Synopsis on Trade Law Project on Currency Manipulation

Siddharth Burman
Semester 6
Roll Number 1944

Currency manipulation is a strategy employed by governments and central banks to

artificially lower the value of their currencies (reducing the cost of their exports) to achieve
an unfair competitive advantage. The devaluation lowers the cost of that country's exports.
The trade deficits are then artificially reduced. Since trade and exchange rates are closely
linked.
Before the establishment of the IMF, the accepted legal doctrine was that countries have an
inherent right to determine the value of their currencies. There were no international laws
governing monetary affairs and the values of currencies were linked to gold or silver, entirely
controlled by the individual countries. As a result, the international exchange rate market and
trade system fell into chaos between World War I and World War II
Currency manipulation is widely recognized to impair international trade order as it grants
price advantages to the exporting companies. Given that the current international laws are not
sufficient to combat the issue, there are proposals that the World Trade Organization (WTO)
should participate in the regulation process.
The issue of the interface of currency manipulation and trade law has been a less explored
and contentious one. While the need to address the issue deliberate currency undervaluation
in the context of trade is raised, it is still unclear what rules of the game prevail in such a
situation. Currency manipulation is widely recognized to impair international trade order as it
grants price advantages to the exporting companies. Given that the current international laws
are not sufficient to combat the issue, there are proposals that the World Trade Organization
(WTO) should participate in the regulation process. The first way is to demonstrate that
currency manipulation violates a WTO obligation. Another way is to conclude a new
cooperation agreement between the WTO and the International Monetary Fund so that
currency manipulation can be subject to the WTO dispute resolution mechanism. a new
solution, which is to amend the Anti-Dumping Agreement so that the price drop caused by
currency devaluation can be eliminated by the anti-dumping duty.