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Info Service on WTO and Trade Issues (Nov22/05) Geneva, 9 Nov (D. Ravi Kanth) — The much-debated proposal of the World Trade Organization’s Director- General, Ms Ngozi Okonjo-Iweala, to increase the WTO’s budget by 7.7% from CHF 197.2 million to CHF 212.45 million in 2023 has apparently made little progress in the face of intense quizzing by WTO members on 8 November, said people familiar with the discussions. The news from an informal meeting of the WTO’s Committee on Budget, Finance, and Administration (CBFA) on 8 November could be pretty discouraging for the DG, as she returns from the 27th meeting of the Conference of Parties (COP 27) to the United Nations Framework Convention on Climate Change (UNFCCC) in Sharm-el- Sheikh, Egypt, on 9 November, said people after attending the CBFA meeting. The CBFA meeting initially started as a regular meeting on 8 November, but soon switched into informal mode only to discuss the DG’s budget proposal. Apparently, the major industrialized countries stuck to their earlier positions, challenging the need for the WTO budget hike in the face of the worsening cost-of-living crisis all around the world, said a person, who asked not to be quoted. The statements made by both the industrialized countries as well as the developing countries at the informal CBFA meeting against the DG’s budget proposal apparently will not go into the record. However, the tone and tenor of the questions raised against the DG’s proposal indicated a lack of progress due to the difficult headwinds being faced by countries around the world. As reported in SUNS #9679 dated 1 November 2022, several members including the Netherlands, Germany, Sweden, the United States, India, South Africa, Sri Lanka, and Djibouti among others challenged the DG’s proposal at the last CBFA meeting on 5 October. Many countries indicated their inability to approve the 7.7% increase in the WTO budget for 2023, as sought by the DG, due to the current poly-crises arising from a combination of economic and financial headwinds, with spiraling inflation having exacerbated the cost-of-living crisis across countries. Yet, the DG seems to have pressured key members to agree to her proposal by tabling it for discussion at the CBFA meeting on 8 November. Unsurprisingly, there was little change in the members’ responses to the DG’s proposal. Several members are understood to have echoed their concerns about the budget hike at the informal CBFA meeting, despite the Secretariat’s claims of inflationary pressures on its overall activities, said a person who asked not to be identified. 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 will 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. The DG is currently making a “Herculean” effort with a big delegation of WTO officials to include trade in the climate change text at the ongoing COP 27 in Sharm-el-Sheikh, Egypt. Ironically, if her budget proposal is not able to make much progress at the WTO, it may be more difficult to include trade and climate change in the COP 27 documents, said a trade envoy, who preferred not to be quoted. “FACE-SAVING” PROPOSAL It appears that the WTO Secretariat made a proposal for a minor budget hike to cope with the inflation-induced hikes in the cost of the WTO’s activities in Switzerland, said a participant. Even that proposal apparently failed to garner any support at the meeting on 8 November, the participant said. 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 the 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. The WTO budget hike will disproportionately affect the poorest countries because of the massive depreciation of their currencies against the US dollar. FINANCIAL REGULATIONS After almost three years, WTO members apparently adopted the financial regulations, including 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 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 expenditures 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, which will record it as miscellaneous income.” FISHERIES TRUST FUND On another issue concerning the notification of the establishment of a fisheries funding mechanism, or trust fund, members raised several questions on the terms and conditions for operationalizing the trust fund. In a restricted proposal (WT/BFA/INF/15) circulated ahead of the CBFA meeting, the WTO Secretariat spelt out the guiding principles for operating procedures of the proposed trust fund. It appears that India and several other countries apparently emphasized that the fisheries funding mechanism should not impose any conditionalities for availing of the fund. In annex three of the restricted proposal, the WTO Secretariat explained the following guiding principles for operating procedures of the proposed trust fund: WTO Fisheries Funding Mechanism Guiding Principles for Operating Procedures Structure * Steering Committee composed of partner organization representatives, and government official representatives of donor Members, and developing countries, including LDC, WTO Members. * Fund Secretariat composed of professional staff with subject matter expertise (including relating to fisheries), and fund administration and grant-making expertise, plus administrative support staff. Fund Secretariat to be supervised by Steering Committee, along with general oversight by Director of the WTO Rules Division. * Fund Secretariat located in WTO and bound by legal and fiduciary rules of WTO. Composition of Steering Committee, Observership * Initially, Steering Committee to be composed of 18 members. * Steering Committee to be established and composed as soon as possible after Fund is first open to receive contributions. * Partner organizations (WTO, FAO, World Bank, IFAD) each to nominate two Steering Committee members, one a senior official of the organization and the other a technical expert. * Each donor Member contributing funds in, or formally pledging funds for, any given calendar year to nominate one government official, up to a total of six, with relevant expertise (in fisheries management and/or project development or management) as Steering Committee members. If more than six donor Members, their officials to serve as Steering Committee members on rotational basis, with length of terms and methods of rotation to be determined by collective decision of donor Members. * The group of eligible developing country Members and the group of eligible LDC Members each to nominate two government officials (for total of four) with relevant expertise (in fisheries management and/or project development or management) as Steering Committee members, to serve on rotational basis, with length of terms and methods of rotation to be determined by the two WTO Member groups. * Non-represented donor Members, eligible developing country and LDC Members that have submitted an application, or that are benefiting from a project, to be able to attend Steering Committee meetings as observers, details to be established by the Steering Committee. Operation of Steering Committee (non-exhaustive) * Steering Committee to meet in person at least twice per year, with additional meetings as needed, mainly to be conducted in virtual mode. Steering Committee to establish quorum rules. * Steering Committee normally to take decisions by consensus. * Steering Committee to elect a Chair and Vice Chair from among its members, for fixed terms of office, duration to be decided by the Steering Committee. * Steering Committee to set/prepare Fund strategy periodically, and establish annual work plans. * Steering Committee to establish Fund Operating Procedures, including eligibility and prioritization criteria for reviewing and approving applications for funding, approval procedures, conflict of interest rules, limits on duration of funded activities, etc. * Steering Committee to establish criteria and procedures for considering and approving applications made by or in respect of more than one WTO Member. * Steering Committee to take decisions on operation of Fund Secretariat, and on approval of applications for funding based on agreed eligibility and prioritization criteria. * Steering Committee to establish indicators, baselines and targets, data sources, etc. (logframe) to assist the Fund Secretariat in planning, monitoring and reporting on results and outcomes achieved (performance also subject to periodic external evaluation – see “Accountability to WTO Membership and partner organizations” below). * Steering Committee to maintain regular contact with the Committee on Fisheries Subsidies regarding the Fund’s operations. (Could be done through a Working Group of the Committee on Fisheries Subsidies, if Members decide to establish such a body.) * All members of Steering Committee, and observers, to provide information on support provided or received in respect of purposes similar to those supported by Fund. Role of Fund Secretariat (non-exhaustive) * Day-to-day operations of Fund in implementing strategy and work plans established by Steering Committee (inter alia, administration, record-keeping, communications, monitoring and evaluation). * Reporting to/supervised by Steering Committee; also under general oversight of Director of WTO Rules Division who will maintain liaison with Steering Committee. * Drafting for approval by Steering Committee of application materials (e.g., formats for expressions of interest, grant application formats). * Advice and assistance to applicants, including with their needs assessments and identification of gaps for which assistance from Fund is sought, and with their provision of information on existing fisheries assistance received or available/being offered. * Compiling and distribution of information on support provided by partner organizations, donors and other sources for purposes similar to those supported by the Fund. * First review of applications for funding; making recommendations on applications to Steering Committee. * Approving payments for projects and other approved activities. * Analysis of and reporting to Steering Committee on performance of funded activities and results and outcomes achieved, based on the logframe established by Steering Committee (performance also subject to periodic external evaluation – see “Accountability to WTO Membership and partner organizations” below). * Contributing as needed to periodic reporting to WTO Committee on Budget, Finance and Administration, and drafting Steering Committee reports to Committee on Fisheries Subsidies, and relevant bodies of other partner organizations; other relevant communications decided by Steering Committee. * Preparation of annual work plans including estimated budgets for consideration and approval by Steering Committee, and provision of inputs to Steering Committee on strategy. * Travel by Fund Secretariat staff to be subject to approval by Steering Committee, based on relevance to work of the Fund, and in accordance with WTO travel policy applicable to WTO Secretariat staff, and subject to available budget. Eligibility and prioritization criteria for applications for funding * Applications to be reviewed and considered in order received and on a non-discriminatory basis based on objective criteria applied equally to all eligible applicants (no tying criteria or specific preferences of any donor, such as regional or substantive, to be taken into consideration). * Steering Committee to determine whether and on what basis to set periodic application deadlines. * Eligible applicants to be government agencies or governmental bodies of eligible WTO Members with specific responsibility for provision of fisheries subsidies or for fisheries operations and management. * Applications reviewed based on concrete proposed actions to create internal linkages (administrative, information, decision-making) within governments between subsidizing and fisheries authorities, as needed to implement the Agreement on Fisheries Subsidies, including for generation, recording and reporting of necessary data and information; and otherwise for integrating work of the different authorities as needed to implement the Agreement. Receipt of funding to have no legal implications regarding compliance with any provision of the Agreement. * No funding to be provided for tangible assets. * Beneficiaries’ contribution of own funds/resources to be considered. * Additional criteria may be agreed by the Steering Committee. Accountability to WTO Membership and partner organizations * Annual reporting to WTO Committee on Budget, Finance and Administration; annual reporting on operations to Committee on Fisheries Subsidies, with specific content to be established by Steering Committee; and reporting to relevant bodies identified by each of the other partner organizations. * Reporting to cover financial operations as well as programme activities and performance, the latter based on application of performance criteria and logical framework to be developed by Steering Committee. * To avoid duplicative work and administrative cost, Steering Committee to develop harmonized, uniform reporting format to be used with all partner organizations including WTO. * Maintenance of liaison between Committee and Steering Committee, for exchange of questions and answers, and provision of feedback and suggestions to the Steering Committee, regarding the Fund’s operations. (Could be done through a Working Group of the Committee on Fisheries Subsidies, if Members decide to establish such a body.) Contributions * To be received in accordance with WTO financial rules, regulations and practices. * To be provided without restriction or designation as to particular use (type of projects, beneficiary Members or regions, programme versus operating costs, etc.). * If received in a currency other than Swiss francs, any currency conversion in accordance with applicable WTO practice. * Any interest earned to be credited to the Fund. Expenditures * Contributions to be spent, without donor-imposed restrictions, for the budgeted costs of the Fund: Fund Secretariat staff costs, administration of the Fund (including costs for the operation of the Steering Committee), and programme activities (PGs, PPGs). * Amounts committed and spent on programme plus operational costs including staffing not to exceed the total resources available in the Fund. External financial and performance review/audit * The Fund to be subject to periodic external financial audit in accordance with applicable WTO regulations, rules and practices. * The Fund to be subject to periodic external evaluation to assess the Fund’s results, outcomes and wider impact, in accordance with applicable WTO regulations, rules and practices and OECD DAC criteria. Termination and return of remaining funds * Any unexpended contributions remaining in Fund at time of its termination to be returned to donors promptly, in proportion to their contributions. Arbitration * Operating Procedures to contain an arbitration clause, specifying forum and other details for arbitration of any dispute that might arise in respect of interpretation of the Operating Procedures. In short, it remains to be seen whether the DG will continue to persist with her budget proposal despite the rather “chilly” response from the members. +
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