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TWN Info Service
on WTO and Trade Issues (Nov22/01) Geneva, 31 Oct (D. Ravi Kanth) — The World Trade Organization’s Director-General, Ms Ngozi Okonjo-Iweala, seems determined to “double down” on her proposal to increase the WTO’s budget by 7.7% from CHF 197.2 million to CHF 212.45 million in 2023, despite an apparently “frosty” response received from WTO members early this month, said people familiar with the development. In an air-gram sent to members ahead of a meeting of the WTO’s Committee on Budget, Finance, and Administration (CBFA) on 8 November, seen by the SUNS, the DG has scheduled an “informal” discussion on her budget proposal despite the setback she suffered early this month. Surprisingly, she is not proposing a discussion on this controversial item in the formal meeting that seeks approval for an increase of CHF 15.25 million to the WTO budget for 2023. Instead, she wants to discuss the item in an informal mode, as it won’t be included in the minutes of the CBFA meeting, said a person, who preferred not to be quoted. At the last meeting of the CBFA held on 5 October, several members including the Netherlands, Germany, Sweden, the United States, India, South Africa, Sri Lanka, and Djibouti among others not only challenged the DG’s proposal but also indicated that they are not in a position to approve an increase in the budget because of the current economic and financial crisis amidst spiraling inflation, the person said. Even though the budgetary increase of CHF 15.25 million may not seem to be a big amount by normal standards, the point is that if such an increase is accepted at a time when the organization seems to be awash with unnecessary and profligate spending, it would be imprudent for members to consider the DG’s request, said a trade official, who preferred not to be quoted. Against the backdrop of growing concern over the monies spent for the DG’s apparently “extravagant” WTO Secretariat reform program, which is being overseen by the private management consulting firm McKinsey & Company, it remains to be seen how the members would respond to the DG’s allegedly increasing pressure tactics, the official said. It appears that the services of McKinsey have cost around CHF 1 million, though this figure could not be officially confirmed. As reported in SUNS #9662 dated 7 October 2022, on her part, the DG had offered a detailed account of the need for the extra monies but members found it difficult to accept her justification at the last CBFA meeting, said several people, who took part in the meeting. The DG appears to have said that while it is true that countries are being exposed to serious inflationary shocks, the WTO Secretariat is also facing inflationary pressures because of the increase in energy costs in Switzerland and several other areas of services, said people familiar with the discussions, who asked not to be quoted. Only Singapore and Nigeria had supported the DG’s proposal, while several industrialized countries – the Netherlands, Germany, Sweden, and the United States – as well as India, and several other countries had raised serious questions over the DG’s proposal. The DG’s report has previously mentioned “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.” The underlying rationale for additional staff was challenged at the CBFA meeting, at a time when the Secretariat has absorbed around 30 staff members from the defunct Appellate Body who are apparently being under-utilized in the divisions they were allocated to, said people familiar with the discussions. It is not clear what the US and the EU member states, which opposed the hike in the budget for 2023, will do at the upcoming CBFA meeting. More than a week ago, the DG held meetings in Washington with the US Trade Representative (USTR) Ambassador Katherine Tai and the EU trade commissioner, Mr Valdis Dombrovskis, to discuss WTO reforms. It is not clear whether the DG broached the issue of the “hardline” stance adopted by these two major budget contributors, said a person familiar with the meeting. The EU contributes close to 30 percent to the WTO’s annual budget, while the US also makes a significant contribution. However, the WTO budget hike will disproportionately affect the poorest countries because of the massive depreciation of their currencies against the US dollar, according to figures provided by the South Centre. WTO SECRETARIAT REFORM According to the schedule for the CBFA meeting on 8 November, the WTO’s deputy director-general, Ms Angela Ellard, is expected to provide an oral report on the ongoing WTO Secretariat reform that is embroiled in various controversies, said people, who asked not to be quoted. More disturbingly, members seem concerned with the DG’s travels and the growing travel budget, which is eating into the budgetary funds. The DG apparently wants to make her presence felt at each and every meeting in order to “hobnob” with leaders, while seemingly paying little attention to servicing the negotiations at the Centre William Rappard, which serves as the headquarters for the WTO, said a staffer, who asked not to be identified. As part of the WTO Secretariat transformation, the DG wants to create a new division called the Planning & Strategy Unit or a possible Regional & Country Support Unit merely to service her visits to various countries, the staffer said. At a time when the WTO staff is apparently being under-utilized, including some five directors in her own Director-General’s Office (apparently, the DG’s personal assistant has been appointed as the director to look into gender-related issues in the Director-General’s Office), the creation of a new unit seems like a “white elephant”. FINANCIAL REGULATIONS At the upcoming CBFA meeting, the discussion on financial regulations could generate sharp debate, particularly on the controversial Financial Regulation 19 dealing with the administration and management of trust funds. Previously, the former WTO DG, Mr Roberto Azevedo, had faced severe criticism when he accepted trust funds for investment facilitation without seeking formal approval from the WTO members. In an attempt to bring more transparency into the management of trust funds, the US and India tabled a proposal, which was not agreed to by several European countries. Against this backdrop, the changes made in Financial Regulation 19 have been submitted for approval at the upcoming CBFA meeting. The proposed language on Financial Regulation 19 states that “voluntary contributions, gifts or donations from WTO Members and Observers may be accepted by the Director-General provided that the purposes for which the contributions are made are consistent with the policies, aims and activities of the WTO, and provided that the acceptance of such contributions which involve additional direct costs* to the regular budget of the WTO or financial liability for the Organization shall require the prior consent of the Committee, in line with the guidelines laid out in Annex C.” Further, it states that: “Voluntary contributions, gifts or donations from Non-Governmental Donors are subject to the additional guidelines laid out in Annex D.” The amended Financial Regulation 19 says that “Monies accepted for purposes specified by the donor shall be treated as trust funds. A standard overhead fee of up to 13% may be charged on direct expenditure incurred by trust funds to reflect supporting services provided by the Secretariat. The standard overhead rate can be reduced when implementing partners are being used and when defined in the agreement signed with the donor. The Programme Support Fund collects the overhead fees from all trust funds and pays expenditure incurred to support the trust fund’s activities. The Programme Support Fund also releases a fee representing 10% of its expenditure to the WTO Secretariat, that will record it as miscellaneous income.” Other elements of Financial Regulation 19 include the following:
As per the amended Financial Regulation 19, “additional direct costs in this context include salaries, health insurance contributions, pension contributions and travel costs of staff members who work either fully or partially i.e. [greater than] 20% of their normal hours on matters related to a proposed new trust fund charged to the WTO regular budget. Additional direct costs are to be clearly identified in any trust fund proposal submitted in conjunction with an offer of a voluntary contribution for the purpose of establishing a new trust fund. It is the responsibility of the contributor to clearly and transparently identify the estimated additional direct costs involved in implementing the fund’s activities. Trust fund implementation activities include training, projects etc., aimed to achieve objectives of the trust fund. Indirect costs to the regular budget of the WTO arising from voluntary contributions shall be charged to the Programme Support Fund.” In short, the upcoming CBFA meeting on 8 November will likely indicate whether the members are ready to approve the WTO budget hike and other “extravagant” changes that the DG wants to make in the Secretariat. +
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