Brazil Wants WTO to Devise Action on ‘Distortive’ Currency Moves

Brazil wants World Trade Organization members to determine what the WTO can do to counteract distortive trade effects caused by abnormal currency movements.

Brazil submitted a paper today asking the trade body to “facilitate discussions by focusing on the specific role the WTO could play in dealing with distortive effects of significant and durable exchange-rate movements,” the country’s WTO ambassador, Robert Azevedo, told journalists in Geneva.

The document follows up on a two-day symposium in March organized by Brazil that found exchange-rate volatility and misalignments have a particularly severe impact on small and medium-sized businesses. Brazil, along with the U.S. and Europe, has accused China of keeping the yuan undervalued to boost exports and lower unemployment.

The Brazilian submission says existing provisions and mechanisms within the WTO are inadequate in light of the degree and type of volatility that affects currencies today. A WTO working group will discuss the paper later this month.

“The WTO is systemically ill-equipped to cope with the challenges posed by the macro- and micro-economic trade effects cause by exchange-rate asymmetries,” the government said in a statement. “The Brazilian paper therefore invites members to reflect on how WTO disciplines could be improved and to consider a proper road map for future engagement.”

‘Nothing Pre-Cooked’

Brazil wants a discussion of the WTO’s role in managing the impact of abnormal currency movements on commerce and isn’t making any proposals, Azevedo said.

His government “is not walking into this discussion with a ready-made recipe” to find remedies for foreign-exchange misalignments, he said. “Brazil has some vague ideas of what it should be, but nothing pre-cooked is in the cards.”

Representatives of the public sector said at the March symposium, which brought together senior officials from the International Monetary Fund, the World Bank, the Organization for Economic Cooperation and Development and central banks, as well as academics and business executives, that trade-policy measures aren’t the right response to non-trade policy concerns and urged governments to address the root causes of currency misalignments.

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