The Legal Regulation On Exchange Rate Subsidy Problem

1977IMF Executive Board passed a resolution to avoid manipulating exchangerates or the international monetary system. The resolution sets out three principles, inwhich the first principles: Fund the obligation to avoid manipulating exchange rates tomanipulate the international monetary system, to hinder effective adjustment of theother member states of the international balance of payments, or unfairly achievedsuperior to other member states competitive position. Meanwhile, according to theGATT (hereinafter referred to as GATT) Paragraph Four of Article XV: ContractingParties shall not hinder the realization of the intent of the provisions of this Agreementforeign exchange operations, nor may trade action, impede international the intent ofthe provisions of the monetary Fund agreed. The two international agreements,Member States are obliged to comply with the agreement to achieve an unfaircompetitive advantage, not through the manipulation of foreign exchange caused bythe disruption of international financial trade order obligations.Based on the two agreements, the Western countries continue to put forward theRMB exchange rate is unreasonably underestimated, and then accuse China ofviolating the provisions of the relevant provisions of the IMF agreement and therelevant WTO agreements, the RMB exchange rate issue is linked with the illegalexport subsidies, accusingChinese exchange rate subsidies, and adopted a series ofmeasures intended to encourage China to change the “unreasonable” exchange ratepolicy, otherwise sanctions will China export products. Which the U.S. Congress in2007introduced three bills on the issue of RMB, accused undervalued currencycontrary to the provisions of the relevant WTO agreements, constitute a subsidy forChinese exports, and ask the U.S. government to take unilateral or multilateral trademeasures to address RMB exchange rate issue. October11,2011, the U.S. Senatepassed the “2011currency exchange rate surveillance reform bill, and to further theRMB exchange rate issue pushed to the cusp.Allegations against Western countries, should first determine the jurisdiction ofthe RMB exchange rate problem resolved under the existing international economiclandscape. RMB exchange rate issue is governed by the IMF or to solve importantprerequisite for science to solve this problem in the WTO framework. This requires aclear relationship of both the IMF and the WTO agreements in the processing of theRMB exchange rate issue. Then further measure of the IMF agreements and WTOrules, to determine both the attribution of jurisdiction on this issue of the RMBexchange rate arrangements and their obligations.Western countries will take measures against China’s exchange rate subsidies, weshould be bound by the WTO Subsidies and Countervailing Measures Agreement(hereinafter referred to as the SCM Agreement). Recently proposed a series of billsaccused the RMB undervaluation violate relevant WTO agreements, except inaccordance with national countervailing duty law requires the U.S. government by theallegations of the SCM Agreement undervalued currency constitutes a prohibitedexport subsidies on Chinese products. In this paper, through the study SCM Agreement provisions identified constituent elements of the subsidies, China’sexchange rate arrangements to inspect whether formation of subsidies on the export ofChinese products.U.S. government continue to exert pressure in China RMB exchange rate to constitutesubsidies arguments, so we have to think that if the United States to take further measures tosubmit this issue to the WTO or take countervailing measures in accordance with their domesticcountervailing duty law, how will we respond to thisbecome the front of urgent research to solvemajor problems. I on the basis of studies of a series of bills proposed by the United States againstChina’s exchange rate, combined with the constituent elements of the analysis of the SCMAgreement on Subsidies and fully demonstrated the likelihood of success of our future may besubjected to countervailing measures and related litigation, and on this basis, a practicalcountermeasures and suggestions to improve and reform of China’s current exchange rate regime.