RESTRICTED
WORLD TRADE WT/GC/W/101
7 October 1998
ORGANIZATION
(98-3891)
General Council
14 October 1998
CONDITIONS OF SERVICE APPLICABLE
TO THE STAFF OF THE WTO SECRETARIAT
Report of the Chairman of the Working GroupWT/GC/W/101
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CONDITIONS OF SERVICE APPLICABLE
TO THE STAFF OF THE WTO SECRETARIAT
Report of the Chairman of the Working Group
Since April this year the Working Group on Conditions of Service has been actively
engaged in preparing a detailed proposal for a WTO compensation and personnel plan which
is independent of the UN Common System of salaries, allowances  and benefits.  In doing so
the Working Group has been guided by Decision WT/L/269 in all its aspects.  Keyconsiderations have been cost-neutrality, long term financial viability, and proper justificationfor new provisions.
The General Council set the objective of  potentially establishing independent
conditions of service for the WTO by 1 Janua ry 1999.  Given the notice required by the UN
Joint Staff Pension Fund of any intention to terminate membership, this implies a decision
being made this month by th e General Council.  The UN F und would subsequently convene
special sessions of its Committee of Actuaries and Pension Board and the matter would thenbe referred to the UN Fifth Committee and ACABQ. 
I would like to recall the significant investment of delegation time, Secretariat time
and also staff time in this project over the la st five years and that more than CHF 500,000 has
been expended on related actuarial studies.
With the agreement of the Working Group, I am presenting this proposal as
representing the best possible balance, give n the different positions of members of the
Working Group on some points.  The pr ecise proposals themselves comprise:
• a draft Decision
• a compensation philosophy
• a set of Staff Regulations and Rules, and sta ndards of conduct.
• a set of Pension Plan Regulations and Administrative Rules
• accompanying the proposal, as required unde r Decision WT/L/269, is the explanation,
rationale and justifi cation of the proposed compensa tion and personnel plan, together
with certification by the i ndependent panel of actuaries , appointed by the General
Council in July, that the proposals are cost-n eutral and financially viable as specified
in the April Decision
The salient features of the compensation package as it now stands may be briefly
summarised as follows:
- introduction of a single-category pers onnel structure in place of the present
Professional and Genera l Service categories;
- introduction of a unified salary scale and uni fied system of allowances, both expressed
in Swiss francs;WT/GC/W/101
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- introduction in the year 2000 of a perform ance pay system in place of the present
quasi-automatic pe riodic increments;
- replacement of permanent contracts by regular contracts, with continued tenure being
subject to performance and compliance with a revised code of c onduct, as well as to
the Organisation’s requirements;
- withdrawal from the United Nations Joint St aff Pension Fund and establishment of a
WTO Pension Plan denominated in Swiss francs;
- introduction of a unified pe nsionable (gross) remunerati on scale expressed in Swiss
francs;
- introduction of a number of pension impr ovements, affecting both retirement and
survivor benefits.
I would now like to make four overall comments about the proposal.
• First of all, I would like to underline the point that, even if this project has been
running for a long time, over several years be fore I joined it, much of the time spent
has in my view been worth it in the sense that considerable value has been added tothe staff and pension provisions. The texts ha ve been subjected to rigorous scrutiny by
a range of highly engaged delegations, as well as by six actuaries.  This should be
reassuring both to members and to staff in  terms of the long-term robustness of the
proposals.
• Secondly, I have been conscious that the proposal put to General Council must first
and foremost meet Council’s stipulations, but  that it must at the same time seek to
balance and satisfy reasonably the interests of all members, the interests ofmanagement, the interests of Secretariat staff, and our common interest in ensuringthat the effectiveness of the WTO is max imised.  I can assure you that the proposal
represents a strenuous effort to achieve this e ssential balance.
• Thirdly, I would note that the independent pa nel of actuaries has already indicated that
the package being developed is indeed bot h cost-neutral and viable.  The actuaries
have commented favourably on the simplifi cation and unification of provisions, the
rebalancing of benefits, reco gnition of the Geneva locati on of WTO, and also on the
consistency of approach with prevailing trends in pension practice.  They have notedthat the cost-neutrality of the proposal w ill further strengthen with time, beyond the
seven year frame set by the General Council.
• And fourthly, it became clear to me from ear ly on in my time with the Working Group
that both the members and the staff share a close interest in an approach, particularlyto the pension plan, which is  prudent and is deliberately risk-averse.  No one has an
interest in shifting to a scheme which might expose the contributors or thebeneficiaries to significant risk.WT/GC/W/101
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There are short and long term risks associated with a WTO pension plan.
Short term there is the risk surrounding the fact that we can not know before lodging
the application to withdraw from the UN Pensi on Fund what the exact transfer sum released
to fund a new WTO Pension Plan will be.  The actuaries have in fa ct based their cost-
neutrality and viability certification on what they see professionally as a prudent worst casescenario.  Some have nonethele ss challenged the independent panel of actuaries’ worst case
assumptions relating to the likely US$ and CHF exchange rate, the market value of the totalUN Pension Fund as at 1 January, and the real rate  of return to be assumed in respect of the
UNJSPF assets earmarked to cover the ICITO beneficiaries.
The key risk management tool available in this connection, in the event of an
unexpectedly low transfer sum which threatened the viability of a WTO Plan is that of“bailing out”.  It has been confirmed by UN Pension Fund representatives that, even after
submission of a formal application to wit hdraw from the UN Fund, the WTO remains free to
rescind its decision to terminate  membership at any time up to the effective date ofwithdrawal.
The longer term risk in relation to a WTO Plan is also considered extremely remote by
the independent panel of actua ries.  It would revolve larg ely around the projected rate of
return on investment generated by the WTO Fund.  The actuaries project, as a “worst case”, a
rate of 3.5 percent.  They say the yield is in fact more likely to exceed 3.5 percent than to be
less, and they note that the WTO Fund, taking into account its asset and liability structure,
would indeed be in a position to engage in a more aggressive but still prudent investmentstrategy which would yield more than 3.5 percent.
The fact remains that members have indicat ed quite clearly, and understandably in the
present international c limate, that there is no readiness to increase budget contributions to
meet unexpected demands of an independent WTO Plan.
Even though the prospect of a chronic structural  deficit arising in a WTO Pension
Fund has been certified as being remote in the re ports of the actuaries, it remains sensible and
prudent to provide against that risk.  The risk management strategy propos ed is that, while the
Plan will in all normal circumstances be one in which the pension benefits are defined inadvance for staff, there is still an “emergency escape clause”.  This provides that in the totallyunexpected event of a significant structural deficit, or surplus for that matter, it will bepossible for the General Council to decide on re medial action involving adjustments to any
aspect of the Plan, including benefits, contribu tions or any other meas ure to restore actuarial
balance.
Members will have another potential long term risk management lever through a
provision allowing a five-yearly review of  the WTO salary scales and adjustment
mechanisms, bearing in mind that salary is of course the key dr iver of pensionable
remuneration.
* * *WT/GC/W/101
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In closing, I would like to express my appreciation for the committed and constructive
way in which delegations  participating in the Working Gr oup have pursued what has been a
challenging task.  I also commend the Secretariat for their tireless and always professionalinput.
I hope that the General Council will see this  as a sound and balanced proposal which
is in the interests of Members and the staff, and will assist the establishment of an effective,independent WTO Secretariat.
[Signed]
Roger Farrell
Ambassador
Chairman of the Working Group on Conditions of Service
Applicable to the Staff of the WTO Secretariat