A Story Half Told—Selective Benefit Assessment in the New US CVD Rule for Exchange Rates

The new countervailing duty proceeding rule of the United States on exchange rates aims to address currency undervaluation through a subsidy tool under the Agreement on Subsidies and Countervailing Measures. As there is no prohibition in the Agreement on Subsidies and Countervailing Measures (ASCM) making macro-economic policies off-limits from the reach of subsidy norms, exchange rates can be subject to countervailing duty proceedings. However, there are specific requirements to be met under the ASCM and World Trade Organization jurisprudence. Most notably, the new countervailing duty proceeding rule arguably fails to meet the ‘benefit’ analysis requirements. It takes into account the effect that negatively weighs on foreign exporters subject to a countervailing duty proceeding while ignoring the one that positively weighs. This skewed benefit analysis of selective nature is difficult to sustain under the ASCM and its jurisprudence. A more detailed and thorough benefit analysis is needed to make this new scheme work in a World Trade Organization (WTO)–consistent manner. The new countervailing duty rule showcases structural problems addressing macro-economic policies through a subsidy framework.