This report describes how the International Monetary Fund (IMF) and World Trade Organization (WTO) deal with the issue of currency manipulation. It also discusses apparent discrepancies in their charters and ways those differences might be addressed. The IMF is the leading international organization in the area of monetary policy. With the end of the cold war, its membership is now nearly universal. Only North Korea, the Vatican, and four other mini-countries in Europe—none having its own currency—are not members of the Fund. The IMF makes loans to countries undergoing financial or balance of payments crises; provides technical assistance to governments on monetary, banking and exchange rate questions; does research and analysis on monetary and economic issues; and it provides a forum where countries can discuss international finance issues and seek common ground on which they can address common problems. Although the IMF is a monetary institution, the promotion of world growth and balanced international trade are also among its basic goals. Article I of its Articles of Agreement says, among other things, that the IMF was created in order to "facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy." It was also created to "assist in the establishment of a multilateral system of payments in respect to current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade." Between 1946 and 1971, the IMF supervised a fixed parity exchange rate system, in which the value of all currencies was defined in terms of the U.S. dollar and the dollar was defined in terms of a set quantity of gold. Countries could not change their exchange rates from the level recognized by the IMF by more than 10% without the Fund's consent. Moreover, said the original language of the IMF Articles, "A member shall not propose a change in the par value of its currency except to correct fundamental disequilibrium." This system broke down in 1971 when the United States devalued the dollar twice without any consultation with the IMF. After a period of turmoil in world currency markets, an amendment to the IMF Articles was adopted in 1978. It said that countries could use whatever exchange rate system they wished—fixed or floating—so long as they followed certain guidelines and they did not use gold as the basis for their currencies. The new language of Article IV, which went into effect in 1978, said that countries should seek, in their foreign exchange and monetary policies, to promote orderly economic growth and financial stability and they should avoid manipulation of exchange rates or the international monetary system to prevent effective balance of payments adjustment or to gain unfair competitive advantage over other members . Some countries claim that their exchange rate policies are not in violation of Article IV because they are not seeking to gain competitive advantage (though this may be the result of their actions) but rather to stabilize the value of their currency in order to prevent disruption to their domestic economic system. To date, the IMF has not publicly challenged this statement of their objective. The Fund was required by Article IV to "exercise firm surveillance over the exchange rate policies of all members and [to] adopt specific principles for the guidance of all members with respect to those policies." The IMF adopted the requisite standards in 1977 (before the Amendment went into effect) and it updated them in 2007. The 1977 agreement said that, among other things, "protracted large-scale intervention in one direction in exchange markets" might be evidence that a country was inappropriately manipulating the value of its currency. The 2007 agreement added a requirement that "A member should avoid exchange rate policies that result in external instability." When a country's current account (balance of payments) is not in equilibrium, the IMF said in its explanation of the new provision, the exchange rate is "fundamentally misaligned" and should be corrected. The IMF can exercise "firm surveillance" but it cannot compel a country to change its exchange rate. Nor can it order commercial foreign exchange dealers to change the prices at which they trade currencies. It can offer economic advice and discuss how changes in countries' exchange rates might be in their own interest. It can also provide a forum, such as its new multilateral consultation mechanism or discussion on the IMF executive board, where other countries can urge a country to change its exchange rate procedures. However, in the end, the authority to make the change resides with the country alone. The WTO is the central organization in the world trade system. When the WTO was created in 1995, countries were required to accept as a condition of WTO membership the existing trade rules embodied in the General Agreement on Tariffs and Trade (GATT). They also had to accept new rules governing other areas of international commerce, such as services and trade-related international property rights. The agreement establishing the WTO says that the members recognize "that their relations in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a steady growing volume of real income and effective demand, and expanding the production of and trade in goods and services" and to do this in a manner "consistent with their respective needs and concerns at different levels of economic development." Unique among the major international trade and finance organizations, the WTO has a mechanism for enforcing its rules. If a country believes another country has violated WTO rules, to its detriment, it may request the appointment of a dispute settlement panel to hear its complaint. The other country cannot veto the establishment of a panel or adoption of a WTO decision by WTO members. The panel reviews the arguments in the case and renders judgment based on the facts and WTO rules. If the losing party does not comply with the ruling within a reasonable period of time, the WTO may, if requested by the complaining party, authorize it to impose retaliatory measures (usually increased customs duties) against the offending country or to take other appropriate retaliatory measures against that country's trade. Whether currency disputes fall under the WTO's jurisdiction is a debatable issue. The WTO rules specify that countries may not provide subsidies to help promote their national exports. Most analysts agree that an undervalued currency lowers a firm's cost of production relative to world prices and therefore helps to encourage exports. It is less clear, however, whether intentional undervaluation of a country's currency is an export subsidy under the WTO's current definition of the term. Countries are entitled, under WTO rules, to levy countervailing duties on imported products that receive subsidies from their national government. The term "subsidy" has a precise definition in the WTO. It requires that there must be a financial contribution by a government to the exporter or some other form of income or price support. Government financial support can take a variety of forms, such as direct payments to the exporter, the waiver of tax payments or special government purchases or the provision of low-cost goods or services (other than general infrastructure) that lowers the cost of production. Currency manipulation would not appear to qualify under the WTO definitions. In addition, an export subsidy is a subsidy that is "contingent on export performance." They must also be "specific to an industry" and not provided generally to all producers. In the past, most legal analysts have found that intentional undervaluation of a currency is not a subsidy that is "contingent on export performance" and not "industry specific" because everyone who exchanges currency gets the same rate even if they are not exporting. More recently, other analysts have asserted, based on an interpretation of the findings in a WTO dispute settlement case, that a subsidy may still be export contingent, even if it is available in some circumstances that do not involve exportation. Thus, they believe, subsidies provided through currency misalignment would be a prohibited subsidy under WTO rules even if non-exporters benefit from the exchange rate. Until the world financial system frayed in the 1970s, the IMF exercised strict control over exchange rates. It was inconceivable that a country could persistently value its currency at a level below that approved by the IMF. When the IMF's rules were changed in 1978, so that it no longer governed world exchange rates, the GATT rules were not adjusted to reflect the new reality of international finance. When the WTO was created in 1995, it adopted the existing GATT rules as its own without significant change and without acknowledging that the international system of exchange rates had changed substantially since the GATT was formed. The WTO and IMF both have major institutional responsibilities in the area of international trade. The WTO, and its predecessor organization, the GATT, were created specifically to facilitate the negotiation of multilateral trade agreements. One of the corresponding purposes of the IMF is to "facilitate the expansion and balanced growth of international trade" in order to facilitate high levels of employment, economic growth, and development in all its member countries." The WTO seeks to expand international trade through the reduction or elimination of tariffs or other barriers to trade. The IMF pursues this goal mainly through efforts to promote international monetary and exchange rate stability. It also has standards, which it has been reluctant to employ, for determining whether currencies are being manipulated and whether they are valued properly relative to other currencies. Trade policy issues may feature prominently in the IMF's surveillance activities, relative to its member countries, and steps to reduce barriers to trade are often included in its policy advice and its loan conditionality. IMF surveillance reports often provide important contributions for the WTO's own Trade Policy Reviews, which assess its member countries' trade policies. The IMF and GATT signed an agreement aimed at facilitating inter-agency cooperation soon after the trade organization was formed in 1947. The IMF and WTO adopted a revised and updated version of that agreement in 1996, shortly after the WTO came into being.