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1 The Forgotten gatt Articles on Exchange Rates

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Chapter Summary

This chapter focuses on articles XII:3(a) and XV:4 GATT. These articles deal explicitly with situations in which states' domestic policies, including their exchange rate policies, affect trade. Only article XV:4, however, appears in a Brazilian submission. This article recognizes that domestic policies can affect the balance of payments equilibrium and records an undertaking by WTO Members to avoid such policies. The chapter discusses whether these articles restrict a WTO Member in the exercise of its monetary sovereignty, should it be established that its exchange rate is undervalued and that this undervaluation reduces this Member's trade commitments vis-à-vis another WTO Member or increases the latter's trade commitments towards the former. It discusses the trade commitments and exchange rate undervaluation. The chapter also describes the difficulties WTO Members face invoking trade remedies, and explores possible explanations why articles XII:3(a) and XV:4 GATT have received little attention in practice.

Keywords: article XII:3(a); article XV:4; domestic policies; GATT; trade commitments; WTO Members



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