitation, trade rela tions and infrastructure management provide joint 
pillars of support to a comprehensive trade deve lopment strategy.  IFC's efforts in providing 
affordable trade finance to developing countries, t ogether with those of regional development banks 
and other financial institutions, were highly appreciated.  The Secretariat Report underlined still 
remaining challenges and risks, including obtaining clean financing for SMEs, and the risk-adverse 
attitude of international banks in taking risks in low- income countries.  In this context, it was all the 
more important to draw attention to the special ne eds of LDCs to develop their supply-side capacities 
and trade-related infrastructures.  The involveme nt of the Director-General of the WTO was 
appreciated, in particular his support of the Expert Group Report's recommendation “ to strengthen 
trade finance facilitation programs where they existed, and create where did not yet exist ”.  In line 
with this recommendation, the Fourth UN LDC Conference in Istanbul provided an important 
contribution in assessing and reviewing the fulfilmen t of the international community's commitments 
towards LDCs. 
14. The Representative of Japan said that he appreciat ed the reports by the WTO Secretariat, the 
IFC and and the International Chamber of Commerce (ICC).  While the general improvement in trade 
finance markets was welcome, the Delegation of Jap an was concerned about the long-term constraints 
faced by low-income countries.  Further action was need ed to improve this situation. In relation to the 
paper by the ICC, Japan recognized the importance of Aid-for-Trade, and welcomed any possible link 
between capacity building work undertaken in trade finance and Aid-for-Trade initiatives, particularly 
in light of the upcoming global review in July.  
15. The Secretariat answered the question from th e Representative of the European Union and 
similar remarks by the Representatives of Pakist an, Turkey and Japan on the linkages between on-
going trade finance work, particularly in the c ontext of the Working Group and the Aid-for-Trade 
initiative.  Such a link had actually been made at the onset of the Aid-for-Trade initiative, when the 
Task Force on Aid-for-Trade had identified trade finance as one of the key soft infrastructures to 
increase the low-income countries' supply-side capac ity to trade.  Trade finance featured strongly 
during the first global review on Aid-for-Trade, wh en President Zoellick announced the creation of 
the World Bank's Global Trade Liquidity Programme.  The linkage was further strengthened by the 
maintenance of a high profile panel on trade finance under the heading of public-private partnership. 
When the financial crisis began, however, market gaps became temporarily global, and trade finance WT/WGTDF/M/22 
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was treated as a "stand-alone" issue by the WTO.  Consequently, the G-20 implemented a trade finance-specific support package, although the Aid -for-Trade linkage still ex isted through the strong 
emphasis the G-20 placed on maintaining trade financing in Africa and on promoting the African Development Bank's capacity to do the same.  Once markets returned to more normal trends, the 
hurdles faced by low-income countries appeared to be rather "structural", although the impact of a 
retrenching global financial industry and new regulatory requirements still remained. In this context, it 
made sense to enhance the existing link between trade finance and Aid-for-Trade.  One important 
component of such an enhancement was the tr aining activities undertaken by the IFC and other 
MDBs.  Finally the Secretariat emphasized its commi tment to channel Members' statements to the 
individuals involved in preparing for the upcoming global review.   
AGENDA ITEM 2: SUBMISSION BY THE DELEGATION OF BRAZIL. CONSIDERATION 
BY MEMBERS 
16. The Representative of Brazil introduced document WT/WGTDF/W/53 and the proposals 
contained therein.  He wished to focus on the reasons behind these proposals and expected outcomes, 
as well as on answering questions from other Members.   The Representative of Brazil indicated that 
the international debate regarding the relationship between exchange rates and trade was not new, but 
had regained momentum following the recent economic crisis.  The policy response to the crisis had 
been comparable across the world, with countri es employing a mix of accommodative monetary and 
fiscal policies to encourage growth and employment.  These measures were subject to different calibrations that were dependent on the characteristi cs of each individual country.  As result, relative 
currency exchange rates of partner economies fluctuat ed considerably in a pattern markedly different 
from historical norms.  These asymme tries affected tr ade in ways that neither the government nor the 
private sector fully estimated, thus instigating a rene wed interest in the interaction between trade and 
exchange rates.  Quoting the Seoul G-20 Summit D eclaration, the Representative of Brazil noted that 
leaders had urged all countries to "refrain from competitive devaluations of currencies", thus 
indicating that this issue was a shared global concern.   
17. Brazil's focus was hence on debating of the impact of large fluctuations of exchange rates on 
international trade.  Such instabilities, while widely  recognized, were hardly debated.  For example, 
the Marrakesh Declaration on the Contribution of  the WTO to Achieving Greater Coherence in 
Global Policy-Making emphasized the fact that "suc cessful co-operation in each area of economic 
policy contributes to progress in other areas.  Greater  exchange rate stability, based on more orderly 
underlying economic and financial conditions, should  contribute towards the expansion of trade, 
sustainable growth and development, and the corr ection of external imbalances."  Against this 
background, Brazil believed that a serious and c onstructive debate on these issues in the WTO, in 
particular in the Working Group, would demonstrat e to the international community its commitment 
to take up trade issues that have lately been at the forefront of the trade policy agenda.  Other trade-
related issues of importance in the WTO agenda needed  to be subject to an examination similar to the 
one proposed by Brazil in WT/WGTDF/W/53.  In approving the work programme contained in the 
document, the WTO would be signalling to the outsi de world its willingness, readiness and ability to 
tackle the relevant issues in a flexible and cooperative way.   
18. Brazil carefully chose the WTO Working Group on Trade, Debt and Finance as the locus for 
discussions in the WTO since it was se eking a flexible, analytical appr oach rather than negotiations.  
Based on recent experiences, the Working Group appeared  to be the best venue for this initiative.  In 
fact, the mandate of the Working Group, which c overed recommendations and steps "to strengthen the 
coherence of international trade and financial policies, with a vi ew to safeguarding the multilateral 
trading system from the effects of financial and mone tary instability", fitted perfectly with the debate 
proposed in W/53.   
19. While document W/53 tried to circumscribe the nature and boundaries of the proposed 
debate, the Representative of Brazil wished to under line some of the basic principles that guided the  WT/WGTDF/M/22 
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  initiative.  First, the initiative was not meant to hi ghjack the exchange rate issue from other fora. 
Exchange rate asymmetries, behaviour, and implicat ions could be approached  from different angles. 
Brazil realized that there was a fundamental a nd unquestionable division of responsibilities across 
international organizations, with the IMF being re sponsible for monitoring exchange rate policies 
globally, while the WTO was chiefly concerned with international trade.  However, as the provisions 
of Article XV of GATT 1947 fully recognised, these two key issues had a bearing on one another, and 
the primary division of responsibilities could not create a no-man's-land preventing a much-needed debate on the interface between them.  Brazil emphasi zed that it stimulated, supported, and was fully 
engaged in any discussion undertaken on exchange rat es in such fora as the G-20. Second, with this 
initiative, Brazil did not seek to negotiate new WT O disciplines or to review existing ones.  The 
Working Group on Trade, Debt and Finance was not  a negotiating body, and Brazil merely sought a 
discussion ought to be analytical in nature.  Third,  Brazil did not want to focus on the fiscal, monetary 
or exchange rate policies of specific countries.  The proposed discussion did not seek to interpret or 
second guess choices by national authorities.  It aimed at a mostly conceptual debate on the general 
relationship between exchange ra tes and trade.  Fourth, Brazil was open-minded as to the shape, 
scope, and pace of the work program.  It was willing to  work with other Members, so as to take their 
interests and concerns on board.  
20. Finally, the Representative of Brazil touched on specific aspects of the proposed work 
program.  Consistent with the proposals set out  in W/53, the Representative outlined a series of 
activities for a two-year work program.  These ac tivities were divided into two main pillars: an 
economic approach based on academic research a nd concrete experience; and an institutional 
approach.  Under pillar one, Brazil suggested four  activities: (i) a compilation and review by the 
Secretariat of available literature and research on the s ubject, particularly in the light of the crisis that 
had started in 2008.  In doing so, the Secretar iat would be compelled to consult Members on any 
literature they wished to indicate; (ii) holding  a workshop with the participation of selected 
economists, with external and inde pendent economist, and/or with economists from the staffs of the 
WTO, IMF, and the World Bank (iii) holding Wo rking Group sessions when WTO Members, on a 
voluntary basis, wished to share their concrete experiences (iv) the commissioning of any other study 
and discussion paper that the Working Group considered to be useful for the debate.  Under pillar two, 
the objective was to assess global governance of inte rnational trade and financial policies.  Brazil 
suggested two activities under this pillar: (i) the commissioning of two discussion papers on how the 
"coherence mandate" had been impl emented with a focus on the relationship between exchange rates 
and international trade – one paper to be prepared  by independent experts after consultation with 
Members, and another one to be completed jointl y by the WTO, IMF and the World Bank, and (ii) 
organizing a workshop to examine those two papers. 
21. The Representative of Brazil concluded by re minding Members that the WTO had too often 
been criticized for its propensity to adopt a narro w and mercantilist approach when discussing global 
issues, and for being unable to promote high-level po licy debates.  The relati onship between exchange 
rates and international trade was no doubt a systemic  issue that was in the interest of every WTO 
Member.  Although Brazil was the proponent of this debate, it hoped that the membership would take 
collective ownership of its development and outcome.  
22. The Chairman opened the floor for statements , remarks and comments on Brazil's proposals. 
23. The Representative of Argentina supported Brazil's proposal by saying that it was an 
important contribution to the Working Group, whic h specifically covered trade-related aspects of 
exchange rates – a topic that was fully part of the organization's mandate.  He agreed with the stated 
objective of the proposal to open a debate without  implying negotiations of commitments. Exchange 
rates had the potential to be used as a trade policy to ol that could have restrictive effects on imports 
and increase artificially the competitiveness of exports.  This type of behaviour impacted the relative 
competitiveness of members and had a bearing on trade flows.  In this respect, possibilities of sharing WT/WGTDF/M/22 
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cases studies and national experiences as well as discussions regarding the coherence mandate's 
implementation would be useful to Members. Brazil' s document referred in particular to the dynamics 
of the relationship between exchange  rates and international trade in the context of the recent financial 
crisis.  The Representative of Argentina thought that it was important for the WTO to analyse a 
number of issues raised during the economic crisis that started in 2008, and he saw the Brazilian 
proposal as complementing the Symposium proposed in July 2010 by Argentina, Ecuador and India. 
With these two initiatives, the WTO Membership had a broad range of areas in which to discuss the 
systemic issues referred to by Ambassador Azevedo, and to meet the concerns regarding WTO's role on those general questions.  The Working Group was clearly the right body in which the proposed exercise could take place. 
24. The Representative of the Dominican Republic also supported the proposal by Brazil.  He 
noted that exchange rate fluctuations modified th e relative prices of goods and services traded as well 
as the balance of payments (both current and cap ital account).  When variations reached 45%, as 
referred to by Brazil, it had the potential to destroy production and jobs, because such sharp 
appreciation weakened the competitiveness of domes tic products.  When this appreciation was the 
outcome of capital inflows seeking to take advantage of exchange or interest rate differentials, it 
increased pressure on the current account and created uns ustainable situations.  This, in turn, created 
negative expectations, which eventually resulted in a reversal of these capital flows, leading to sudden 
depreciations of the currency.  Such external s hocks forced governments to protect the long-term 
interest of their economies by applying measures to their capital account. Exchange rate movements 
were bringing about changes in the relative co mpetitiveness of countries, which, if voluntarily 
applied, could be considered as export subsidies.  It  was hence important that both pillars of Brazil's 
proposal be accepted by the Working Group.  He also was of the view that UNCTAD should be included as part of the contributing organizations.  
25. The Representative of the United States believed that Brazil had raised an important topic, 
since exchange rates and trade were clearly linked.  Market-determined exchange rates were 
influenced by many factors, including domestic and foreign policies, relative rates of economic 
growth, capital flows, and investors’ risk appetite .  Additionally, issues surrounding exchange rate 
intervention and reserve accumulation were also partic ularly significant for a wide range of countries.  
This was especially true for factors that helped to  underpin export-led growth  strategies, resulting in 
large current account surpluses and currency u ndervaluation which skewed production incentives 
toward the external sector at the expense of domest ic demand.  In this regard, the Working Group 
needed to be mindful of the multilateral instituti ons’ various competencies and jurisdictions in 
designing a work program, and refrain from launching work that was duplicative.  The G-20, which comprised 85 percent of world output, was already engaged in a major exercise to promote strong, 
sustainable and balanced growth, and in 2011 w as conducting external sust ainability assessments to 
reduce persistently large external imbalances.  That effort was alr eady heavily focused on 
macroeconomic policies and exchange rates. 
26. Clearly, macroeconomic policies and exchange rate s were within the jurisdiction of the IMF. 
Indeed, GATT Article XV was clear that exchange ra te questions were within the jurisdiction of the 
Fund while questions of trade were within the jurisdiction of the GATT (now the WTO).   The 
agreement between the IMF and WTO of November  1996 stipulated that the Fund and WTO “shall 
cooperate in the discharge of their respective mandat es.”  In order to foster  consensus and based on 
this division of responsibilities between the IMF a nd WTO, the U.S. could support part A (pillar one) 
of the WTO work program laid out in Brazil’s pa per, which focused on examining the effect of 
exchange rates on trade flows.   As suggested by  Brazil, the WTO work program included a literature 
review and symposium during which WTO Member s could share “concrete experiences and case 
studies.”  Since the examination of macroeconomic policy-making was beyond the mandate of the 
WTO, the IMF should be tasked with providing a paper and presentation with regard to recent 
economic factors and events affecti ng the determination of exchange rates, including: exchange rate 
management, over/under-valuation of exchange ra tes and reserve accumulation.  A work program  WT/WGTDF/M/22 
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  along these lines would be consistent with the ag reed mandates of the r espective institutions and 
would take advantage of work already on-going in the IMF.  Further, such a work program would 
need to meet another essential precondition for the US  delegation – that it set no precedent that would 
confuse the existing organizational st ructure of multilateral institutions. 
27. As for part B (pillar two) of the Brazil proposal , the Delegation of the United States remained 
concerned that it proposed to revis it institutional issues related to juri sdictions of the various relevant 
international organizations.   Its view was that the current arrangement was satisfactory and, therefore, 
did not see any utility in reopening the issue; henc e it could not support this element of Brazil’s 
proposal.   The United States was of course open to hearing dissenting views and opinions. 
28. The Representative of Canada agreed that th e issues addressed by Brazil's proposed work 
program were timely and relevant, and would benefit from closer atte ntion.  The relationship between 
exchange rate and trade was certainly high-profile , highlighted among other things by the different 
recovery experiences of developing economies, as well as the resulting divergences in their economic 
policies.  Also, he agreed that the coherence of the approaches adopted by different international 
institutions (IMF and WTO) with respect to exchange  rate and trade could be improved.  Hence, he 
concurred that the WTO could make a positive cont ribution to this debate , and supported the work 
programme in this respect. 
29. The representative of Hong-Kong, China indicated that there was no doubt that international 
trade could be affected by fluctuations in exchange  rates.  Various aspects of this subject had been 
studied before by other organisations and in academ ia.  The IMF had updated its survey on exchange 
rate volatility and trade in 2004, which had been pr esented to the Working Group on that year.  The 
OECD had also conducted a stud y in 2010, titled “To What Extent  do Exchange Rates and Their 
Volatility Affect Trade?”  However, the issue ought  not to be "hijacked" from other organizations 
such as the IMF, as suggested by the Brazilian Ambassa dor. In addition, duplication of work had to be 
avoided. Further efforts in this respect should bu ild on studies already done.  He had no strong view 
as to the Secretariat reviewing available literature and research on this topic. 
30. The Representative of Venezuela supported the proposal by Brazil because this reflected a 
need of Members at a difficult time for the WTO.  The issue of the relationship between international 
monetary relations and trade re quired substantial research, studies and discussion, which was what 
Brazil had proposed.  This Working Group was the ideal  forum for such an exchange of ideas.  He 
believed that there were no negotiations involved in  this proposal, and that the conclusions of the 
proposed studies would not affect negotiating positions  in the DDA. Regarding the possibility of any 
duplication of efforts with the G-20, the Repr esentative noted that the G-20 only represented 
Members that were part of this Group; inst ead the WTO should follow the mandate of its own 
Membership, that of the "G-153".  
31. The Representative of Uruguay supported th e proposals by Brazil – both regarding its 
substances and timetable – which was based on solid  background analysis a nd justification, and a 
clear mandate underlying the creation of the Working Group.  The new realities in international trade 
had led the Delegation of Uruguay to conclude that the relations hip between exchange rate and 
international trade played an important role in th e countries' concerns regarding the distortions faced 
by local traders.  The WTO could not remain on side lines of this debate, whether or not other 
discussions took place in other fora. Coherence be tween international organizations could not be 
achieved by excluding and limiting the scope of action that the Members had assigned to their 
organizations. Organisations ought to be dynamic and comply with their respective roles, giving each other mutual support in their field of competence. Members of these institutions also had to strive to ensure Secretariat support in main taining institutional compliance w ith their statutes and respective 
fields of competence.  WT/WGTDF/M/22 
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32. The Representative of the European Union sai d that his delegation had examined Brazil's 
proposal with great interest.  The issue was real a nd deserved discussion: exchange rate fluctuations 
could have a very significant interplay with world trade flows.  What Brazil was proposing seemed to 
be consistent with the manda te of this Working Group as well as with the WTO "Coherence 
Declaration".  The proposal in its current form wa s reasonably modest and contained; it seemed to be 
mainly aimed at gathering analytical eviden ce, and promoting discussions and debate.  An 
examination of such issues in the WTO appeared to be legitimate, and his delegation was, in principle, 
open to considering it favorably.  However, it was es sential to clearly define the scope of any potential 
work program.  The views of the Secretariat were sought as to how and under what sort of timeframes 
the suggested work program could be implemented. Furthermore, substantial amount of literature 
already existed on the relationship between exchange rate fluctuations and trade flows.  Hence, in 
putting into place a possible work pr ogram, it was important to ensure : first, that it genuinely added 
value, and second, that it did not cut across wo rk undertaken in other international fora.  The 
Representative of the European Union stated that any WTO/WGTDF work program had to be 
coherent with the work of the IMF, as well as the unde rtakings in the context of the G-20, not only for 
the sake of coherence itself, but also because the IMF had strong and long-standing technical 
expertise on exchange rate issues.  As with the Balance of Payments Committee, the WTO ought to 
draw on the expertise of the IMF. At the same  time, any possible diagnostics or recommendations 
emerging from a work program should in due course feed into ongoing discussions in the IMF or the G-20.  Brazil's submission seemingly fitted well with  the objective to develop and leverage further the 
WTO 'middle pillar' of peer review, and sharing of experiences among Members.  The proposal could 
therefore potentially contribute to reinforcing the ability of the organization to address in a 
constructive manner real systemic questions relating to the coherence of economic policies, including 
issues that went beyond the current WTO negotiating agenda. 
33. As regards pillar two of Brazil's proposal, im plementing the WTO's 'Coherence mandate' and 
reporting on it ought to be the regular task of the respective staff of the WTO and other relevant 
international organizations.  Any such reporting ha d to remain within the remit of the 'Coherence 
mandate', without venturing into areas that were best dealt with in other fora.  
34. The Representative of Japan appreciated the cl arifications provided by Brazil and found the 
proposal interesting.  In line with the European Union and the United States,  Japan wished to give 
careful consideration to the issue of mandate and responsibilities of each institution.  The Delegation 
of Japan recognized that GATT Article XV addr essed exchange rate issues, although prime 
responsibility for exchange rate polic ies remained with the IMF. In this context, the delegation of 
Japan was still considering the proposal and would de liver a more solid position at a later stage, after 
having consulted with its capital. 
35. The Representative of Turkey found Brazil's pr oposal to be quite useful and constructive. 
With respect to pillar one, the literature review  on the relationship betw een exchange rate and 
international trade, and a dedicated workshop with  the participation of selected economists could 
enhance all Members' understanding of the issue.   Relevant institutions in Member countries, 
including Turkey, would be able to contribute to the topic of Member's experiences and case studies. 
Regarding pillar two, the Representative of Turk ey was ready to look at the proposal positively, 
although more time was needed to fully reflect on it.   
36. The Representative of Indonesia indicated that  he welcomed Brazil's proposal, as it touched 
important and relevant topics.  It was timely  for the WTO to get better understanding of the 
relationship between exchange rates and internationa l trade.  His delegation was hence pleased to join 
further work of this nature in the context of  the Working Group, and would ask its capital to 
contribute as well. 
37. The Representative of Chile believed that Br azil's proposal was very relevant to the 
organization.  With respect to pillar one, he s upported the proposal for an academic discussion and a  WT/WGTDF/M/22 
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  workshop on basis of case studies and experiences of  Members.  However, he raised questions on 
pillar two similar to other delegations, in partic ular avoiding any possible conflict of responsibility 
between international organizations .  He was confident that his delegation could move forward on 
pillar two's implementation as soon as greater security  was given on this point.  He saw in Brazil's 
statement a willingness to avoid such conflict.  
38. The Representative of India welcomed the discussi on of this very important issue on the basis 
of Brazil's proposal.  Indeed the IMF had worked in th is area, in particular in the context of the 2004 
updated study on exchange rate and trade.  However,  he also wished to draw the attention of the 
Working Group on a July 1998 study published by the WTO Economic Research Division, which showed that there was a precedent of the WTO getting involved in this area fro m a trade perspective.  
He wholeheartedly supported Brazil's proposal under pillar one, on which there seemed to be general 
support, and also on pillar two.  With regard to specific arguments exchanged by Members on pillar 
one, he indicated that organisations should not be afraid of contributions provided by independent 
experts; Brazil's proposal was not meant to challe nge the acknowledged jurisdiction of the IMF.  The 
WTO ought to keep its "windows and doors open" to br ing in fresh ideas and analytical work to feed 
in the discussion of Members.  As regards to the proposed work program on pillar two, he believed 
that the joint collaboration of the IMF, WTO, and the World Bank was hardly questionable, since each institution had something to contribute according to its mandate and expertise: the IMF had the 
jurisdiction and considerable expertise over macroec onomic and in particular exchange rates policies; 
the WTO also had more than 60 years of experience of trade, and on the factors influencing trade flows.  While he agreed that there should be no duplication of work and overlap, the expertise of 
different organizations should be sy nergized to get better clarity to these matters. In this respect, he 
would welcome the possible contribution of UNCTAD, as it was an organization that dealt with trade 
and its impact on development. In th e end, though, the joint Secretaria ts' paper would be subject to the 
Members' final acceptance.  Proper time had to be taken for its preparation. In conclusion, he looked 
forward to the fruitful implementation of the overall work program proposed by Brazil. 
39. The Representative of China welcomed, as all other Members, the presentation made by the 
Brazilian Ambassador, Mr. Azevedo.  China had no objection to pillar one. In fact, it wished to 
contribute to the effort by recommending its experts to participate in the proposed workshop.  Since 
China had been pursuing an open-door policy and ec onomic reform strategy for quite some time, it 
had accumulated thirty years of experience in the fi eld of international trade.  Chinese experts had 
recently conducted research on trade balances, foreig n exchange reserves, and real effective exchange 
rates of the world’s leading 46 economies, using Granger causality tests in a combination of short-
term and long-term samples within an overall test pe riod covering 1975 to 2005.  The research led to 
the following conclusion:  trade balance could not determine exchange rates. China’s contribution on 
this issue would potentially deepen and broade n the proposed discussion on relationship between 
exchange rates and international trade.  China was also supportive of the Dominican Republic’s 
proposal to involve UNCTAD in the discussion, particularly given that organization's expertise in 
trade and investment issues.  China shared th e same concerns as the United States and other 
delegations that pillar two of the proposal might crosscut the businesses of other multilateral 
organization such as the IMF.  Monetary as well as ex change rate policies were within the domain of 
the IMF and of G-20 Finance Ministers.  The poten tial WTO transgression into the territory of other 
multilateral organizations would not only duplicate the legitimate work of those organizations, but 
could also cause conflicts.  Hence, he suggested that Brazil further elaborate on pillar two of its 
proposal. 
40. The Representative of Paraguay supported the propo sals made by Brazil. He encouraged a co-
operation between the WTO and UNCTAD on the issues raised by the proposal.  In this respect, he 
referred to a recent presentation by UNCTAD on the impact of the financial crisis with some analysis 
on the impact of exchange rates on international tr ade. He looked forward future contributions by 
Paraguay on this issue. WT/WGTDF/M/22 
Page 10  
 
41. The Representative of South Africa supporte d the establishment of the work program 
contained in Brazil's proposal and looked forward to the upcoming discussion that would derive from 
it.  
42. The Representative of the Kingdom of Saudi Arabia  indicated that the important issues raised 
in the Brazilian proposal deserved an open and objectiv e debate.  He stressed that it was important for 
the WTO to concentrate on its mandate and to avoi d a clash of jurisdictions with other multilateral 
organizations at the expense of its mandate, especi ally at this juncture of the DDA negotiations. 
43. The Representative of the Republic of Korea t hought that the relationship between exchange 
rates and international trade was important and signi ficant for the organization. He concurred with the 
delegations of the United States, European Union, and others that the WTO should take GATT Article 
XV and the WTO-IMF cooperation agreement into due consideration while reviewing Brazil's 
proposal.  At the same time, the G-10 and the IMF had been holding discussions on the issues raised 
in Brazil's proposal as one of the policy responses to mitigate the global imbalances problem. Hence, 
he believed that it would be desirable for the WTO to review the results of those discussions before 
proceeding with its own analysis.  
44. The Representative of Ecuador expressed great interest in proceeding with a discussion on 
exchange rates and international trade, in line with  the proposal of Brazil.  He supported Argentina's 
position in the sense that he viewed this proposal as a continuation of the Symposium organized in July 2010 on international trade stimuli, at the in itiative of Argentina, Ecuador and India. Brazil's 
proposal would provide an opportunity to discuss a matter that Ecuador had been raising for some 
time in different bodies of the WTO, i.e. its own s ituation regarding the impossibility of applying its 
monetary policy because it used the US dollar, and th e impact it had on external balances.  He wished 
to endorse the suggestion by the Dominican Republic , India and other Members to take into account 
the experience of UNCTAD in this area. 
45. The Representative of the Philippines stated th at her delegation was open to the suggested 
work program, as it was timely and relevant. She agr eed with the views expressed by Brazil that the 
proposed discussion was not aimed at "hijacking" the exchange rate debate ta king place in other fora, 
and that, under pillar one, the WTO should take  advantage of the discussions taking place in 
institutions such as UNCTAD.  She agreed with ot her Members such as the United States that the 
work program should be undertaken on a step-by-st ep basis, and she suggested that the Working 
Group move into pillar two only after having "absor bed" pillar one issues.  However, she believed 
that pillar two issues were not irrelevant to th e WTO, as the institution had a solid "coherence" 
mandate.  
46. The Representative of Switzerland believed th at Brazil's proposal was relevant for the 
organization, in particular in its trade-related asp ects.  He was supportive of the work program but 
wished to stick as closely as possible to the WTO ma ndate, in particular that of the Working Group. 
The WTO should ensure that it does not duplicate the work of other organizations such as the IMF, 
OECD and the World Bank; rather the WTO should bu ild on such work.  Special consideration should 
be given to what the expected "deliverables" in pillar one would be, and on how those outcomes 
would feed the work of the WTO at large.  His delegation was considering providing more thoughts 
and comments at a later stage. 
47. The Chairman thanked the delegations for their statements, and turned to the delegation of 
Brazil for comments and replies. 
48. The Representative of Brazil thanked all delegati ons for according a high degree of attention 
to his delegation's proposal.  He first commented on the role of UNCTAD, by saying that he fully 
agreed that UNCTAD would add an additional dimens ion to the analysis.  The only reason why Brazil 
had not been mentioned it in the paper was beca use UNCTAD was not explicitly mentioned in the  WT/WGTDF/M/22 
 Page 11 
 
 
  WTO Coherence Mandate. Nonetheless, the views of UNCTAD economists could be useful under 
pillar one.  With regard to pillar two, he gathered that some delegations want ed to think more about 
committing to such action.  He clarified that under pillar two, Brazil's intent was neither to undertake 
any exercise that would reframe the coherence mandate, nor to talk about the respective jurisdictions 
of the international organizations concerned. Brazi l's intentions were to examine how the Coherence 
Mandate had been implemented to date.  He hoped that the WTO coul d contribute even more to this 
Mandate, in particular on the aspects of the relations hip between exchange and trade.  He reiterated 
that Brazil did not want to detract from the jurisd iction of any organization, nor to renegotiate any 
particular point of jurisdiction.  The main objectiv e was to utilize the synergies between organizations 
to debate the issues in a more productive way.  He  suggested that the WTO begin work under pillar 
one, while concurrently holding c onsultations with the delegations that had expressed concerns on 
pillar two.  He indicated that Brazil was willing to reframe pillar two in a way that would be 
acceptable to the Members concerned, and would be open to submitting a revised version of the 
proposal to the Working Group as a whole. 
49. The Chairman summarized the discussion on this ite m.  He sensed that there had been general 
support to the thrust of Brazil's proposals.  As regards pillar one he had heard almost universal, 
unqualified support for undertaking this aspect of the work program sequentially, except from one delegation that needed more time to consult its  capital.  This did not preclude the Working Group 
from giving support to pillar one, in principle. As re gards pillar two, he noted a number of requests for 
further consideration, and concerns regarding bot h the Coherence Mandate, and the need to avoid 
duplication of work with other international organi zations and processes.  Hence, he suggested, as the 
Chair of the Working Group, to hold individual or small group consultations on the scope of pillar 
two in order to address and resolve all raised concerns .  With regard to a survey of currently existing 
literature, the Chairman agreed with the delegation of HK China pointed out that the IMF survey of 
2004 would be a useful starting point in moving forward under pillar one.  
50. The Chairman proposed that subject to one Member's confirmation from its capital, the 
Working Group would proceed with the implementation of pillar one, and to include it in the Working 
Group's schedule for the current year. 
51. It was so agreed. 
52. The Chairman also proposed that Members hold consultations with Brazil and one another in 
order to refine the scope of the proposal, in a wa y that addressed the concerns of Members about 
duplication of work, and about the WTO moving in to areas that were already covered by other 
international organizations. 
53. It was so agreed. 
54. The Chairman asked whether the delegation that had requested more time to receive a firmer 
position from its capital could revert to him or the Secretariat within one week.  The delegation in 
question agreed. 
55. The Chairman summarized the other items of the Agenda. With respect to trade finance, he 
noted the reiteration by delegations of the value th ey attached to the Working Group's deliberations on 
the subject, and that much had been done in the c ontext of the initiatives taken by the G-20 since the 
London Summit.  While the market situation for trad e finance had much improved in the past year or 
so small players such as traders in  low income countries, and smaller traders in developed countries 
were currently vulnerable to credit scarcity, and co uld be at risk of marginalization in a banking 
environment subject to retrenchment and re-regula tion.  Countries' commercial and sovereign risks 
had also increased recently.  In light of these factor s, the meeting emphasized that the current efforts 
under the G-20 umbrella to support short-term trad e finance in low-income countries were welcomed. WT/WGTDF/M/22 
Page 12  
 
Efforts to link up this work to the Aid-for-Tra de Initiative would also be welcomed by some 
Members. 
56. The Chairman finally reminded Members that the Working Group had to report to the 
General Council and to Ministers, in advance of the Ministerial Conference to be held at the end of 
this year.  In the past, the Secretariat had helped  the Chair produce a short factual report, approved on 
a lapse-of-time basis.  He suggest ed that the same procedure be applied this year.  On his own 
responsibility, he would circulate a short draft befo re the next meeting of the Working Group to be 
held in the fall, and to be approved within ten days  or so of the date of its issuance.  During this 
period, any substantive comments could be sent to th e Secretariat.  This procedure would allow for a 
timely presentation of the Working Group's report to the last General Council of the Year, and hence 
to Ministers. 
57. It was so agreed. 
58. The Chairman thanked all the delegations for their participation, and then closed the meeting.   
POST-MEETING NOTE 
59. The Japanese delegation subsequently confirmed th at they could join the consensus on pillar 
one, and agreed to proceed with and contribute to the work program in this area.  However, Japan 
indicated that it shared other Members' systemic con cerns on pillar two, particularly in relation to the 
mandate of other international orga nizations such as the IMF.  As a result, Japan will decide on 
proceeding with pillar two proposals after co mpleting the work involved in pillar one. 
 
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