RESTRICTED
PREPARATORY COMMITTEE PC/BFA/W/3
FOR THE 24November 1994
WORLD TRADE ORGANIZATION
(94-2531)
SUB-COMMITTEE ONBUDGET,
FINANCE AND ADMINISTRATION
RELATIONSHIP BETWEEN ITCAND THE WTO
Note bytheSecretariat
A. Introduction
ThePreparatory Committee fortheWTO hasbeen mandated inter alia"toprepare
recommendations fortheconsideration ofthecompetent bodyoftheWTO or,totheextent necessary,
takedecisions or,asappropriate, provisional decisions inadvance oftheestablishment oftheWTO,
withrespect totherecommendations submitted toitbytheChairman oftheSub-Committee onBudget,
Finance andAdministration ...incooperation withtheChairman oftheGATT Committee onBudget,
Finance andAdministration, assisted byproposals from theSecretariat on...
(vi) therelationship between theITCandtheWTO".
Thisnoteisintended toprovide thefactual background toenable theSub-Committee totake
aviewonthematter.
B. Origin andEvolution oftheITC
TheITChaditsorigins intheInternational Trade Information Centre which wasestablished
within theframework ofGATT inMarch 1964. Inestablishing theCentre theCONTRACTING
PARTIES wereguided bythedesire tomake acontribution totheefforts ofdeveloping countries to
expand theirexports. Itwasdecided thatintheinitial phase ofoperations theCentre would concentrate
onthefollowing:
(a) establishment ofa"documents centre" -andoperation ofa"clearing house" fortrade
information;
(b) provision ofa"correspondence-answering service";
(c) publication ofa"Register ofSources ofTrade Information";
(d) publication ofthe"International Trade News Bulletin", inaform designed tomeet
thespecial needs oftheless-developed countries;
(e) preparation ofamanual onefficient means forestablishing andoperating export
promotion services;
(f) arranging forand,asappropriate, provision oftraining facilities orcourses inexport
promotion techniques.PC/BFA/W/3
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In1967theDirector-GeneralofGATTproposedthatwithintheUnitedNationsExportPromotion
Programme,inwhichUNCTADandGATThadbeenparticipating,ajointGATT/UNCTADinternational
trade centre should beestablished forthepurpose ofassisting theexport promotion efforts ofthe
developing countries. Thesuggestion wasbased onarecognition ofthefactthatwhile Article XXXVIII
2(e)ofPartIVoftheGATT envisaged theprovision oftrade information andpromotion services by
theGATT, thiswasalsoanimportant preoccupation ofUNCTAD. Inthecircumstances pooling of
resources between GATT andUNCTAD forthepurposes ofassisting thedeveloping countries by
providing trade information andpromotion services wasadesirable course ofaction. Theobjective,
aswellastheadministrative andfinancial arrangements, oftheITCwere outlined intheDirector-
General 'sproposals asfollows:
1. Within theUnited Nations Export Promotion Programme, inwhich UNCTAD andGATT are
participating, therewould beestablished ajointInternational Trade Centre, forthepurpose ofassisting
theexport promotion efforts ofthedeveloping countries by:
(a) providing trade information;
(b) providing trade promotion advisory services;
(c) arranging training inexport promotion;
(d) undertaking studies onspecific aspects oftrade promotion andmarketing;
(e) providing substantive support forexport promotion projects financed under United
Nations technical cooperation programmes.
2. TheCentrewouldbeheadedbyaDirectorappointedbyagreementbetweentheSecretary-General
ofUNCTAD andtheDirector-General ofGATT. Inthedischarge ofhisduties, theDirector would
actunder thejointguidance oftheSecretary-General ofUNCTAD andtheDirector-General ofGATT,
whowould eachdesignate asenior officer fromtheirrespective staffs toassist themforthispurpose.
3. Anannual report ontheCentre 'sactivities would besubmitted totheTrade andDevelopment
Board ofUNCTAD andtotheCONTRACTING PARTIES ofGATT, whowould make appropriate
recommendations andtakeappropriate stepsforprovision ofbudgetary resources fortheprogramme
recommended. TheTrade andDevelopment Board andtheCONTRACTING PARTIES maywish
toestablish ajointadvisory group consisting ofgovernment experts. Thisgroup would meetannually
toreview theactivities oftheCentre andformulate recommendations tothegoverning bodies. The
report ontheCentre would alsobemade available tothecoordinating bodyoftheUnited Nations Export
Promotion Programme.
4. Thebudget oftheCentre would beshared between UNCTAD andGATT.
5. TheoperationalactivitiesoftheCentrewouldbefinancedprimarilythroughtechnicalcooperation
projectsrequestedbygovernmentsundertheUnitedNationstechnicalassistanceprogrammesandthrough
voluntary contributions totheCentre intheform ofmoney andservices.
6. Inaddition toitsownresources, theCentre would relytothefullest extent possible onthe
existing staffandfacilities oftheUnited Nations, UNCTAD andGATT.
7. Administrative andfinancial arrangements would beworked outjointly andkeptasflexible
aspossible toensure themost expeditious andefficient operation oftheCentre. Newly recruited
professional staffoftheCentre would beappointed byagreement between UNCTAD andGATT.PC/BFA/W/3
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C. TheITCBudgetary System
1. WhentheJointInternationalTradeCentreUNCTAD/GATTwasestablishedon1January1968,
itwasdecided thattheGeneral Agreement onTariffs andTrade (GATT) should continue todealwith
administrative andfinancial matters suchaspersonnel actions, making ofpayments andmaintaining
theaccounts relating totheregular budget ofITC,andthatallrelevant GATT financial andstaffrules
andregulations should apply. Theexpenditures ofvoluntary contributions would alsobeaccounted
forbyGATT andaudited byitsauditors. However, following reviews in1972and1974, itwasdecided
thattheITCwould follow United Nations staffandfinancial regulations andrules andwould make
maximum useofthesupport services oftheUNoffice inGeneva forreasons ofeconomy andefficiency.
2. Asaresult oftheabove-mentioned arrangements, ITC'sbudget ispresented incompliance
withtheUnited Nations budgeting process andcycle asbriefly described below.
3. AsixyearMedium Term Planisreviewed bytheCommittee forProgramme andCoordination
(CPC) (amain subsidiary organ ofECOSOC andtheUnited Nations General Assembly), following
endorsement bytheJoint Advisory Group.
4. TheRegular Programme Budget covers abiennium period starting withaneven-numbered
year. Itisprepared inaprogramme format (subdivided intosubprogrammes which contain narrative
partsdescribing outputs andservices) andincludes alsoabreakdown byobjects ofexpenditure (such
assalaries, common staffcosts, travel, general operating expenses, supplies andmaterials, equipment
etc.).
5. Itincludes staffing tables. Italsoshows dataonextrabudgetary resources andabreakdown
ofanticipated miscellaneous income.
6. Theinitial estimates areprepared byITConthebasis ofinstructions andparameters given
byUNNew York; theyareprocessed inNew York toensure thattheyarecompatible withthe
Secretary-General 'spolicy guidelines withregard toincreases/decreases andwiththeMedium Term
Planasapproved bytheGeneral Assembly.
7. These proposals aresubmitted totheCommittee forProgramme andCoordination (CPC) and
totheAdvisory Committee onAdministrative andBudgetary Questions which reports totheGeneral
Assembly through theFifth Committee (theAdministrative andBudgetary Committee).
8. Theyarealsosubmitted totheCommittee onBudget, Finance andAdministration oftheGATT
forsubmission totheCouncil.
9. ThebudgetofITCbecomesoperationalwhenithasbeenapprovedbyboththeGeneralAssembly
andtheCONTRACTING PARTIES.
D. Concerns oftheGATT Committee onBudget, Finance andAdministration
1. TheGATT commitment toITC'sUSdollar biennium budget isrecorded onanannual basis
inSwiss francs; itissubject toanumber ofvariations, overwhich theSecretariat hasnocontrol.
These variations result from thetechnical adjustments inherent inthebudgeting system applied and
referred toabove.
2. Thetiming oftheseadjustments made inthecourse ofthebiennium makes theirtimely recording
intoanannual GATT budget impossible. Theconsequence isthattheyearly GATT contribution toPC/BFA/W/3
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ITCisrecorded intheGATT budget showing large variations from yeartoyear. These variations
arenottheresult ofprogramme implementation deviations byITCbutonlytheconsequence ofthe
technical adjustments resulting fromthemethodology applied inthepreparation ofthese Performance
Reports.
3. Foranumber ofyears now, theGATT Committee onBudget, Finance andAdministration
hasexpressed growing dissatisfaction withitscontrol function being hampered asaresult ofthedifferent
budgeting andreporting system followed byITC.
4. Inthiscontext, itshould bekeptinmind thattheGATT contribution toITCrepresents some
14%ofitstotalbudget, whereas theUNcontribution represents some 0.7% ofitsregular budget.
E. ThePrincipal Activities oftheInternational Trade Centre
ITC'sinitial services werefocused ontradeinformation, market studies andotherpublications,
andtraining inexport promotion. Trade promotion advisory services weresoonadded, covering trade
promotion institutions, support services andprogrammes, along withmarket development advisory
services, focusing onproducts andmarkets. Atthesame timeITCbecame increasing involved in
technical cooperation projects. Inthelatter partofthe1970s ITCalsobegan tocarry outactivities
inimport operations andtechniques, thereby completing, ingeneral terms, thecoverage ofitstechnical
cooperation programme asitexists today. These programme areas havebeencategorized intofour
types ofactivities under theUNMedium-term Plan1992-1997, asstated below.
1. Institutional infrastructure, including business organizations, fortrade promotion andexport
development.
2. Product andmarket research, development andpromotion.
3. Import operations andtechniques.
4. Human resource development fortrade promotion.
TheExecutive Director ofITChasprepared apaper entitled "ITCattheCrossroads: AnAgenda
fortheFuture," which willbediscussed attheJAGfrom 21to25November. Thatpaper outlines
sixcoreservices upon which ITCwillfocus inthemedium term. These services group, inalogical
manner, themain technical cooperation activities contained intheUNMedium-term Plan1992-1997
referred toabove. They arethefollowing:
1. Trade development strategy andprogramme design.
2. Trade information.
3. Export product andmarket development.
4. Development oftrade support services.
5. Import management.
6. Human resource development. .PC/BFA/W/3
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F. WTO andITC
While GATT isandtheWTO willbeconcerned mainly withtrade policy, theITC'sareaof
workcomprisestradeinformation,tradepromotion,tradefacilitation,importmanagementandinstitution
building. Atthetimeofthecreation ofthejointGATT/UNCTAD International Trade Centre itwas
specifically mentioned inthereport oftheWorking Party which wasadopted bytheCONTRACTING
PARTIES atthe24thSession thatthe"Centre would notbeconcerned withthenegotiations oftrade
policy issues suchastariffs, non-tariff barriers, preferences etc.which wereoutside thecompetence
oftheCentre". TheITChasadhered totheexclusions mentioned attheoutset initsmandate.
ThisisnottosaythattheITCactivities arenotencompassed byGATT 1994. Article XXXVIII
ofGATT envisages interaliathattheCONTRACTING PARTIES shallcollaborate jointly within the
framework oftheGATT andelsewhere asappropriate tofurther theobjectives ofincreasing theexport
earnings ofthedeveloping countries anddiversifying theireconomies. Inparticular Article XXXVIII
envisages theCONTRACTING PARTIES would collaborate "inseeking feasible methods toexpand
trade forthepurpose ofeconomic development ...through export promotion bytheestablishment
offacilities fortheincreased flowoftrade information andthedevelopment ofmarket research".
Itmustberecalled thatthedecision oftheCONTRACTING PARTIES tohiveoffthetrade
information andtradepromotion activities inaseparate organization wasmotivated mainly bythedesire
topoolresources ofGATT andUNCTAD. Thepresent arrangement ofpartnership worked wellfor
many years. However some problems arose firstonthebudgetary sideasexplained earlier andmore
recently inthejoint exercise ofadministrative control. In1993 when difficulties arising from
disagreement between theCONTRACTING PARTIES andtheUnited Nations about therankofthe
Executive Director ITCcompounded theproblems arising fromthebudgetary process, thecontracting
parties haddiscussed informally thepossible future arrangement andthefollowing main options had
emerged:
1. Tocontinue withthecurrent practice inwhich theGATT (orWTO) involvement waslimited
toafinancial contribution totheITC;
2. Toseekare-establishment ofagenuine partnership i.e.fullconsultation onallaspects ofITC's
activities, including allappointments andfinancial procedures;
3. Tostopmaking anycontribution totheITCregular budget, enabling theCentre tobecome
wholly aUnited Nations body;
4. Toassume complete responsibility fortheITC. TheCentre would thenoperate asaWTO
body, subsidiary butautonomous, thestatus ofwhich should bedetermined beforehand.
TheSub-Committee mayliketotakeaviewonthefuture relationship between theWTO and
ITCtaking theabove aspects intoconsideration. Inthisconnection itisrelevant tonotethatthebudget
ofITChasalready beenapproved forthebiennium 1994-1995 andshould theSub-Committee decide
torecommend achange intheexisting arrangement, thenewrelationship could beintroduced with
effect from 1January 1996.