TWN Info Service on WTO and Trade Issues (Nov19/11)
18 November 2019
Third World Network

US blocks revised WTO budget proposal for 2020-2021
Published in SUNS #9019 dated 14 November 2019

Geneva, 13 Nov (D. Ravi Kanth) – The United States has blocked a revised budget proposal for $180 million for the years 2020 and 2021 submitted by the World Trade Organization director-general.

The US blocked the budget proposal over alleged irregularities in the use of funds for the Appellate Body, the voluntary contribution trust funds, and lack of consistent governance, trade officials told the SUNS.

At a meeting of the WTO’s budget committee on 12 November, the US said that it cannot approve the director- general Roberto Azevedo’s revised budget proposal for the years 2020 and 2021 on several grounds.

The reasons cited by the US include the outlay for the Appellate Body (AB) for the next two years, the use of trust funds for non-mandated issues in a non-transparent manner, and the lack of horizontal coordination among the WTO bodies, including the controversial travel expenditure incurred by senior WTO officials for attending meetings on non-mandated issues outside Geneva, said a trade official, who asked not to be quoted.

The US also questioned the Secretariat on the funds used for the Appellate Body until now, as well as the latest outlay for the AB’s upkeep during the next two years, said another trade official, who preferred not to be identified.

The US blockage of the WTO budget proposal, if not resolved by 12 December when the General Council meets for its year-end meeting, could effectively make the Appellate Body dysfunctional, and also pose problems for the functioning of the trade body next year, said several trade diplomats, who asked not to be quoted.

The US had already blocked a proposal from 116 members for launching an expeditious selection process for filling six vacancies at the AB on “systemic” considerations.

The AB will become dysfunctional from 11 December 2019 when it will be reduced to one member from its requisite strength of seven.

Effectively, an AB panel of three members cannot be constituted if the US blockage persists, said a trade official, who asked not to be quoted.

Prior to the US decision to block the biennial budget for the next two years, several “individual members” have posed numerous questions at the WTO’s committee on budget, finance, and administration (CBFA) about the revised budget proposal circulated by Azevedo on 1 November.

In a restricted proposal submitted to the WTO’s CBFA on 4 November, the unnamed individual members sought clarifications on various issues concerning the revised budgetary proposal for 2020 and 2021.

In the six pages of questions contained in the restricted document (WT/BFA/INF/5) that was circulated on 4 November, members sought to know whether there is any “correlation between the basis of budgetary allocation and the current work being handled in areas listed, including facilitating negotiations, administering agreed WTO rules, conducting research etc”.

Further, members asked “what are the parameters for which the budget has been allocated by Output Chapter, e.g. the details of projected expenditure under the listed areas?”

Members asked the WTO secretariat to provide information on the travel budget, including the travel expenses incurred for meetings outside Geneva.

Following these informal questions by several unnamed countries, the US submitted another list of questions to the WTO on 7 November “relating to the coordination, governance and administrative responsibilities of multi-donor voluntary contribution trust funds”.

In the restricted document of six pages (WT/BFA/INF/6) circulated on 7 November, the US sought to know, among others:

i. “What is the policy or process currently in place within the WTO Secretariat to ensure full coordination across the institution in establishing voluntary contribution trust funds?”;

ii. “When individual divisions undertake initiatives to establish a trust fund, or to enter into a partnership with an external organization on behalf of the WTO for the purpose of establishing a trust fund, what internal process provides for transparency to Members about these efforts at the initiation stage, and also ensures that the organization as a whole understands and agrees with commitments undertaken by any particular division?”;

iii. “Why do recent voluntary contribution trust funds, established for the purposes of providing technical assistance or capacity building, not fall under the Institute for Training and Technical Cooperation?”;

iv. “What entity is ultimately accountable for the activities, decisions and outcomes of these trust funds? Secretariat staff, donor agencies, some other entities among others?”.

The US also circulated a list of questions for the consideration of the CBFA on the Appellate Body Operating Fund in 2019; “which part of the WTO budget funded previous arbitration proceedings under DSU (Dispute Settlement Understanding) Article 25”; and “what was being done with Appellate Body Members’ fees for 2018 that had not been expended due to the departure of Appellate Body Members”.

Lastly, several unnamed members raised questions on 7 November on “enhancing strategic planning and horizontal coordination in the WTO”.

The restricted one-page proposal (WT/BFA/INF/7) circulated on 7 November asked the WTO Secretariat to respond in 2020 on the following:

A. Enhancing Strategic Planning and Horizontal Coordination in the WTO

a. It is important that the WTO’s resources are aligned and that strategies are developed to support the WTO’s goals. However, there has been some perceived gaps, and questions about reallocating resources, reducing redundancies, and promoting efficiency gains and innovation. In this context, the Secretariat is requested to provide information on:

i. the existing mechanisms for strategic planning and horizontal coordination amongst divisions in the WTO;

ii. known gaps, if any, in terms of the WTO’s ability to effectively conduct strategic planning and horizontal coordination;

iii. historical discussions and proposals in the WTO to put in place mechanisms for strategic planning and horizontal coordination; and

iv. best practices for strategic planning and horizontal coordination in other International Organisations, e.g. role of Chief Operating Officer/Chief Strategy Officer.

b. Based on A (a) i-iv, the Secretariat is requested to suggest approaches to enhance strategic planning and horizontal coordination in the WTO.

At the CBFA meeting on 12 November, several members such as China, Germany, Sweden, France, and Spain among others disagreed with the US on its questions concerning the arbitration process under Article 25.

They said arbitration under Article 25 is important for members to resolve trade disputes, said a trade official, who asked not to be quoted.

The WTO Secretariat provided detailed answers to the questions raised by the US and other members, saying it had introduced result-based management in 2012 to guide the implementation of its technical assistance programme.

The WTO said “voluntary funds are accepted by the Director General for the purposes specified by the donor.”

In a note circulated by the WTO Secretariat on 18 March, a senior official in charge of administration and general services division had contended that the director-general can accept voluntary funds that involve “no additional financial liability” to the organization.

However, the director-general’s discretion to accept voluntary funds was curtailed as part of financial regulations early this year, said a trade official, who asked not to be quoted.

More importantly, the answers provided by the WTO seemed like an attempt at “misdirecting” members from the alleged irregularities than offering credible reasons for the irregularities, said a trade official, who preferred to remain anonymous.

In 2017, the director-general signed with one major donor for receiving funds for technical assistance programs centering on investment facilitation even though it was not agreed by WTO members.

Several members had raised sharp concerns about the manner in which senior WTO officials, including the director-general, are constantly traveling on questionable grounds for meetings that had little relevance to the mandated issues.

For example, a director of an important division had apparently attended a meeting on trade and gender in Dubai to explain about the WTO’s stand, even though trade and gender is not a mandated issue, said a trade official, who asked not to be quoted.