Wednesday, November 01, 2006

Meddling With UN Finances

It wasn’t so long ago that the Bush administration floated the idea that UN assessments for certain operational agencies in the UN Secretariat, for specialized agencies, and even for peacekeeping be made voluntary. Now there is a new, more fundamental change in the works, and it won’t be good news for the UN if the U.S. has its way.

But first, a thumbnail sketch of the assessment question.

Throughout the 1990s, Congress objected to the formula for determining the amount of the assessment for UN operations. The percentage of the UN budget assessed each country was based primarily by Gross National Product (GNP), a number that could be objectively determined by the UN. The U.S. assessment was the highest, at one point somewhere around 33% of the projected budget for peacekeeping operations worldwide and about 30% of the UN’s operational budget. But the U.S. fell so far behind in paying its assessments that it teetered on the brink of losing its vote in the General Assembly.

After years of arrearages, Senator Jesse Helms (SC) and Senator Joseph Biden (DE) struck a deal in 1998 under which, in return for “reforms” of the UN, Congress would enact legislation to eliminate the peacekeeping arrearages. As part of the deal, the U.S. unilaterally lowered its percentage of the regular assessments to 22%, leaving the UN General Assembly holding the bag for the rest.

After the regime in Baghdad was ousted, the U.S. wanted the UN to help with the reconstruction of Iraq – but only where the U.S. would allow the UN to operate. The UN’s chief representative, Serjio de Milo, refused to be hamstrung. The dispute was interrupted by a suicide car bomb that detonated just outside the UN headquarters in Baghdad in August 2003, killing 21 international and local employees, including de Milo. UN personnel were pulled back to Jordan.

Back in the U.S., financing became a crisis again when, in 2005, Representative Henry Hyde (IL) introduced another set of UN “reform” measures. Among other provisions, the legislation directed U.S. representatives to “oppose the creation of new, or expansion of existing, United Nations peacekeeping operations” until reforms in the Department of Peacekeeping Operations and in the General Assembly were adopted.

The whole tenor of the legislation was anti-peacekeeping. The original draft of the Hyde bill, H.R. 2745, included a unilateral U.S. declaration that it would pay for no more than 25 percent of the amount assessed for each operation. Moreover, Hyde called for “right-sizing” and “cost effective” missions, conditions that fly in the face of the unpredictability inherent in such operations. In particular, Hyde’s implicit call to terminate long-standing, “static” operations that “cannot fulfill their mandate” would require impossible foresight.

Now, the U.S. is proposing to abandon the GNP basis for determining assessments for a scheme based on “purchasing power parity” or PPP. This is a scheme that looks at how much of a nation’s currency is needed to buy a “shopping cart of goods” and then comparing that to how much it costs other countries. U.S. supermarkets employ this technique, the object of which is to compare costs with rivals and thus “demonstrate" one’s higher standard of living because the extra money saved can be spent elsewhere.

If adopted, economists project that U.S. assessments would decline only half a percent. What the change could do, if adopted, is so increase assessments of rapidly developing countries that these countries could not pay, thereby wreaking more havoc on UN finances than is now the case. A country would, in sheer self-defense, manipulate the content of its “basket” to minimize increases in the basket’s total value when compared to the “basket” of another country. All this assumes that data on costs of the “basket” are kept and are current, which is highly questionable. Moreover, a base currency for comparisons is needed. This probably would be the dollar, so the value of the basket when converted from a local currency to the base currency for comparison would be skewed by the relative strengths of each currency vis-à-vis the dollar.

The bottom line? The U.S. is in no position to try further meddling in the UN operations on which Washington depends so heavily. What the Bush administration ought to do is pay arrears and request enough money to pay peacekeeping costs for current and projected missions. After all, compared to what the U.S. is paying for Iraq and Afghanistan, UN peacekeeping is one of the best bargains around.

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