Legal Aspects of the WTO/IMF Relationship Revisited
In M. Cremona, P. Hilpold, N. Lavranos, S. S. Schneider & A. Ziegler (Eds.), Reflections on the Constitutionalisation of International Economic Law: Liber Amicorum for Ernst-Ulrich Petersmann. Leiden: Brill. 277-290, 2013
16 Pages Posted: 21 Mar 2013 Last revised: 15 Feb 2017
Date Written: 2013
The relationship between the World Trade Organization (the WTO) and the International Monetary Fund (the IMF) has given rise to recurrent legal issues in international economic law, especially during times of financial turbulence, such as the 1970s economic crisis, 1997 Asian financial crisis, and the current difficulties. Institutional coordination between these two organizations dates back to the era of the General Agreement on Tariffs and Trade (GATT) when an international organization governing world trade had not yet come into being and decision-making was undertaken between the GATT Contracting Parties. With the establishment of the WTO, coordination between the WTO and the IMF embedded in the GATT provisions continued intact, but WTO Members went further adopting a decision on the WTO/IMF relationship and a declaration calling for greater coherence in global economic policymaking. The former decision reaffirms that the relationship between the WTO and the IMF with respect to GATT 1994 would continue to be governed by past provisions and practices established between the GATT Contracting Parties and the IMF; the latter declaration directs the WTO to pursue further cooperation with international organizations responsible for monetary and financial matters, notably, the IMF and the World Bank, with a view to achieving greater coherence in global economic policymaking. Subsequently, the institutional link between the WTO and IMF was formalized through an agreement between these two organizations.
The WTO panel and Appellate Body have addressed this subject matter in such complaints as Argentina – Textiles, Dominican Republic – Cigarettes, and India – Quantitative Restriction. The question arises whether the WTO panel/Appellate Body helps to clarity the WTO/IMF. In the policy domain, balance of payments measures (the BOP measures) remain the main recourse for developing countries seeking to safeguard their external financial position and foreign reserves while exchange-rate targets that are under attack have shifted from Japanese Yen to Chinese Yuan. In that scenario, Brazil submitted a proposal to discuss the relationship between exchange rates and international trade in the Working Group on Trade, Dept and Finance under the auspices of the WTO.
The special exchange arrangement signed between Taiwan, under the title of ‘Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu’ and abbreviated as ‘Chinese Taipei’, and the WTO during the former’s accession process adds complexities to this subject matter. Since Taiwan is not a member of the IMF, Taiwan, as part of its accession package, signed a special exchange agreement with the WTO, annexed to the accession protocol pursuant to Article XV:6 of the GATT 1994. The role of the IMF in interpreting or monitoring the implementation of this special exchange arrangement is worth exploration.
In this context, this chapter thus aims to contribute to the old debate on the WTO/IMF relationship by accounting these new developments. Following this introduction, Section II will briefly contrast the constitutional features, institutional design and decision-making of the WTO and IMF. Section III will address jurisdictional conflicts between the WTO and IMF, while Section IV will determine the nature of the consultation requirement as set out in Article XV of the GATT 1994. Section V will examine issues arising from the special exchange arrangement, and Section VI will look at the IMF’s involvement on trade activities. Section VII concludes this chapter.
Keywords: WTO, IMF, BOP measures
JEL Classification: K33, K29, K29
Suggested Citation: Suggested Citation