ABSTRACT
This chapter discusses currency manipulation, the grand new topic in International Trade, and its economic, legal and policy ramifications. The gold standard prevented currency manipulation by fixing exchange rates against a certain value of gold. Since all currencies were fixed against gold, they were also fixed against one another. In short, world trade organization members' rights to apply permitted levels of tariff protection as well as their rights under the Antidumping, Subsidies and Countervailing Measures, and Safeguards Agreements might be violated or nullified as a result of some currency manipulations. The model of the Peterson Institute of International Economics, in turn, estimates the "ideal" exchange rate of any country vis-a-vis the United States (US) dollar. This model also compares this "ideal" exchange rate with the current exchange rate. Since the dollar is used as the basis of the calculation, the model assumes that the US currency is not misaligned.
