SCALE OF ASSESSMENTS: INITIAL FIFTH COMMITTEE

C O N F I D E N T I A L SECTION 01 OF 02 USUN NEW YORK 002184

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/22/2011
TAGS: AORC UNGA KUNR
SUBJECT: SCALE OF ASSESSMENTS: INITIAL FIFTH COMMITTEE
CONSIDERATION OF MEMBER STATE PROPOSALS; WHAT LIES AHEAD

Classified By: Ambassador Mark D. Wallace; Reasons: 1.4 (B) and (D).


1. (U) SUMMARY/COMMENT: On November 21, the Fifth Committee
(Administrative and Budgetary) took up initial discussion on
concepts submitted by the U.S., the Group of 77 and China,
Japan, the European Union, Russia, and Mexico on the scale of
assessments for the period 2007-2009, with the majority of
the substantial proposals coming from the first five
above-mentioned delegations. The U.S., along with Japan and
the EU, argued for modification of the 80 percent gradient
(or discount) now given to states with low per capita income
(PCI),so that those states whose PCI was below the world
average but whose Gross National Income (GNI) was above one
percent or more of the global market share should receive a
smaller rebate because their economies were stronger. The
G77 and China rejected outright any modification to the
gradient, and also rejected Japan's proposal for a P-5 floor,
labeling both suggestions "non-negotiable." The EU argued
that as per General Assembly resolution 55/5C, the ceiling
should be reviewed as a part of the current scale
negotiation. The G-77 proposed that the ceiling should be
raised to 25 per cent. The discussion on scales will resume
on Tuesday, November 28. The Coordinator (Iran) expects to
present a draft resolution to the Committee based on all of
the submissions from Member States.


2. (C) SUMMARY/COMMENT (CONTINUED): As reflected in the
November 21 discussions, the battle in the Fifth Committee
over scale will center on the length of the base period
(shorter base period of 3 yrs advocated by Japan, U.S.;
longer period of 6 yrs proposed by EU; retention of current
4.5 yrs supported by G-77),possible modification of the
gradient (i.e. 40, 50 or 60 per cent vice 80 percent as
applied to large, fast-growing economies such as China,
Russia, India and Brazil - supported by Japan, U.S., EU,
CANZ; opposed by G-77),and attempts by the G-77 and EU to
attack the U.S. on the 22 per cent ceiling by claiming the
U.S. has not improved its record on arrears. In fact, the
G-77 said the U.S. had reneged on its commitments made during
the last scale negotiations in 2000 to repay its arrears in
full in exchange for a reduction in the ceiling. The
Japanese believe it may be possible to isolate the four
states (China, Russia, India, Brazil) who currently benefit
disproportionately from the current 80 per cent gradient if
the U.S., Japan, CANZ and the EU stand united, but the G-77
appear unified in their demand for uniform application of an
80 per cent gradient to all states whose per capita income
falls below the world average (low per capita income
adjustment),even those developing states whose gross
national income may be one per cent or more of global GNI.
Perhaps the greatest challenge lying ahead is that the U.S.
will be under siege throughout the scale negotiations
defending the 22 per cent ceiling and our record on arrears.
END SUMMARY/COMMENT.

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SCALE OF ASSESSMENT: INTRODUCTION OF PROPOSALS
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3. On November 21, the Fifth Committee took up initial
discussion on concepts submitted by Member States on the
scale of assessments covering the period 2007-2009. The
U.S., along with Japan and the EU, argued for modification of
the 80 percent gradient (or discount) now given to states
with low per capita income (PCI),so that those states whose
PCI was below the world average but whose gross national
income (GNI) was above one percent or more of the global
market share should receive a reduced discount because their
economies were stronger. While giving an overview of the
U.S. positions as reflected in its submission, the U.S.
delegate clearly and explicitly conveyed the USG position on
keeping the ceiling at 22 percent. Explaining that while
capacity to pay was an important factor, in keeping with the
UN Charter and historical precedent since 1946, the U.S.
delegate said it also was important to uphold the principle
of sovereign equality of Member States, thereby preventing
financial domination by or dependence on one state. He added
that the U.S. believed strongly in the consensus principle
for decisions taken in the Fifth Committee, but warned that
the U.S. could not join consensus on any proposal advocating
an increase in the current 22 per cent ceiling.


4. The Group of 77 and China advocated leaving the
methodology as it was with two changes they deemed
"technical, not political" - namely, raising the ceiling to
25 percent, and adding a mechanism to phase in
large-scale-to-scale increases in equal installments over
three years. Both in the explanation of their proposals and
whenever these subjects were raised throughout the day's

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session, the G77 rejected outright proposed modifications to
the gradient, leaving the ceiling at 22 percent (unless the
U.S. paid off its arrears in full),and Japan's proposal for
a P-5 floor. The G-77 labeled the proposals on the gradient
and the P-5 floor as "non-negotiable."


5. The European Union, like the U.S., had four separate
submissions, all of which included changing the base period
to a flat six-years, and imposing a 60-80-85 percent gradient
when determining the low per capita income adjustments
(LPCIAs). The EU said the flat base period was the most
stable solution, which prevented against unfair increases to
developing countries. The current system of averaging six
and three years, they argued, unduly burdened 31 countries.
Under the EU proposal, that number would shrink from 31
countries to 13. The EU also argued that as per General
Assembly resolution 55/5C, the ceiling should be reviewed as
part of this scale negotiation. Thus, two of their
submissions called for a 22 percent ceiling and two called
for a 25 percent ceiling. The EU never clearly advocated
imposition of a 25 per cent ceiling, however, even when
pressed to do so by the G77, but merely said the issue of the
ceiling merited review as per Resolution 55/5 C. The EU also
attacked the G77 proposal to factor in population size in the
capacity to pay, saying the most important factor for
determining capacity to pay was a country's strength of
economy and world market share as reflected in gross national
income figures.


6. Mexico proposed two changes to the current methodology -
moving the base period from an average of six and three years
to an average of six and two years. The Mexican delegate
said they believed such a move would foster the necessary
balance between accuracy and political motivations. In their
explanation of position, Mexico indicated that they would
have preferred a base period averaging six and one years;
however, based on the Secretariat's earlier indications to
their delegation, a six and one year base period would be too
difficult to implement at this time. As a result, the six
and two year base period would serve as a just compromise.
Mexico stated that a shortened base period was detrimental to
least developed countries (LDCs) and economies in transition
since such nations encountered wide economic fluctuations.
Separately, the Mexican delegate also called for a low per
capita income adjustment of 80 percent, with the threshold
per capita income limit of the average per capita gross
national product of all Member States to be absorbed by high
per capita income States.


7. (U) In keeping with their proposals submitted in March of
this year, Japan submitted two variations for alterations to
the current methodology. Both proposals called for
shortening the base period to three years, basing LPCIAs on
debt stock, maintaining a ceiling at 22 percent, and an
annual recalculation of the rate of assessment. The first
Japanese proposal called for a P-5 floor of three or five
percent, while the second proposed a multiple gradient of
between 60 and 80 percent. Based on the explanations given
during the informal discussion and comments made by Japan in
private meetings, shortening the base period and instituting
a P-5 floor remained their top priorities, as Japan believed
these two elements best reflected capacity to pay.


8. (U) The Russian Federation proposed that the scale
methodology remain as it was currently, based on the same
criterion negotiated in 2000 (Resolution 55/5 B). They noted
that the present methodology was more balanced and less
political than the submissions of various delegations.

9. (U) The Fifth Committee will resume discussion on scale of
assessments on November 28. The discussion Coordinator
(Iran) expects to present a draft resolution to the Committee
based on all submissions by Member States at that time. The
UN Statistics Division also is expected to distribute charts
("machine scales") showing the various calculations for each
Member State based on the various methodological formulas
submitted by delegations, including the United States.

BOLTON