TWN Info Service on WTO and Trade Issues (Jul22/05)
14 July 2022
Third World Network

Trade: WTO DG faces scrutiny for availing of controversial Trust Funds
Published in SUNS #9615 dated 14 July 2022

Geneva, 13 Jul (D. Ravi Kanth) -- The WTO Director-General, Ms Ngozi Okonjo-Iweala, faces the prospect of enhanced transparency requirements for availing of controversial Trust Funds that could surge following the WTO's 12th ministerial conference (MC12) that includes a partial agreement on fisheries subsidies, new areas such as WTO reforms, and attempts to legitimize informal plurilateral initiatives on digital trade, investment facilitation, disciplines on MSMEs, trade and gender, and environment.

To ensure a thorough scrutiny of the WTO Trust Funds, India and the United States have circulated a revised restricted proposal (WT/BFA/W/564/Rev.1) that "takes into consideration the views expressed by Members during the discussion on the proposal at CBFA and the constructive suggestions put forward by Members to reach possible landing zones."

The revised joint proposal by India and the US is expected to come up for discussion at a meeting of the Committee on Budget, Finance and Administration (CBFA) on 15 July.

According to the joint proposal, the "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 prior consent of the Committee."

In effect, the proponents are seeking to ensure that the activities undertaken as part of voluntary contributions do not pose any additional costs.

The proponents argue 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 proponents maintain that "the standard overhead rate can be reduced when implementing partners are being used and when defined in the agreement signed with the donor."

Also, "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."

Further, they said, "monies accepted in respect of which no purpose is specified shall be treated as miscellaneous income and reported as "gifts" in the accounts of the financial period."

According to the proposal, even a staff Member of the Secretariat, who receives an honorarium "in his/her official capacity" during the implementation of activities funded by Trust Funds, shall remit "to the Organization and be credited to the WTO Staff Assistance Fund."

The proponents made it clear that "unless otherwise provided, such voluntary contributions, gifts or donations shall be administered in accordance with the present Financial Regulations."

As part of the "WTO Secretariat's Guidelines for the Receipt and Notification of Voluntary Contributions from Members and Observers," India and the US have proposed several guidelines under Financial Regulation 19.

They include:

1. In keeping with a commitment to streamline the procedures for the notification, approval, implementation and reporting on voluntary fund contributions, the Director-General has authorized the following guidelines which are aimed at improving transparency and consistency in the handling of all voluntary funds. These procedures shall be applied in strict conformity with Financial Regulation 19.

2. In the case of formal pledges made for the future establishment of a Trust Fund or Trust Funds, these pledges will be notified to members for transparency purposes. Once an actual Fund is proposed in furtherance of the pledge, it will be notified as such, in accordance with the guidelines below.

3. All voluntary funds will be submitted to the Director-General for his/her consideration and may be accepted where he/she determines that "... the purposes for which the contributions are made are consistent with the policies, aims and activities of the WTO".

4. In considering the proffered voluntary contribution, the Director-General will receive the Administration and General Services Division's (AGSD) determination whether the contribution would involve additional direct costs to the regular budget of the WTO or financial liabilities for the Organization, as defined under Financial Regulation 19.

5. When the Director-General assesses the proffered funding positively, and upon receipt of the AGSD's assessment, a notification will be transmitted to the Committee on Budget, Finance and Administration (CBFA) for consideration in the following manner:

* Where the voluntary contributions/fund involves no additional direct costs to the regular budget of the WTO or financial liabilities for the Organization, the CBFA will be notified by the Director-General prior to the receipt of such voluntary contributions, for information and discussion at its regular meetings. This will be done by including such notifications as an agenda item in the upcoming CBFA meeting.

* Where the voluntary contributions/fund involves direct costs to the regular budget of the WTO or financial liabilities for the Organization, the notification will be submitted for consideration and consent by the CBFA by the Director-General. This will be done by including such notifications as an agenda item in the upcoming CBFA meeting and documents related to such agenda item shall be circulated in accordance with the agreed rules of procedure for distributing CBFA meeting documents.

6. The Director-General's notification to the CBFA of all trust funds arising under voluntary fund arrangements shall contain the following information and supporting documentation thereof:

* The objectives of the trust fund;

* The expected beneficiaries (if specified);

* The implementation strategy;

* The expected deliverables;

* The amount of the funding dedicated to the trust fund;

* The expected duration;

* The implementation partners identified;

* The Secretariat focal points for the trust fund; and

* The Governing Body.

Earlier, the US had criticized the manner in which trust funds were being raised and used by the Director-General, said a person, who asked not to be quoted.

The US has little control over the trust funds as other WTO members such as China, Japan, members of the European Union, Norway, Australia, Canada, and New Zealand among others contribute to the trust funds, the person said.

In a restricted proposal submitted to the WTO's CBFA on 4 November 2019, 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 2019, the 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 posed by several unnamed members, the US submitted another list of questions to the WTO on 7 November 2019 "relating to the coordination, governance and administrative responsibilities of multi-donor voluntary contribution trust funds".

In a restricted document (WT/BFA/INF/6) of six pages, the US asked "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?"

It remains to be seen whether the proposal by India and the US will be accepted by consensus or will be subjected to more changes, said people, who preferred not to be quoted. +