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WTO x PTAs -- Where to Negotiate Trade and Currency

25 Pages Posted: 18 Jun 2014  

Vera Thorstensen

São Paulo School of Economics (EESP) at Fundação Getulio Vargas (FGV)

Emerson Fernandes Marçal

Sao Paulo School of Economics - FGV; Mackenzie Presbyterian University

Lucas Ferraz

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Date Written: June 16, 2014

Abstract

The negotiations of mega agreements between the US and the Pacific countries (TPP) and between the US and the EU (TTIP) are raising the attention of experts on international trade law and economics. TPP and TTIP are proclaimed to be the designers of the rules for the XXI Century. Old trade instruments such as tariffs are said to be no more important for TTIP because tariffs are negligible among those partners but significant to for TPP. Another relevant agreement in negotiation is between the EU and Mercosul, where tariffs are the most important issue in discussion. The main purpose of this paper is to shows that tariff are important for all these agreements, not because of its nominal value, but because the impacts of exchange rate misalignments on tariffs are so significant that all concessions can be distorted by overvalued and by devaluated currencies. The article is divided into six sections: the first gives an introduction to the issue; the second explains the methodologies used to determine exchange rate misalignments and also presents some results for Brazil, US and China; the third summarizes the methodology applied to calculate the impacts of exchange rate misalignments on the level of tariff protection through an exercise of “misalignment tariffication” and examines the effects of exchange rate variations on tariffs and their consequences for the multilateral trading system; the fourth creates a methodology to estimate exchange rates against a basket of currencies (a virtual currency of the World) and a proposal to deal with persistent and significant misalignments related to trade rules. The fifth presents some estimates for the main PTAs. The conclusions are present in the last section.

Suggested Citation

Thorstensen, Vera and Marçal, Emerson Fernandes and Ferraz, Lucas, WTO x PTAs -- Where to Negotiate Trade and Currency (June 16, 2014). Fourth Biennial Global Conference of the Society of International Economic Law (SIEL) Working Paper No. 2014/09. Available at SSRN: https://ssrn.com/abstract=2451292

Vera Thorstensen (Contact Author)

São Paulo School of Economics (EESP) at Fundação Getulio Vargas (FGV) ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

HOME PAGE: http://ccgi.fgv.br/

Emerson Marçal

Sao Paulo School of Economics - FGV ( email )

Rua Itapeva 286 10 andar
São Paulo, São Paulo 01332-000
Brazil
551137993382 (Phone)

HOME PAGE: http://cemap.fgv.br/en/emerson-marcal-en

Mackenzie Presbyterian University ( email )

Rua da Consolação 920
Sala 213
01302-907 Sao Paulo, São Paulo 010302907
Brazil
55-11-21148268 (Phone)

HOME PAGE: http://www.mackenzie.br/stricto_administracao_empresas.html

Lucas Ferraz

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Rua Itapeva, 474
Sao Paulo
Brazil

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