RESTRICTED L/5196 GENERAL AGREEMENT ON 23 October wsi TARIFFS AND TRADE. Distribution REPORT OF THE COMMITTEE ON BUDGET, FINANCE AND ADMINISTRATION

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1 RESTRICTED GENERAL AGREEMENT ON 23 October wsi TARIFFS AND TRADE Limited Distribution REPORT OF THE COMMITTEE ON BUDGET, FINANCE AND ADMINISTRATION CONTENTS INTRODUCTION 1 iv A. GATT SECRETARIAT 3 I. REPORT ON THE 1980 ACCOUNTS AND REPORT OF THE EXTERNAL AUDITOR THEREON 3 II. FINANCING OF THE 1981 BUDGET 3 III. ESTIMATES OF EXPENDITURE FOR Page Established Posts 7 Regradings 7 Temporary Assistance 8 Staff Assistance Fund g Revision of expenditure estimates 9 IV. INCOME BUDGET ESTIMATES FOR V. OTHER MATTERS 11 9 Staff Regulations and Rules and Financial Regulations and Rules for GATT 11 Pension Fund matters 11 External audit n VI. CONCLUSION 12 Draft Resolution on the expenditure of the CONTRACTING PARTIES in 1982 and the ways and means to meet such expenditure 13 SCHEDULE I REVISED ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR SCHEDULE II SCALE OF CONTRIBUTIONS FOR ANNEX STATEMENT BY MRS. E. MICHAUD, MEMBER REPRESENTING THE CONTRACTING PARTIES ON THE ICITO/GATT PENSION COMMITTEE 21 B. INTERNATIONAL TRADE CENTRE UNCTAD/GATT 23 I. SECOND PERFORMANCE REPORT FOR II. PROPOSED PROGRAMME BUDGET FOR

2 Page 1 INTRODUCTION 1. The Committee on Budget, Finance and Administration, appointed by the Council on 18 June 1980, met at the Centre William Rappard, Geneva, on 5, 7 and 12 October The Committee was chaired by Mr. P.K. Williams of the United Kingdom and the following seventeen members attended: Australia Brazil Canada France Germany, Fed. Hungary Rep. India Israel Japan Malaysia Nigeria Spain Sweden Switzerland United Kingdom United States Zaire Italy, Ivory Coast, Netherlands, Romania and Turkey were represented by observers. 3. In accordance with its terms of reference, the Committee considered the DirectorGeneral's Financial Report on the 1980 Accounts of the GATT and the Budget Estimates for In addition, the Committee examined the financial position of the GATT at 30 September 1981 on the basis of outturn figures prepared by the secretariat, the situation with regard to outstanding contributions and the question of Staff Regulations and Rules and Financial Regulations and Rules for GATT. It also examined the Second Performance Report for of the International Trade Centre UNCTAD/GATT and its Proposed Programme Budget for The Committee had before it the following documents: DirectorGeneral's Financial Report on the 1980 Accounts and Report of the External Auditor Thereon (L/5128) Budget Estimates for the Financial Year 1982 (L/5180) Outstanding Contributions as at 30 September 1981 (Spec(81)41) Staff Regulations and Rules and Financial Regulations and Rules for GATT (Spec(81)39) Second Performance Report on the Programme budget of the ITC for the Biennium (ITC/OED/BUD/10) Proposed Programme Budget of the ITC for the Biennium (ITC/0ED/BUD/9/Rev.l) ACABQ: First Report on the Proposed Programme Budget of the ITC for the Biennium (A/36/7)

3 Page 2 5. At the beginning of the meeting, the Committee heard an introductory statement by the DirectorGeneral. He stressed the great importance of understanding and dialogue between the Committee and the secretariat in the examination of the budget estimates and related questions. He was very conscious of the difficulties that confronted many governments and the 1982 GATT budget estimates had been prepared keeping these concerns very much in mind. The result of the secretariat's efforts in assessing the minimum requirements necessary for the efficient execution of the work before it, had been the maintenance of staffing provisions at their present level or, in budgetary terms, zero real growth had been fixed as the objective, even at a moment when activities had a tendency to increase rather than decrease. 6. The DirectorGeneral pointed out that it was precisely in a difficult international economic situation that greater demands were made on the GATT secretariat, and these demands thus intensified at a time when governments encountered greater difficulty in providing additional budgetary resources. 7. He appreciated that governments' general policies of budgetary stringency were a result of the present economic climate, but it was essential that GATT be provided with the means to accomplish efficiently its tasks. The Committee had recognized on many occasions that there were no hidden elements in GATT budgets and the members were well aware of the longstanding tradition of concern for economy within the secretariat. This resulted in very tightly calculated budgets, offering very narrow physical limits for reductions or even for "nongrowth". 8. The DirectorGeneral pointed out that the budgetary increase of 9.91 per cent represented entirely elements over which the secretariat had no control. One important factor was inflation which it had been necessary to take into account, particularly in view of the fact that GATT's modest provision for inflation in 1981 was already surpassed. The other principal factors were the increase in the contribution payable to the International Trade Centre UNCTAD/GATT and the provision for a new post, the cost of which was, however, to be entirely reimbursed by the Office of the High Commissioner for Refugees.

4 A. GATT SECRETARIAT

5 Page 3 I. REPORT ON THE 1980 ACCOUNTS AND REPORT OF THE EXTERNAL AUDITOR THEREON 9. The Committee examined the Report on the 1980 Accounts and the Report of the External Auditor Thereon (L/5128) and heard additional explanations from representatives of the secretariat. 10. The Committee recommends that the CONTRACTING PARTIES approve the audited accounts for 1980 and convey to the External Auditor their thanks for the valuable assistance given to the CONTRACTING PARTIES in the audit of these accounts. II. FINANCING OF THE 1981 BUDGET 11. The Committee examined the outturn figures prepared by the secretariat and was given additional information and explanations. It was noted that, on the basis of these figures, additional expenditure amounting to approximately SwF 871,000 was expected to occur on the GATT expenditure budget. This anticipated situation was based on the following assumptions: Swiss francs Overexpenditure in respect of increases in salaries and dependency allowances for staff in the General Service category and sickness insurance and education grant increases for staff of all categories approved by the United Nations General Assembly 338,000 Overexpenditure in respect of Pension Fund contributions due to the fact that (i) the provision for such contributions was budgeted at the rate of US$l/SwF 1.74 whereas contributions had been actually paid at considerably higher rates, and (ii) pensionable remuneration for staff in the Professional category and above had increased by 8.7 per cent with effect from 1 October ,000 Provision for overexpenditure that would accrue to the 1981 budget if a 3 per cent salary increase for staff in the General

6 Page 4 Service category, comparable to the increase already approved by the Governing Body of ILO, was approved at the present Session of the United Nations General Assembly and thus becomes automatically applicable to the eligible GATT staff Swiss francs 210, ,000 Overexpenditure in respect of GATT's contribution to the International Trade Centre UNCTAD/GATT due to the fact that (i) the average market exchange rate applicable to the monthly payments made to the Centre had been higher than the Centre's budget rate for 1981, on which GATT's budget provision was based; and (ii) the effects of a higher rate of inflation than was foreseen for ,000 1,279,000 Anticipated savings on other sections of the 1981 GATT budget and the use of the Unforeseen Expenditure item (408,000) 871, The Committee further noted that these overexpenditures would be partially offset by excess income of approximately SwF 450,000 and that it would therefore be necessary to transfer from the Working Capital Fund an amount of some SwF 421, With regard to the components of this deficit, the Committee, at its meeting in May 1981 (document L/5150), had made recommendations with regard to additional expenditure amounting to SwF 338,000 arising from salary and allowance increases approved by the United Nations General Assembly. At its meeting in July 1981 (document L/5170), the Committee had noted that a further increase of 3 per cent for General Service category staff whose salaries had been frozen since 31 December 1977 was proposed by the Executive Heads of the Genevabased organizations with effect from 1 March 1981 in line with the increase already approved by the Governing Body of IL0. If approved by the United Nations General Assembly, this increase would have to be applied automatically to the GATT staff. 14. In noting that the additional amount payable in respect of contributions to the International Trade Centre resulted from the fact that the average market exchange rate applicable to the monthly payments made to the Centre had been higher than the Centre's budget rate for 1981, on which the provision in the GATT budget had been based, and to

7 Page 5 the fact that inflation had been higher than foreseen, the Committee expressed its concern. Discussion on this matter is reflected in Part B of this Report. 15. While recognizing that the causes of the anticipated overexpenditure in 1981 were beyond the secretariat's control, the Committee expressed the opinion that, in principle, overexpenditure should be avoided and that the approved budgetary appropriations should be respected. The Committee requested the DirectorGeneral to attempt to make further savings wherever possible in the 1981 expenditure budget for the remainder of the year and agreed to recommend to the Council that the anticipated overexpenditure on the 1981 expenditure budget be met to the extent possible by savings within the appropriate sections of the 1981 budget or by transfers from other sections. Should it not prove possible to finance these amounts fully in this way, the Committee recommends that the DirectorGeneral be authorized to transfer the necessary funds from Part III Unforeseen Expenditure, and from anticipated 1981 income and be authorized to have recourse to the Working Capital Fund if necessary. 16. In connexion with the use of the Working Capital Fund to meet overexpenditure, the Committee expressed its concern. It was pointed out that the principal purpose of the Fund was to meet cashflow difficulties and that other means of meeting overexpenditure should be examined. 17. The Committee noted with concern that the level of outstanding contributions continued to be very high. It further noted the disquieting situation in which current outstanding contributions totalled about SwF 10 million representing as much as a quarter of the annual GATT budget. Ways and means of reducing arrears were considered and the Committee agreed to take this question up again at an early date. 18. The Committee further agreed to recommend to the Council that governments be once again urged to pay pending contributions immediately and to pay each year's contribution as early as possible in the year in which it falls due. III. ESTIMATES OF EXPENDITURE FOR Before the Committee began its itembyitem examination of the 1982 expenditure estimates, several members of the Committee made general comments on the estimates and on their presentation by the Director General. 20. There was a general feeling of appreciation in the Committee for the establishment of the estimates on a zeroreal growth basis and maintaining staffing provisions at their present level which reflected the DirectorGeneral's continued commitment to the principles of budgetary austerity. The members recognized that it was essential not to

8 Page 6 impair the secretariat's possibility of responding to the requests made by contracting parties and that it should retain the ability of maintaining the high level of efficiency that had been demonstrated in the past. 21. Nevertheless, most members of the Committee had instructions to seek reductions in the budgets of all international organizations. This was a reflexion of economic conditions that were being suffered by governments and of the stringent approach to their governments' own spending. They were aware of the effects that inflation was having on the budget provisions and, in view of the fact that their governments could not subscribe to full compensation for inflation, appreciated that in many cases, these inflationary effects had been absorbed within the budgetary items concerned without increasing the provision. 22. A representative of the secretariat reiterated the Director General's comments with regard to the fact that the estimates had been established within the very narrow limits of GATT's customary policy of budgetary austerity and that the increase over 1981 was due entirely to causes other than real growth. In particular the estimates provided for no staff increase whatsoever. A zero growth level had been very far from easy to' achieve. It had only been made possible by a very carefully studied and extensive redeployment of staff resources so as to ensure their most rational and efficient utilization. This, and an extensive redistribution of tasks had been necessary in order to face up to the greatly increased workload confronting the secretariat. 23. A representative of the secretariat also informed the Committee of other factors which had enabled certain economies to be made, such as the increased use of rationalized textprocessing machinery and distribution equipment. This had been decided upon after careful study and the evaluation of the experience of other organizations in this field. For a relatively modest outlay this machinery permitted optimum efficiency in handling the great volume of documentation which the secretariat was now called upon to process and would enable further cost reductions and a cutback in staff needs in the long run. 24. In addition to these measures, the DirectorGeneral had insisted upon further economies being sought throughout the entire area of secretariat activities, one example of which was the execution of technical cooperation missions by GATT staff, whenever possible, rather than by recourse to the use of additional temporary consultants. 25. Notwithstanding the policy of zero growth, some effect of inflation on the 1982 budget estimates had been inevitable. Actual inflation in Switzerland in 1981 had already surpassed the provisions made in the 1981 budget and it was assumed that, if the present progression continued, inflation could be expected to approach 10 per cent in If both these factors were taken into consideration, it would be appreciated that

9 Page 7 the budgetary increase proposed in the 1982 estimates represented the result of a considerable effort with regard to the absorption of inflation within the budget. Established posts 26. In answer to questions, a representative of the secretariat pointed out that the impact on the 1982 budget of statutory salary and allowance increases resulting from the International Civil Service's 1980 survey, and with regard to which the Committee had made recommendations at its meeting in May 1981 (document L/5150), accounted for a substantial part of the 1982 budgetary increase. In addition, the Committee had noted at its meeting in July 1981 (document L/5170), that the executive heads of the Genevabased organizations had decided to bring before the International Civil Service Commission and their respective governing bodies the matter of the abnormal situation of unequal net remuneration between similar groups of General Service category staff in Geneva, resulting from the decision of the Governing Body of ILO to increase by 3 per cent with effect 1 March 1981 the salary scale for such staff in effect at 31 December The Committee had been informed that, in accordance with the usual procedure, the DirectorGeneral would implement whatever decision was taken in this respect by the United Nations General Assembly. Provision had been made in the 1982 GATT budget estimates to cover the estimated 1982 cost of such an increase. 27. The Committee was of the opinion that a provision for an increase in General Service category salaries corresponding to the increase decided upon by ILO should not be made since the United Nations General Assembly had not yet taken a decision in this regard. 28. With regard to the consolidation of thirty post adjustment index points into base salary which had been approved by the United Nations General Assembly with effect from 1 January 1981, one member of the Committee stated that his authorities were opposed on principle to this procedure. In their view the post adjustment compensation system was faulty in that the post adjustment applied to almost the entire net salary instead of only to that part corresponding to the costofliving at a highcost duty station. Regradings 29. While recognizing the difficulty of setting out full justifications for the regrading proposals in the budget documents, some members of the Committee were of the opinion that the textual explanations given were not entirely adequate. Additional information on the proposals, including the General Service category regradings for which no justification is normally included in the budget, was provided by a representative of the secretariat. Some members felt that regradings and promotions could be considered to represent a form of real growth. Other

10 Page 8 members said that their authorities were critical of any misuse of regradings to replace the promotion system. 30. A representative of the secretariat pointed out that the grading of all secretariat posts was subjected to very careful scrutiny each year in the course of the regular, annual grading review. This year in particular, the regradings had been limited to an absolute minimum and in the interests of economy, the DirectorGeneral had felt obliged to defer a number of fully justified regrading proposals. Temporary assistance 31. The Committee was concerned that the rate of increase in the estimate for temporary assistance, representing 12.7 per cent over 1981, exceeded the rate of increase in other areas of the budget. A representative of the secretariat explained that for Professional category staff, a substantial part of the increase was accounted for by the upward adjustment of 1981 actual rates due to the fact that more revisers than translators had been recruited than was foreseen in the 1981 budget. As far as the General Service category staff was concerned he pointed out that salary scales for temporary staff were different from those applicable to the regular staff. As the temporary salary scales had not been frozen, the full impact of inflation had been felt in this estimate. 32. Some members felt that a ratio of 44 temporary assistance posts to 287 manning table posts was too high. In their opinion the number of temporary assistance posts should represent about 10 per cent of the permanent establishment and they requested that reductions be made. A representative of the secretariat indicated that this seemingly high percentage was due to the fact that a number of staff members under temporary assistance were, in fact, performing duties of a continuing nature and that these posts should normally have been consolidated. Proposals to this effect had not been made only in order to maintain consolidation proposals to a minimum. 33. The Committee expressed its satisfaction that some technical assistance missions were being performed by GATT staff members rather than by recruiting additional consultants, resulting in economies without detriment to the volume or the efficacy of the assistance provided. It urged that this practice be extended. Staff Assistance Fund 34. When examining the proposal to increase the provision for a contribution to the Staff Assistance Fund from SwF 20,000 to SwF 40,000, some members of the Committee recalled that a onetime exceptional additional payment of SwF 20,000 had been approved at its meeting in May 1981 (document L/5150) on the understanding that the payment would

11 Page 9 not constitute a precedent and that a report would be made with regard to its disposal. The Committee agreed to consider this question again at a future meeting. Revision of expenditure estimates 35. During the Committee's examination of the expenditure estimates, it became apparent that members could not accept the budget at the level proposed by the DirectorGeneral. Their governments were continuing to apply a very strict policy of reducing their own expenditures to the utmost and their examination of the budgets of international organizations to which they contributed had also to be governed by this consideration. They recognized the unavoidable need to provide for some measure of inflation but expected that, to a large extent, its effects be absorbed within the relevant budgetary items. 36. In the light of these comments and in an attempt to meet the various concerns expressed, the DirectorGeneral put forward revised expenditure estimates which entailed a reduction of the estimates by SwF 510,000 as follows: Swiss francs Reduction to be achieved by deleting the provision for an increase of 3 per cent in the General Service category salary scales not yet approved by the UN General Assembly 330,000 Reduction to be achieved by cutting back the overall temporary assistance credits at the DirectorGeneral's discretion Reduction to be achieved by reducing the US$/Swiss franc exchange rate, budgeted for Pension Fund purposes at the then official rate of US$l/SwF 2.07 to the present rate of US$l/SwF 1.97 Reduction to be achieved by deleting the provision for an additional contribution of SwF 20,000 to the Staff Assistance Fund 60, ,000 20, ,000

12 Page A representative of the secretariat informed the Committee that it had not been easy to formulate these proposals due to the stringency with which the 1982 budget had been established. They were put forward, however, in a spirit of conciliation and recognized the real budgetary problems with which governments were faced in the present economic circumstances. The DirectorGeneral wished it to be understood that, should a 3 per cent salary increase for staff in the General Service category be approved at the current Session of the United Nations General Assembly it would be automatically applicable to the eligible GATT staff. At that time it would be necessary for him to come forward with proposals for financing the additional cost. 38. With regard to the contribution to the Staff Assistance Fund, the DirectorGeneral regretted that it had been necessary to withdraw this proposal in view of the reservations expressed by some members of the Committee. A real need existed to relieve hardship experienced by some former GATT staff members suffering from infirmity as well as economically from the effects of inflation and he would wish to revert to this matter next year if circumstances continued to warrant it. 39. Several members of the Committee expressed regret that further economies had not been possible but finally could accept the estimates as amended and agreed to a revised level of total expenditure of SwF 45,501,000. IV. INCOME BUDGET ESTIMATES FOR A representative of the secretariat informed the Committee that, because of governments' difficulties in accepting the estimates as presented in the present economic climate, the DirectorGeneral had also reexamined the income budget estimates. In view of the fact that the provision for income from interest on investments had been based on an interest rate of 6 per cent and that currently available rates were somewhat higher, he proposed that the estimate for miscellaneous income be increased by SwF 80, One member of the Committee, in referring to the apparent lack of interest by outside bodies for renting GATT conference space, and in particular the Council Room, suggested that prices be lowered and that the availability of such space in the Centre William Rappard be made more widely known. 42. The Committee accepted the DirectorGeneral's proposal and agreed that the budget for 1982 be financed as follows:

13 Page 11 Swiss francs (a) Contributions assessed on contracting parties 44,310,000 (b) Miscellaneous income 1,095,264 (c) Transfer from the 1980 surplus 95,736 45,501,000 V. OTHER MATTERS Staff Regulations and Rules and Financial Regulations and Rules for GATT 43. The Committee examined the note prepared by the DirectorGeneral on possible Staff Regulations and Rules and Financial Regulations and Rules for GATT (document Spec(81)39). 44. After hearing explanations by a representative of the staff and representatives of the secretariat, the Committee agreed that it would be helpful to see, as soon as possible, a draft comparing the United Nations regulations and rules as applied to GATT at present and those proposed, on the understanding that this agreement would not prejudice the Committee's final decision in this regard. One member of the Committee expressed a strong reserve with regard to the setting in hand of this work. Pension Fund matters 45. The Committee heard a report on current Pension Fund developments from Mrs. E. Michaud (France), member representing the CONTRACTING PARTIES on the Joint Staff Pension Board. The text of Mrs. Michaud's statement is annexed hereto. External Audit 46. The Committee noted that the DirectorGeneral had been informed by Sir Douglas Henley, K.C.B. that he had to relinquish the position of External Auditor of GATT on his retirement on 30 September He was succeeded as Comptroller and Auditor General of the United Kingdom by Mr. Gordon Downey, C.B., who was also willing to succeed Sir Douglas as External Auditor and the DirectorGeneral proposed to the Committee that Mr. Downey be so appointed. The Committee noted in this connexion that Mr. Downey was also External Auditor of ILO, WHO and WMO. 47. The Committee agreed and recommends that the Council approve this appointment with effect from 1 October The Committee further recommends that the Council invite the CONTRACTING PARTIES to express

14 Page 12 their thanks and appreciation to Sir Douglas Henley for the most valuable services rendered during his term as External Auditor of GATT since The Committee noted that the DirectorGeneral intended to make the necessary arrangements with the External Auditor for the final audit of the 1981 accounts of the GATT, for the interim audit of the 1982 accounts and for the submission to the CONTRACTING PARTIES of the Auditor's report for 1981 in accordance with the decision taken by the CONTRACTING PARTIES in VI. CONCLUSION 49. The Committee submits to the CONTRACTING PARTIES for consideration and approval a draft resolution on the.expenditure of the CONTRACTING PARTIES and ways and means to meet such expenditure. POINTS FOR DECISION: Paragraph 10 Paragraph 15 Paragraph 18 Paragraph 47 Paragraph 49

15 Page 13 DRAFT RESOLUTION ON THE EXPENDITURE OF THE CONTRACTING PARTIES IN 1982 AND THE WAYS AND MEANS TO MEET SUCH EXPENDITURE The CONTRACTING PARTIES HAVING CONSIDERED the estimates of expenditure of the CONTRACTING PARTIES for 1982 as set forth in schedules annexed to this Resolution, RESOLVE that 1. The DirectorGeneral is authorized to repay promptly ICITO for the services rendered during the year 1982, provided that such repayment does not exceed a total of 45,501,000 Swiss francs. 2. The repayment referred to in paragraph 1 shall be financed as follows: (a) by contribution from contracting parties in the amount of 44,310,000 Swiss francs; (b) by miscellaneous income estimated at 1,095,264 Swiss francs; (c) by transfer from the 1980 Surplus Account of 95,736 Swiss francs. 3. The DirectorGeneral shall report to the CONTRACTING PARTIES or to the Council on the status of budgetary expenditure over the first nine months of The contribution of the contracting parties shall be assessed in accordance with the attached scale of contributions. Contributions from contracting parties are considered as due and payable in full as from 1 January 1982.

16 Page 14 SCHEDULE I REVISED ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1982 Original Estimates (L/5180) SwF Decreases SwF Revised Estimates SwF PART I: MEETINGS Section 1 ThirtyEighth Session of the CONTRACTING PARTIES (i) (ii) (iii) Temporary assistance (interpreters) 13,000 13,000 Travel and subsistence of temporary staff 2,000 2,000 Rental of meeting rooms and additional office space 4,000 4,000 (iv) Other services 1,000 1,C00 Total Section 1: 20,000 20,000 Section 2 Meetings of the Council and other Meetings (i) (ii) Temporary assistance (interpreters) 145, ,000 Travel and subsistence of temporary staff 2,000 2,000 (iii) Other services 4,000 4,000 Total Section 2: 151, ,000 Total Part I: 171, ,000

17 Page 15 Original Revised Estimates Decreases Estimates (L/5180) SwF SwF SwF PART II: SECRETARIAT Section 3 Salaries and Wages and Official Missions (i) Established posts 21,015,000 (250,000) 20,765,000 (ii) (iii) Temporary assistance (including overtime) and consultants 3,860,000 (60,000) 3,800,000 Missions (a) Official missions 350, ,000 (b) Technical cooperation missions 150, ,000 Total Section 3: 25,375,000 (310,000) 25,065,000 Section 4 Common Staff Costs (i) Installation grants 40,000 40,000 (ii) Travel and removal expenses of staff and their dependants 100, ,000 (iii) Separation payments 60,000 60,000 (iv) Contribution to the United Nations Joint Staff Pension Fund 4,233,000 (180,000) 4,053,000 (v) Repatriation grants 100, ,000 (vi) Travel on home leave 315, ,000 (vii) Family allowances, education grants and related travel: (a) Family allowances 560, ,000 (b) Education grants and related travel 500, ,000 (viii) Joint services 165, ,000 (ix) Other common staff costs 504, ,000 Total Section 4: 6,577,000 (180,000) 6,397,000

18 Page 16 Original Estimates (L/5180) SwF Decreases SwF Revised Estimates SwF Section 5 Common Services (i) Cables, telex and telephone communications 100, ,000 (ii) Freight and cartage 14,000 14,000 (iii) Books and information material 91,000 91,000 (iv) Rental and maintenance of premises and equipment: (a) Rent 1,280,000 1,280,000 (b) Electricity 120, ,000 (c) Water supply 8,000 8,000 (d) Heating 100, ,000 (e) Telephone and telex (rental) 130, ,000 (f) Insurance premiums 120, ,000 (g) Maintenance expenditure 340, ,000 (h) Contractual cleaning 525, ,000 (i) Maintenance of service cars 13,000 13,000 (v) Postal services 320, ,000 (vi) Stationery and office supplies 120, ,000 (vii) Reproduction of documents 560, ,000 (viii] External audit 56,000 56,000 (ix) Other services and miscellaneous expenditure 600, ,000 Total Section 5: 4,497,000 4,497,000 Section 6 Printing 400, ,000 Section 7 Representation and Hospitality 105, ,000 Section 8 Public Information 5,000 _ 5,000

19 Page 17 Original Estimates (L/5180) SwF Decreases SwF Revised Estimates SwF Section 9 Permanent Equipment 175, ,000 Section 10 Contribution to the Staff Assistance Fund 40,000 (20,000) 20,000 Total Part II: 37,174,000 (510,000) 36,664,000 PART III: UNFORESEEN EXPENDITURE Section 11 Unforeseen Expenditure 200, ,000 PART IV: COMMERCIAL POLICY TRAINING COURSES Section 12 Commercial Policy Training Courses 580, ,000 SubTotal 38,125,000 (510,000).37,615,000 PART V: INTERNATIONAL TRADE CENTRE UNCTAD/GATT «Section 13 Contribution to the International Trade Centre UNCTAD/GATT 7,886,000 7,886,000 GRAND TOTAL 46,011,000 (510,000) 45,501,000

20 Page 18 SCHEDULE II/ETAT No II SCALE OF CONTRIBUTIONS FOR 1982/ BAREME DES CONTRIBUTIONS POUR 1982 (Scale including a single minimum of 0.12%)/ (Contribution minimale: 0,12%) Country/Pays Swiss francs/ Francs suisses parties/parties contractantes: Argentina/Argentine 181,670 Australia/Australie 580,460 Austria/Autriche 553,880 Bangladesh. 53,170 Barbados/Barbade 53,170 Belgium/Belgique 1,670,490 Benin/Benin 53,170 Brazil/Brésil' 562,740 Burma/Birmanie 53,170 Burundi 53,170 Cameroon/Cameroun 53,170 Canada 1,781,260 Central African Republic/République centrafricaine 53,170 Chad/Tchad '. 53,170 Chile/Chili 124,070 Colombia/Colombie 110,780 Congo (People's Republic)/République populaire du Congo 53,170 Cuba 128,500 Cyprus/Chypre 53,170 Czechoslovakia/Tchecoslovaquie 447,530 Denraark/Danemark 505,140 Dominican Republic/République Dominicaine... 53,170 Egypt (Arab Republic)/République arabe d'egypte 106,350 Finland/Finlande 358,910 France 3,292,230 Gabon 53,170 Gambia/Gambie 53,170 Germany (Federal Republic)/République fédérale d'allemagne 5,113,380 Ghana 53,170 Greece/Grèce 181,670 Guyana/Guyane 53,170 Haiti/Haïti 53,170 Hungary/Hongrie 257,000 Iceland/Islande 53,170 India/Inde 257,000

21 Page 19._ Swiss fran Country/Pays ~ 3 J Francs suis Contracting parties/parties contractantes: (cont'd)/(suite) Indonesia/Indonésie 305,740 Ireland/Irlande 261,430 Israel/Israel 186,100 Italy/Italie 2,304,120 Ivory Coast/Côte d'ivoire 70,900 Jamaica/Jamaïque 53,170 Japan/Japon 3,465,040 Kenya 53,170 Korea (Republic)/République de Corée 540,580 Kuwait/Koweït 345,620 Luxembourg 146,230 Madagascar 53,170 Malawi 53,170 Malaysia/Malaisie 292,450 Malta/Malte 53,170 Mauritania/Mauritanie 53,170 Mauritius/Maurice 53,170 Netherlands/Pays Bas 2,118,020 New Zealand/NouvelleZélande 141,790 Nicaragua 53,170 Niger 53,170 Nigeria/Nigeria 496,270 Norway/Norvège 443,100 Pakistan 97,480 Peru/Pérou 66,470 Philippines 177,240 Poland/Pologne 545,020 Portugal 137,360 Romania/Roumanie 283,590 Rwanda 53,170 Senegal/Sénégal 53,170 Sierra Leone 53,170 Singapore/Singapour 354,480 South Africa/Afrique du Sud 283,590 Spain/Espagne 682,380 Sri Lanka 53,170 Suriname 53,170 Sweden/Suède 855,180 Switzerland/Suisse. 886,200

22 Page 20 Country/Pays Swiss francs/ Francs suisses Contracting parties/parties contractantes: (cont 1 d)/(suite) Tanzania/Tanzanie 53,170 Togo 53,170 Trinidad and Tobago/TrinitéetTobago 84,190 Turkey/Turquie 115,210 Uganda/Ouganda 53,170 United Kingdom of Great Britain and Northern Ireland/Royaumelini de GrandeBretagne et d'irlande du Nord 3,597,970 United States of America/EtatsUnis d'amérique 6,358,490 Upper Volta/HauteVolta 53,170 Uruguay 53,170 Yugoslavia/Yougoslavie 310,170 Zaire/Zaïre 53,170 Zimbabwe 53,170 Associated Governments: Democratic Kampuchea/Kampuchea démocratique.. 53,170 Tunisia/Tunisie 70,900 44,310,000

23 Page 21 ANNEX Statement by Mrs. E. Michaud, Member Representing the CONTRACTING PARTIES on the ICITO/GATT Pension Committee On adopting the Washington proposal last December the United Nations General Assembly requested the International Civil Service Commission to prepare a special index for pensioners which would take into account the incidence of national taxation and which would replace the Weighted Average of Post Adjustments (WAPA) in the calculation of pensions. The real purpose of this index, which was sought by the staff representatives of United Nations New York, was to reduce the effect of the Washington Proposal in the case of staff members retiring in countries having a strong currency and relatively moderate direct taxation. They had in mind in particular Austria, which does not tax the pensions of international civil servants. The work of preparing this index was begun this year on the basis of the approaches adopted by the International Civil Service Commission. Discussions are now to be continued with a view to working out specific proposals for examination by the United Nations Joint Staff Pension Board at its July 1982 session. The Pension Board's recommendations would then be transmitted to the United Nations General Assembly for adoption and would enter into force, without retroactive effect, on 1 January GATT will therefore have to follow with increased attention the work carried out in 1982, with a view to ensuring the adoption of a fair index that does not call the very basis of the Washington Proposal into question. In this connexion I should like to give a few examples to illustrate the operation of that proposal over the nine months since its entry into force. It will be remembered that the calculations are made for a staff member with 30 years' service, of which the last three years were served at the top step in his grade. Furthermore, the local currency equivalent of the dollar pension is calculated on two different principles: (a) on the average rate of exchange of the past 36 months, with the application of the costofliving differential factor embodied in the Washington Proposal; (b) on the rate of exchange in force in the month preceding the quarter in which the pension is due; the pensioner receives the result of the more favourable of these two calculations.

24 Page 22 On 31 March 1981 the Swiss franc/dollar exchange rate calculated on principle (a) was 1.70 and that calculated on principle (b) The Washington Proposal applied to all grades. The pension paid to a pensioner who had retired at level P4 step 12 represented, before tax, 64.8 per cent of his last salary (base salary plus post adjustment). On 31 July 1981 exchange rate (a) was 1.72 and exchange rate (b) The Washington Proposal applied only to grades P3 and P4. The calculation on principle (b) was more favourable to the higher grades. The pension of a P4 represented 65.6 per cent of his last salary. On 30 September 1981 exchange rate (a) was 1.74 and exchange rate fb) The Washington Proposal applied only to grade P3; to all other grades the calculation on principle (b) was more favourable. The pension of a P4 represented 67.3 per cent of his last salary. Considering the movement of the exchange rate in the course of the year, 2.13 was an exceptionally high rate; consequently I give by way of comparison the situation on 30 September for a fictitious rate of 2.0 calculated on principle (b). In this case the Washington Proposal would apply to all grades and the pension of a P4 would represent 66.7 per cent of his last salary. It will be seen from this that the purpose of the Washington Proposal, which was to provide a pension representing, before tax, 65 per cent of the last salary of a staff member retiring at level P4 step 12 has been achieved. However, it will be well to watch out for the unfavourable effects which.the preparation and adoption of a new pension indexing system by the General Assembly in 1982 might have on these results.

25 " B. INTERNATIONAL TRADE CENTRE UNCTAD/GATT >

26 Page 23 SECOND PERFORMANCE REPORT FOR The Committee examined the Second Performance Report on the Centre's Programme Budget for the Biennium , contained in document ITC/OED/BUD/10 and noted that US dollar requirements were reduced by US$1,206,100 for the biennium, after the Centre's revaluation of its budgetary provisions. This was due to: (a) (b) US dollars the revaluation of the expenditure for the last six months of 1981 at the rate of US$l/SwF 2.07 instead of the budgetary rate of US$l/SwF ,001,400 the effect of increasing the rate of inflation by 2.9 per cent (from 5 per cent to 7.9 per cent) (112,900) (c) net budgetary savings 317,600 Net reduction 1,206, The Committee noted that, in spite of the reduction of Centre requirements for the biennium in US dollar terms, the 1981 GATT budget provision for contributions to the Centre would be overspent by approximately SwF 406,000. This was due to: the fact that the budget requirements for 1981 had been based on an exchange rate of US$l/SwF 1.67, whereas the average rate applied to GATT*s monthly contribution to the Centre had averaged US$l/SwF 2 over the first nine months of The adjustment of the budget rate to US$l/SwF 2.07 resulting in a decrease of the Centre's dollar requirements for the last six months of 1981 did not entirely cover GATT's loss. the effect of the adjustments made in the budgetary rate of inflation: (a) from 1 per cent to 5 per cent in 1980 (document ITC/OED/BUD/8 ; and (b) an additional adjustment of 2.9 per cent to 7.9 per cent in respect of 1981 (document ITC/OED/BUD/10). Budgetary savings had also been made during the biennium which only partially offset the above additional expenditure for GATT in Swiss franc terms.

27 Page While recognizing that the exchange rate at which GATT had had to pay its contributions to the Centre in 1981 had been consistently above the budgetary rate, the Committee expressed its concern with regard to a situation in which GATT had to bear a disproportionate share of the burden of exchange risks resulting from the fact that the contribution of the United Nations to the Centre was in US dollars whereas the provision for such contributions in GATT budgets was in Swiss francs. Some members of the Committee thought that a solution to this problem would be to express Centre budgets in Swiss francs in future. Amongst other methods of avoiding exchange losses which were discussed, one concerned the payment by GATT of its contribution to the Centre at the budgetary rate regardless of the UN internal accounting rate or the market rate at the time of payment. This seemed feasible in view of the fact that some 90 per cent of the Centre's expenditures were made in Swiss francs and only about 10 per cent was disbursed in dollars. 53. Following a suggestion by a representative of the secretariat, the Committee requested the secretariat to concert with the secretariats of the Centre and the United Nations to study ways and means, of resolving the whole problem of future exchange rates and inflation rates.to be applied to budgets of the International Trade Centre UNCTAD/GATT, including the question of the possible revision of the rates applicable to the Centre's budget. The GATT secretariat should present a report on this question before the thirtyseventh session of the CONTRACTING PARTIES in November. 54. The Committee had already expressed its views with regard to the avoidance of overexpenditure and the respecting of approved budget appropriations in its consideration of the financing of the 1981 GATT budget (paragraph 15 above). It requested the Executive Director of the Centre to attempt to make further savings wherever possible in the 1981 expenditure budget for the remainder of the year. 55. Notwithstanding the views expressed the Committee recommends to the Council that the revised estimates of expenditure of the International Trade Centre UNCTAD/GATT for the biennium be approved in the amount of US$16,737,500 (1980: US$8,435,900; US$8,301,600). The contribution from the 1980 and 1981 GATT budgets amounts to US$8,270,000 (1980: US$4,185,300; 1981: US$4,084,700) and is payable on the assumption that a like amount will be borne by the United Nations, that US$139,900 (1980: US$30,100; 1981: US$109,800) will be forthcoming as miscellaneous income and US$57,600 from surplus. The Committee noted that the net effect that the revision of the Centre budget had on the 1981 GATT budget was that the provision of SwF 7,403,000 would be exceeded by approximately SwF 406,000 unless the US dollar/swiss franc exchange rate were to fall considerably during the rest of 1981 and the Centre's estimates were not increased in US dollar terms.

28 Page In this connexion it was pointed out that there was no other alternative than to use the Working Capital fund to meet the overexpenditure in respect of the contribution to the Centre and the Committee reiterated its reservations in this regard (see paragraph 16 above). II. PROPOSED PROGRAMME BUDGET FOR THE BIENNIUM Before turning to the Proposed Programme Budget of the Centre for the Biennium contained in document ITC/OED/BUD/9/Rev.l, the Committee heard an introductory statement by the Executive Director of the Centre. He recalled that the proposed Programme Budget of the ITC for the Biennium (document ITC/OED/BUD/9/Rev.l) had been presented to the Committee in May He made clear that since the proposal was based on zero growth in real terms, as compared to the budget, all of the priorities recommended by the Joint Advisory Group could not be taken into account in the preparation of the Budget. As a consequence, difficulties might be encountered in dealing satisfactorily with some of the requests for technical assistance in trade promotion coming to the Centre from developing countries. The more so since it was now probable that there would be a levelling off in the extrabudgetary resources available to the Centre for the coming biennium. He reminded the Committee also that during recent years there had been hardly any growth in the regular budget so that having now made a proposal with zero growth in real terms, the Centre was down to a bare minimum. 58. The ITC budget proposal was thoroughly examined in June by the United Nations Advisory Committee on Administrative and Budgetary Questions (ACABQ), which concurred with the proposal presented by the Centre and had submitted it for final approval by the General Assembly and its Fifth Committee. 59. The Committee expressed its appreciation for the efforts that had been made to produce a zero growth budget which it could accept. The members' reservations centered around the question of the exchange rate which had been set at US$l/SwF 1.71 and an inflation rate of 5 per cent for each year of the biennium, both of which the Committee considered to be unrealistic even though it was recognized that the rates applied were those given in the United Nations guidelines. In this respect, the Committee would wish to apply the same procedure to the Centre budgets as to those of GATT and would not accept supplementary assessments once the budget had been approved. It would expect additional expenditure resulting from a higher rate of inflation than foreseen or a variation in the exchange rate to be absorbed within the budget. The Committee could agree to the provision made in the GATT budget on the understanding that it could be modified if necessary in the light of the report to be made to the Committee (paragraph 53 above).

29 Page The Committee recommends to the Council that the estimates of expenditure of the International Trade Centre UNCTAD/GATT for the biennium be approved in the amount of US$19,256,700 (1982: US$9,433,200; 1983: US$9,823,500). A contribution of US$9,429,300 will be made to the Centre for the biennium from the 1982 and 1983 GATT budgets (1982: US$4,611,600; 1983: US$4,817,700) on the assumption that a like amount will be borne by the United Nations, that US$375,900 will be forthcoming as miscellaneous income (1982: US$187,800; 1983: US$188,100 and that a transfer of US$22,200 will be made to the 1982 budget from surplus. At the rate of US$l/SwF 1.71 the GATT budget provisions amount to SwF 7,886,000 for 1982 and SwF 8,238,000 for POINTS FOR DECISION: Paragraph 55 Paragraph 60