Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization

Two aspects of global imbalances--undervalued exchange rates and sovereign wealth funds--require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund has not been effective in dealing with undervalued exchange rates. This paper proposes...

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Main Authors:	Mattoo, Aaditya, Subramanian, Arvind
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Trade Policy International Trade Organizations F130 Foreign Exchange F310 International Monetary Arrangements and Institutions F330 International Lending and Debt Problems F340 International Financial Markets G150 International Linkages to Development Role of International Organizations O190
Online Access:	http://hdl.handle.net/10986/4750

id	okr-10986-4750
recordtype	oai_dc
spelling	okr-10986-47502021-04-23T14:02:19Z Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization Mattoo, Aaditya Subramanian, Arvind Trade Policy International Trade Organizations F130 Foreign Exchange F310 International Monetary Arrangements and Institutions F330 International Lending and Debt Problems F340 International Financial Markets G150 International Linkages to Development Role of International Organizations O190 Two aspects of global imbalances--undervalued exchange rates and sovereign wealth funds--require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund has not been effective in dealing with undervalued exchange rates. This paper proposes new rules in the World Trade Organization to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The World Trade Organization would not be involved in exchange rate management, and would not displace the International Monetary Fund. Rather, the authors suggest ways to harness the comparative advantage of the two institutions, with the International Monetary Fund providing the essential technical expertise in the World Trade Organization's enforcement process. There is a bargain to be struck between countries with sovereign wealth funds, which want secure and liberal access for their capital, and capital-importing countries, which have concerns about the objectives and operations of sovereign wealth funds. The World Trade Organization is the natural place to strike this bargain. Its General Agreement on Trade in Services already covers investments by sovereign wealth funds, and other agreements offer a precedent for designing disciplines for these funds. Placing exchange rates and sovereign wealth funds on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups. 2012-03-30T07:29:33Z 2012-03-30T07:29:33Z 2009 Journal Article World Economy 03785920 http://hdl.handle.net/10986/4750 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Trade Policy International Trade Organizations F130 Foreign Exchange F310 International Monetary Arrangements and Institutions F330 International Lending and Debt Problems F340 International Financial Markets G150 International Linkages to Development Role of International Organizations O190
spellingShingle	Trade Policy International Trade Organizations F130 Foreign Exchange F310 International Monetary Arrangements and Institutions F330 International Lending and Debt Problems F340 International Financial Markets G150 International Linkages to Development Role of International Organizations O190 Mattoo, Aaditya Subramanian, Arvind Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	Two aspects of global imbalances--undervalued exchange rates and sovereign wealth funds--require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund has not been effective in dealing with undervalued exchange rates. This paper proposes new rules in the World Trade Organization to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The World Trade Organization would not be involved in exchange rate management, and would not displace the International Monetary Fund. Rather, the authors suggest ways to harness the comparative advantage of the two institutions, with the International Monetary Fund providing the essential technical expertise in the World Trade Organization's enforcement process. There is a bargain to be struck between countries with sovereign wealth funds, which want secure and liberal access for their capital, and capital-importing countries, which have concerns about the objectives and operations of sovereign wealth funds. The World Trade Organization is the natural place to strike this bargain. Its General Agreement on Trade in Services already covers investments by sovereign wealth funds, and other agreements offer a precedent for designing disciplines for these funds. Placing exchange rates and sovereign wealth funds on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups.
format	Journal Article
author	Mattoo, Aaditya Subramanian, Arvind
author_facet	Mattoo, Aaditya Subramanian, Arvind
author_sort	Mattoo, Aaditya
title	Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization
title_short	Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization
title_full	Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization
title_fullStr	Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization
title_full_unstemmed	Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization
title_sort	currency undervaluation and sovereign wealth funds: a new role for the world trade organization
publishDate	2012
url	http://hdl.handle.net/10986/4750
_version_	1764392622371110912

Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization

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