Research On The Legality Of Currency Subsidy Under WTO Law

Over the past two decades of economic and trade exchanges,the exchange rate issue has been one of the focal controversies between China and the U.S.,especially the so-called “currency undervaluation subsidy” even triggered international trade disputes.Although both this exchange rate issue and the subsidy issue are common internationally,the combination of the two is uncommon.The reason is that the exchange rate arrangement is under the exclusive jurisdiction of the International Monetary Fund,while the subsidy issue is an international trade issue in the charge of the World Trade Organization.However,the U.S.is bent on suggesting that the RMB exchange rate is intentionally undervalued and asserting that such results in a subsidy.Consequently,the according procedural as well as substantive aspects have been hotly debated.Specifically,there are two main focuses of this controversy: first,whether the so-called currency undervaluation subsidy issue should be governed by the World Trade Organization;second,whether the so-called currency undervaluation matches the substantive issue of subsidy.Regarding these puzzles,this paper contends that there is no undervaluation of RMB exchange rate and the allegation of RMB undervaluation subsidy is not valid;the issue of the so-called currency undervaluation subsidy should be under the jurisdiction of International Monetary Fund,but World Trade Organization still has a say on the subsidy part while directing the exchange rate dispute to International Monetary Fund according to its own regulations.In addition,the paper argues that the U.S.allegation and its new rules(Modification of Regulations Regarding Benefit and Specificity in Countervailing Duty)on "benefits" and "specificity" are at odds with the SCM Agreement.Finally,this paper gives the corresponding countermeasures based on the legal perspective:(1)In terms of international law and justice,study on Modification of Regulations Regarding Benefit and Specificity in Countervailing Duty of the U.S.,grasp the essence of this controversy,and tackle such challenges positively under the Dispute Settlement Body of World Trade Organization.(2)In view of international law legislation,respond to the possibility mentioned: adhere to the jurisdiction of International Monetary Fund over exchange rate issues and the jurisdiction of World Trade Organization over subsidy element issues respectively.(3)In the light of domestic laws and regulations,strengthen the study of the correlation between exchange rate and the subsidies.At the same time,emphasize the construction of China’s foreign-related rule of law area,and promote the RMB towards internationalization,so as to fundamentally oppose U.S.trade protectionist actions such as these.