EU Presidency Statement - Contributions to UN budget

Summary: October 2, 2000: Statement by Mr. Jean-David Levitte, Permanent Representative of France to the United Nations. Scale of contributions to the regular budget (New York)

I have the honor to take the floor on behalf of the European Union. The Central and Eastern European countries associated with the European Union (Bulgaria, Estonia, Hungary, Latvia, the Czech Republic, Romania, Slovakia and Slovenia), the other associated countries (Cyprus, Malta) and also the EFTA countries that are members of the European Economic Area (Iceland) align themselves with this statement.

First of all I should like to thank the Chairman of the Committee on Contributions, Mr. Hugo Sessi, for his concise and illuminating presentation. My thanks also go to members of the Committee, all of whom have contributed to the report presented to us today.

It is essential to the effective functioning of the United Nations that common rules be defined to ensure that the financial burden which the United Nations' regular budget represents is divided fairly among Member States. This is a task which falls to the Fifth Committee and it is one to which the European Union, as chief contributor to the United Nations budget, is earnestly committed. Examining the scale of contributions to the regular budget is a traditional exercise for that Committee, which deals with the matter every three years. We are restricted in our debates by the methods of the scale, which has to take account as precisely as possible of the ability to pay of each of the Organization's Member States.

All United Nations' partners have long been aware of the European Union's analysis and proposals; it is now nearly five years since it formulated them. Europe's commitment is deep, and not a single General Assembly session has passed since 1996 without our giving it expression.

The principles on which these proposals are based are clear:

each Member State's contributions must reflect their real ability to pay as closely as possible in the light of the current economic situation,
the methods used to define the scale must be simple, equitable and transparent.

For the European Union, these are pre-requisites for the creation of stable, sustainable financing in the service of the aims and principles of the United Nations.

Member States' ability to contribute to the Organization's expenditure naturally depends first of all on their recent macro-economic performances and on currency movements. These two factors determine each Member State's "purchasing power" in the currency in which we pay our contributions today: the United States dollar.

The starting point, the initial estimate of ability to pay, therefore requires reliable, homogeneous, comparable data regarding gross national product. To be comparable, these data need to be converted into United States dollars, as far as possible, in the European Union's view, using exchange market rates. The body of experts whose task it is to assess this technical criterion is the Committee on Contributions, not the Fifth Committee.

In 1998, according to the figures of the Committee on Contributions, the European Union accounted for 29,5% of world gross national product. The European Union nonetheless contributes 36,6% of the regular budget. That is a distortion, and means in stark terms that each of the Union's 15 Member States pays considerably more than its national wealth. On schedule and without conditions, each of the EU's 15 Member States pays a surcharge of one quarter of its share of world GNP.

The European Union has long been by far the Organization's largest contributor: more than one dollar in three of the regular budget is paid in by a European citizen. As the EU's share of world GNP - its ability to pay - has fallen in recent years, it follows that the share of the regular budget borne by EU Member States should be reduced.

It is the view of the European Union that, rather than reflect its ability to pay, the methodology currently used to establish the scale unduly distorts it. Let me pinpoint three causes here:

Member States' ability to contribute clearly depends on their economic weight. However, the economic data taken into account this very day for the calculation of the scale for 2000 go back to 1990 or even 1985. Until this year, shares were calculated with a built-in transitional factor derived from the previous scale, which was based on data dating back to 1985. Calculation of Member States' wealth is therefore based on data that are 10 or even 15 years old: each country will have experienced over a 15-year period one or more periods of prosperity, or more periods of crisis, one or more devaluations or appreciations of national currency against the dollar. There is little doubt, to the European Union's mind, that the best way of reflecting each country's current performance, with minimum delay, is to select a shorter reference period.

As you are aware, the European Union is also proposing that this reference period should be annually updated with fresher economic data. Annual updating would eliminate excessive fluctuations from one scale to another and would provide a transitional mechanism which would never depart from the ability-to-contribute principle.

It must be emphasized that this proposal is not without importance for a large number of Member States. Had the scale for the year 2000 incorporated an annual updating mechanism, 55 developing countries would have already seen their share fall from its current level.
The European Union considers that the adjustment applicable to countries whose per capita income is lower than the world average must remain a basic feature of the scale. The principle of equity must enable the situation of low-income countries to be taken into account in the form of an abatement weighting in favour of these countries, making for a progressive system.

The developing countries, taken as a whole, today account for approximately one fifth of the world's economy; these are, once again, the figures of the Committee on Contributions. However, in 2000, these countries contribute globally a little under a tenth general budget expenditure. The European Union considers that the ability-to-contribute principle for countries taken individually has been somewhat overlooked and that two of the scale's features must be corrected:
- debt burden adjustment today makes for a lack of transparency, for complexity and for inequality in the scale and should be abandoned. Debt burden adjustment is by way of a double entry as interest payments on debt already reduce GNP statistics;
- the abatement factor for low-income countries must be reduced and should not exceed 75%.
I now come to the third element of distortion: obviously, for the European Union, capping the share of the largest contributing State is an important departure from the ability-to-contribute principle, particularly since the weight of the European Union and of the prime contributing State in the world economy are in 1998, the same: approximately 29%. That is why the European union would like the ceiling to remain at its current level of 25% thus avoiding a more serious distortion

.

Lastly, in accordance with Resolution 52/215, the formula of limiting share variations should be eliminated. The long-scheduled abolition of that transition mechanism militates in favour of annual updating of the reference period, which would be a useful replacement for it.

Let me remind you of the spirit in which the European Union is approaching these negotiations. As early as 1996 the European Union proposed four series of measures to restore balance and sustainability to the finances of the United Nations and to ensure that the Organization had a foreseeable, healthy, durable and equitable financial base. Reform of the scale for the regular budget forms part of that series, as does reform of the scale for peacekeeping operations. Needless to say, however, the objective will be fully attained only if all Member States pay all of their contributions on schedule and without conditions.

The European Union is pleased that the main session of the 55th General Assembly is providing us with an opportunity to discuss both scales, which are at the core of European concerns. The European Union would like an overall solution to be found and would like us to achieve that through consensus.

Ref: PRES00-239EN
EU source: EU Presidency
UN forum: Fifth Committee (Administrative and Budgetary Affairs)
Date: 2/10/2000

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