The 'missing link' between the WTO and the IMF

Abstract

This article is part of a broader study on the impacts of exchange rate on trade. It searches for an explanation on why there is no effective rule in the World Trade Organization (WTO) to neutralize the negative impacts of currency misalignments on trade instruments. In other words, it searches for the missing link between the WTO and the International Monetary Fund (IMF) concerning the relationship between exchange rates and trade. It also seeks to demonstrate that, in the creation of the Bretton Woods system this link was clearly defined but was forgotten after the end of the par value. Despite all the historical and theoretical developments these two organizations have been through, their only legal link remains the same: General Agreement on Trade and Tariffs (GATT) Article XV. The article analyzes the differences between the IMF Article IV approach based on the concept of manipulation of exchange rates and the GATT Article XV approach that looks for the frustration of the trade objectives. Finally, it argues for the rescue of GATT Article XV to solve the serious problem of trade rules circumvention through currency misalignments.