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Info Service on WTO and Trade Issues (Oct22/01) Geneva, 26 Sep (D. Ravi Kanth) -- The World Trade Organization's Director-General, Ms Ngozi Okonjo-Iweala, has raised a demand for increasing the WTO budget by CHF 15.25 million for 2023, ostensibly for the TRIPS Council negotiating processes on diagnostics and therapeutics, and controversial Secretariat reforms based on the recommendations of McKinsey & Company, as well as for pursuing non-mandated "critical emerging issues." According to the DG, the "critical emerging issues" for further negotiations include "trade and health, supply chain disruptions, trade and climate change, and trade and women's economic empowerment." The 49-page "WTO Mid-Term Budget Review" sent to members on 23 September, seen by the SUNS, contains proposals that are allegedly inconsistent with several provisions of the Marrakesh Agreement that led to the establishment of the WTO in 1995. It raises serious questions about the underlying intentions and integrity of the DG's demand for additional funds, said people, who asked not to be quoted. DIAGNOSTICS & THERAPEUTICS The DG's budget proposal on COVID diagnostics and therapeutics appears to have put paid to any decision by 17 December as mandated in the WTO's 12th ministerial conference (MC12) decision. Paragraph eight of that decision, contained in document WT/MIN (22)/30, states, "no later than six months from the date of this Decision, Members will decide on its extension (on what was agreed for vaccines) to cover the production and supply of COVID-19 diagnostics and therapeutics." However, Ms Okonjo-Iweala said that the need for a budget increase of CHF 15.25 million is also meant for "data and analysis on COVID therapeutics and diagnostics to support discussions related to MC12 decision. This work will require additional analytical resources." Effectively, the DG's proposal seems to be an indication that the negotiating processes on diagnostics and therapeutics will be guided by "additional analytical resources" and not on members to negotiate based on their proposals and available evidence, said a person, who asked not to be quoted. Further, Ms Okonjo-Iweala appears to be echoing what Switzerland, Japan, and the US have said that more evidence is needed for continuing negotiations on diagnostics and therapeutics, a demand that will certainly delay the negotiations on these two items, the person said. The DG justified her latest demand for CHF 15.25 million which would increase the WTO's overall budget to CHF 212.45 million for 2023, on several grounds that allegedly go against the Marrakesh Agreement, said people familiar with the review. NON-MANDATED ISSUES Among the functions of the WTO as per paragraph two of Article III of the Marrakesh Agreement, the trade body "shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to this Agreement. The WTO may also provide a forum for further negotiations among its members concerning their multilateral trade relations, and a framework for further implementation of the results of such negotiations, as may be decided by the Ministerial Conference." However, the DG's budget proposal intends to pursue non-mandated negotiations on digital trade, trade and health, supply chain disruptions, trade and climate change, and trade and gender among others. The DG said, "at our very successful MC12, Members gave us the mandate not only to implement the outcomes in the areas of fisheries subsidies, intellectual property, and food security, but also to continue negotiations in those and other areas and to explore critical emerging issues, such as trade and health, supply chain disruptions, trade and climate change, and trade and women's economic empowerment." Interestingly, there appears to be no multilateral mandate yet on any of these issues and their fate is expected to be decided at the 13th ministerial conference. So, for the DG to seek funds for the negotiations on these non-mandated issues is somewhat misleading and confounding to the problems being faced by members, said an analyst, who asked not to be quoted. ERASING DOHA The DG, in her mid-term budget review, emphasized the need to carry out further work, including negotiations on food security. She also briefly mentioned the mandated issues such as the permanent solution for public stockholding (PSH) programs for food security, the special safeguard mechanism (SSM) for developing countries, and the development issues seeking improvements in several special and differential treatment provisions in various WTO agreements. Yet, Ms Okonjo-Iweala remained utterly silent on how she intends to carry these negotiations forward, said people, who asked not to be quoted. Without mentioning the JSIs (Joint Statement Initiatives), she spoke about "digital trade", a non-mandated issue being pursued by the informal JSI group on digital trade. In the report, she also focused on disciplines for MSMEs (micro, small, and medium enterprises), and trade and gender, which remain only as JSIs at this juncture without multilateral approval since the WTO's eleventh ministerial conference in Buenos Aires, Argentina, in December 2017. The DG appears to have turned a blind eye to the termination of the 1998 moratorium on customs duties on electronic transmissions, said people familiar with the document. According to the MC12 decision on the e-commerce moratorium, ministers agreed to "reinvigorate the work under the Work Programme on Electronic Commerce, based on the mandate as set out in WT/L/274 and particularly in line with its development dimension. We shall intensify discussions on the moratorium and instruct the General Council to hold periodic reviews based on the reports that may be submitted by relevant WTO bodies, including on scope, definition, and impact of the moratorium on customs duties on electronic transmissions. We agree to maintain the current practice of not imposing customs duties on electronic transmissions until MC13, which should ordinarily be held by 31 December 2023. Should MC13 be delayed beyond 31 March 2024, the moratorium will expire on that date unless Ministers or the General Council take a decision to extend." Here again the DG did not disclose how she intends to intensify the negotiations on this vital issue of importance for developing countries who had suffered a huge fiscal loss to the tune of billions of dollars in lost revenue, according to the UN Conference on Trade and Development (UNCTAD) figures. The DG said the Secretariat has been loaded with more work in the areas of "intellectual property, government procurement and competition, integrated work at the intersection of trade and health, especially collaborative technical assistance." Surprisingly, these initiatives are plurilateral initiatives which are not the core agenda of the WTO, said a trade envoy, who asked not to be quoted. "McKENSEYIZATION" OF SECRETARIAT Ms Okonjo-Iweala argued that "Members are calling on the Secretariat to assist Members in their commitment to reform of the WTO, including dispute settlement - a significant and fundamental undertaking." Without revealing what has been achieved in the reform of the Secretariat based on the recommendations of the private consultancy, McKinsey & Company, and the additional costs that it had imposed on members, she argued on "the need for increased budgetary resources for 18 additional staff posts so that the Secretariat can create more value and deliver desired output to members." Recently, she selected the former chair of the Doha fisheries subsidies negotiations, Ambassador Santiago Wills of Colombia, to head the WTO's Council Division even though he lacked the requisite 15 years of experience, said a member, who asked not to be quoted. Apparently, her decision to appoint Ambassador Wills allegedly caused tremendous resentment among some industrialized countries who felt that it caused a conflict of interests, the member said. Moreover, the WTO is over-staffed, yet the DG wants to create new positions, the member said, adding that apparently, the Secretariat has absorbed 30 staff members of the Appellate Body Secretariat who practically do not have a lot to do. At a time when countries are drowning in poly-crises, especially the food, financial, and fiscal crises, the DG's demand is "imprudent and highly irresponsible to ask for more resources when there is clearly no need," said a developing country member from South America. Further, the ongoing reforms of the Secretariat have apparently brought unprecedented resentment among the Staff members, who are being kept in the dark, the member said. Although stating that "building a state-of-the-art Secretariat managerial capacity, including strategic planning and risk management, is necessary to improve the strategic allocation of resources and enable risk-aware decision-making," the DG seems to be worsening the overall working climate, said a staffer, who asked not to be quoted. At the recent meeting of the Committee on Budget, Finance and Administration, which was preceded by an informal Committee meeting, concerns were raised about the implementation of the reforms. In her response to members' concerns, the deputy director-general in charge of the Secretariat transformation process, Ms Angela Ellard of the United States, said "the focus of the transformation work is now shifting to implementing the outcomes approved so far on rewards outside promotion, procurement, risk management, promotions, mobility, recruitment, and career pathways." IMPLICATIONS FOR TRIPS The DG's mid-term review stating that "data and analysis on COVID therapeutics and diagnostics to support discussions related to MC12 decision" and that "this work will require additional analytical resources", is a cause for worry as it tends to suggest that the six month deadline to extend the TRIPS decision on vaccines to cover diagnostics and therapeutics could be undermined, the trade envoy said. The DG's review states, "high quality economic research, analysis, and data is necessary to facilitate work emerging from MC12, including on WTO reform." It says that "the following areas of work are particularly salient: * Ex-ante quantification of the effect of various trade policy scenarios with the Global Trade Model (GTM) and econometric evaluation of trade policies. This type of analysis is critically important to inform Members' trade policy decisions, including on the benefits of cooperation in specific areas of work mandated by MC12. Beyond that, this analysis is needed to better understand the forces reshaping the global trade landscape in areas such as trade and climate change, subsidies, trade decoupling, trade and investment facilitation, and trade and gender. Work on the GTM requires a very specific skill set (Computable General Equilibrium modelling). * Digital trade data and LDC services statistics to comply with the MC12 LDC services waiver. This work requires expertise in trade in services and digital trade data. * TiVA/GVC (global value chains) indicators and analytical reports to assist Members' policymaking towards more resilient and sustainable supply chains. This effort will require staff experienced in supply chains data and analysis. * Data and analysis on COVID therapeutics and diagnostics to support discussions related to MC12 decision. This work will require additional analytical resources. * Transposition of Members' tariff schedules. Accelerating this work and reducing the backlog accumulated over the years requires an experienced statistician with good knowledge of the Harmonized System. * New alternative data sources to provide real-time trade intelligence and to support research and analysis. The development and use of such sources require data scientists/engineers with solid experience in cloud computing and big data analytics." The mid-term review with its somewhat grand demands seems to be oblivious of the fact that the WTO is a member-driven, rules-based, and inter-governmental multilateral trade body. It is the members who set the agenda and rules and not the DG, whose role is limited as per the Marrakesh Agreement, said another member. According to paragraph four of Article VI of the Marrakesh Agreement, "the responsibilities of the Director- General and of the staff of the Secretariat shall be exclusively international in character. In the discharge of their duties, the Director-General and the staff of the Secretariat shall not seek or accept instructions from any government or any other authority external to the WTO. They shall refrain from any action which might adversely reflect on their position as international officials. The Members of the WTO shall respect the international character of the responsibilities of the Director-General and of the staff of the Secretariat and shall not seek to influence them in the discharge of their duties." The moot issue is when the DG seems to be pursuing somewhat brazenly an agenda of the major developed countries, including the controversial plurilateral issues, it is not clear what members must do, said a trade official, who preferred not to be quoted. Even though several countries in Africa seemingly oppose the DG's proposals, they are not able to say "NO" on grounds of gender and implications for the continent's image, the trade official said. The WTO is not a research body like the World Bank or the International Monetary Fund, and the DG's plans to confound the work based on her World Bank experience will undermine the role of the trade body, the member said. "Organizations such as UNCTAD were set up precisely to do this, i.e., provide trade data and conduct impact analysis of trade policy," said an analyst, who preferred not to be identified. "In fact, UNCTAD has a separate Division on International Trade employing more than 50 people to provide trade data and conduct trade policy impacts. It has a separate Unit on Trade and Gender as well as on Trade and Environment," the analyst said. More importantly, "duplicating the work of UNCTAD may not be cost-effective at all for the WTO," the analyst said. The analyst said because of her long "theological" association with global trade models based on neo-liberal tenets, the DG fails to acknowledge that "CGE models, as suggested, have been highly criticized in the economic literature as the model is considered a "Black Box" where the results depend heavily on the assumptions made by the modeler." +
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