Abstract: The Exchange Rate Chapter of the China-US First Phase Economic and Trade Agreement marked a temporary consensus of the two parties on the issue of exchange rate, with a return to the bilateral and multilateral channels of resolving the relevant divergence and disputes. The main content of this chapter involves exchange rate policy and its transparency, while the core obligation is to avoid manipulation of exchange rates. From a practical point of view, the relevant International Monetary Fund (IMF) rules and the relevant US domestic laws are the main benchmarks for the understanding and analysis of such an obligation.The IMF rules are comparatively restrained in finding currency manipulation anddo not provide for or authorize any sanctions. The US domestic legislations and practices, on the other hand, are quite aggressive. Not only have there already been cases of designation of “currency-manipulators” under the Omnibus Trade and Competitiveness Act of 1988, but the Trade Facilitation and Trade Enforcement Act of 2015 expressly authorized the US to impose sanctions unilaterally. Given the lack of a “hard” enforcement or dispute settlement mechanism in the First Phase Agreement, whether it can effectively control the unilateral action of the US remains to be seen. On the part of China, three things are to be done. First, to perform the obligations of the Agreement in a bona fide way with utmost good faith. Second, to further improve the RMB exchange rate formation mechanism and enhance the transparency of the relevant exchange rate policies and operations. Third, to strengthen the “bottom-line thinking” and be well prepared for the potential “currency subsidy” accusation.
Key words: First Phase Economic and Trade Agreement; Exchange Rate Chapter; currency manipulation; currency subsidy; unilateralism
The author of this article is a research fellow at CASS Institute of International Law and Deputy Director General of the CASS Bureau of International Cooperation. This article, published in Wuhan University International Law Review 2 (2020), is the preliminary result of the CASS Innovation Project “Studies on the International Economic Law Issues in the Construction of the “Belt and Road”.
