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Info Service on WTO and Trade Issues (Jun24/06) Geneva, 12 Jun (D. Ravi Kanth) — Discussions on “potential long-term structural reforms that will best serve the interests of the WTO (World Trade Organization) in the future” concerning budget- and pension-related issues in the rules-based, member-driven trade body appear to be facing multiple systemic crises, said people familiar with the development. With the world’s largest trading nation having seemingly plunged into “friend-shoring” to create new forms of trade and supply chain resiliency, according to Financial Times columnist Rana Foroohar on 10 June, and with the multilateral trade negotiations in agriculture, fisheries subsidies, and other issues facing numerous hurdles, all focus appears to be shifting to the issues concerning “structural reforms” of the WTO’s budget, finance, and administration, particularly on pension reforms, said a person who asked not to be quoted. In a restricted document issued following an informal meeting of the WTO’s Committee on Budget, Finance and Administration (CBFA) on 10 June, it is suggested that the underlying purpose is “to consolidate an understanding of what concrete and actionable outcomes a working process would accomplish and what elements need to be included for Members to proceed.” According to the document, seen by the SUNS, it is further stated that “following the informal meeting, the Chair (Ambassador Jose R Sanchez-Fung of the Dominican Republic) will refine the approach and prepare a short document including a draft decision to be considered by the Committee at the July meeting.” The informal meeting is tasked with addressing two issues: (1) “commitment to a Working Group to be chaired by the CBFA chair to determine whether any refinements of the Board’s recommendation should be made and to examine how to continue deliberations”; and (2) “agreement that CBFA, by its December meeting, will recommend to the General Council the package of pension reforms recommended by the Board in 2023 [with any amendments agreed to by the Members through the WG process.]” Four informal meetings are being scheduled to discuss a range of issues starting with “technical questions on actuarial situation and investment of assets.” As part of the “technical questions”, the first informal meeting will “review Current Actuarial Position to address remaining technical clarifications” and “review investment approach and performance over time/assumptions including presentation by WTOPP [World Trade Organization Pension Plan] investment advisor.” In the second meeting, members will consider “questions about (the) current package” for employees. The questions posed for consideration include: (1) “review of (the) current proposed package of reforms”; (2) “consideration of burden sharing”; and (3) “what, if anything, should be done in light of 12.4% v. 10.5% gap?” The important third meeting will focus on “long-term structural reforms” involving the pension system at the WTO. The following questions are being raised for members’ consideration: * What would be the objectives of changing the pension model at the WTO? * What are the options that Members should consider and respective pros and cons? * How should the costs of different options be realistically assessed? * When would shifting to a new model realistically make sense? * What should be the process for analysing identified options in sufficient detail? * What external expertise would be necessary for Members to feel comfortable with any analyses and be able to ultimately take a decision? Lastly, the fourth meeting will focus on issues concerning what needs to be done in 2024 and beyond for members’ consideration, particularly “fixing the actuarial funding deficit to stop or mitigate the costs of being under-funded in 2024” and “establishing a specific process and time-lines for considering longer term structural reforms”. While members last year approved an increase of 3.6 percent in the WTO’s budget for 2024, sharp concerns were expressed over the proposed rise in the pension fund, which was not agreed then, said people familiar with the discussions. As previously reported, members, however, did not approve the WTO Director-General Ms Ngozi Okonjo- Iweala’s proposal for a “modest budget increase of CHF 14.56 million (around $15 million) for 2024”, and an additional CHF 1.94 million for 2025. Despite the near rejection of her first budget-hike proposal last year, the DG chose to come back again with a new 43-page proposal that came up for a first reading at the CBFA on 18 July 2023. RECENT DEVELOPMENTS Despite her repeated calls for hiking the WTO budget during 2022 and 2023, the DG on 29 April acknowledged that “the organization will have a budgetary surplus of CHF 4.8 million (close to USD 5 million)”, an increase that prompted her to seek “stepping up our recruitment to hire the very best staff.” In a restricted letter (JOB/BFA/102) sent to the chair of the CBFA on 29 April, the DG wrote that the “very best staff” will be hired “utilizing the strategic staffing competency and mapping framework that we are developing.” Since she took office on 1 March 2021, there has been a perceptible rise in expenses towards travel (the DG is currently on a tour of several former Soviet republics) and seemingly extravagant projects like the reform of the WTO Secretariat undertaken by the management consulting firm McKinsey & Company, which allegedly cost around $1 million, said a person who asked not to be quoted. The controversial Secretariat reform process generated considerable turmoil in the organization, said several people familiar with the reform-related developments. Against this backdrop, in her letter, seen by the SUNS, she told the chair, Ambassador R. Sanchez-Fung, “I am reaching out to you at this time because we have closed the books for 2023, and our External Auditors are in the process of auditing our Financial Statement. That statement and the audit report will be provided to Members for discussion at the July CBFA meeting.” She said that “before the audited statements are released to us and to Members,” she wanted “to provide some informal insight to you as to our budgetary result for 2023. I do so in the interest of making sure that you and our Members have pertinent information as quickly as possible.” She said, “As we could begin to see in the 3rd Quarter Report issued to Members last year, the Organization will have a budgetary surplus of CHF 4.8 million for 2023.” Ms Okonjo-Iweala admitted that “it may seem counter-intuitive that we had a budget surplus in 2023 at the same time that we were asking for an increase in budget for the 2024 and 2025 biennium.” Behind this development, she said, “last year, we were facing considerable uncertainty as to whether Members would provide us with a budget increase as we faced inflationary pressures as well as certain unavoidable mandatory and essential expenses.” She said, “I am gratified that Members granted us a modest increase, but that decision was not made until mid- December.” The DG maintained that “we have seen a record number of Members in arrears or quite tardy in making the required contributions.” With several countries, including Nigeria, currently mired in economic crises, it remains to be seen whether it is indeed an opportune time to focus on “long-term structural reforms,” said a member, who asked not to be quoted. +
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