Department of State Report on the Meeting of the Council of Administration of the Universal Postal Union (UPU), Bern, Switzerland, October 22-26, 2001
Released by the Bureau of International Organization Affairs
November 7, 2001
This document summarizes reporting by Department of State officers on the annual meeting of the 41-member Council of Administration (CA) of the Universal Postal Union (UPU), held in Bern, Switzerland, from October 22 to 26, 2001. Guozhong Huang of China is the Council chairman.
This report covers reform-related, budgetary, and administrative discussions of the Council of Administration, as well as technical postal issues. The centerpiece of the meeting was the consideration and ultimate approval of the recommendations for reform proposed by the Council's High Level Group (HLG) on the Future Development of the UPU. The CA also discussed issues of postal security in light of recent discoveries of anthrax in various mail systems, extraterritorial offices of exchange (ETOEs), UPU financial regulations, UPU relations with the World Trade Organization (WTO), and plans for the next UPU Congress, to be held in Abidjan, Cote d'Ivoire, in 2004.
The U.S. delegation to the CA was led by Ambassador E. Michael Southwick, Deputy Assistant Secretary of the Department of State's Bureau of International Organization Affairs (IO), and included Neil Boyer and Heather Von Behren of IO; Michael Regan, Director of International Postal Affairs of the U.S. Postal Service, and Lea Emerson and William Alvis of USPS; Mary Townswick of the U.S. Mission in Geneva; and David Spence, a representative of Federal Express, a private express delivery company. The United States was the only CA member to include a representative of the private sector in its delegation.
Reform Proposals Approved
The Council approved without change the proposals for reform put forward by the High Level Group. The HLG recommended that the UPU remain an inter-governmental organization with membership limited to governments. However, it stressed the need for the UPU to open itself up to the private sector. Thus, it recommended the creation of a "third circle," a new UPU body roughly comparable to the Council of Administration and the Postal Operations Council, to be called the "Consultative Committee" (CC). This would consist of key postal stakeholders (private express couriers, international mailers, equipment manufacturers and suppliers, trade unions and others interested in international postal affairs) and a limited number of member governments. The CA would establish criteria for membership and make decisions on applications. The new Consultative Committee would meet twice a year to learn about and discuss key issues under review within the UPU and to make recommendations on postal issues. The members of the Consultative Committee would also be permitted, upon request, to observe and participate in meetings of the major governing bodies of the UPU: the Council of Administration (CA), the Postal Operations Council (POC), and the Congress.
Formal creation of the Consultative Committee would require approval by the UPU Congress of changes in the UPU General Regulations, and the CA recommended that the 2004 Congress give this approval. In the meantime, the CA approved a resolution that authorized members of the private-sector Advisory Group, created under authority of the 1999 Congress, to be invited to plenary and committee meetings of the CA. It also recommended that the POC approve a similar procedure, and it was understood that the management committee of the POC, meeting at the end of the CA session, decided that invitations to Advisory Group members to attend the April 2002 POC session would be issued in advance of that session and need not await formal approval of the POC plenary. Following the CA's decision, the UPU staff issued a news release that declared "UPU Opens up to the Private Sector."
During the CA discussions, a few members expressed concern that the proposals would have negative impact on developing countries, allowing private-sector institutions -- inevitably from the industrialized world -- to join with industrialized member states in defining UPU policy. Barbados, which had been vocal throughout the reform process on this point, in the end noted that although it had problems with some parts of the report, it trusted that developing countries would be given proper attention in the implementation of reforms. The UPU staff stressed that this was indeed accurate and pointed out that LDCs had not only been strongly involved in the HLG decision process, including its membership and chairmanship, but also stood to benefit from the result.
Japan was the only CA member to express a serious objection to the HLG proposals, arguing that private sector agencies should not be admitted to meetings of the CA if UPU's sister organization, the International Telecommunication Union (ITU), did not allow the private sector into its Council meetings. UPU staff replied by explaining that the ITU had a very advanced system for private participation in sector councils, a process that did not exist in the UPU. The staff also said that an ITU plan, on the verge of implementation, would permit observers from the private sector to attend its council meetings. Japan did not press the point. One other concern came at the end of the meeting, when Canada, which had regularly raised problems during the evolution of the reform consensus, took the floor to argue (from a position as an observer at this meeting) that the UPU news release on the reform decisions was provocative, embarrassing and misleading and should have said UPU had been opened to "civil society" rather than "private sector." The U.S. delegation said the release was accurate and acceptable the way it was originally written.
During the debate, U.S. chief delegate Southwick said the United States was pleased at the outcome, which showed the determination of many countries to achieve a positive result. The consensus reflected a careful balance, he said. There was a serious need to open the UPU doors to wider and deeper relations with all postal stakeholders. Southwick said the United States appreciated the staged, transitional implementation plan that would provide for a trial of the new system up to the Abidjan Congress in 2004. The new plan would open up more possibilities for developing countries to improve their postal operations. Approval of the recommendations, he said, would send a strong signal to the entire world that the UPU is strong and confident about its future.
After much discussion (19 countries expressed their views on the reform proposals), the HLG proposals were declared approved. Besides the recommendations on openness to the private sector, the CA approved a revision of the mission statement of the UPU, agreed that the UPU Congress will henceforth be held every four years instead of every five, and made recommendations on financing of the UPU and revisions of the UPU Acts. The CA also approved a revised draft of the UPU convention and final protocol and recommended that it be submitted to the 2004 Congress for approval. Proposals for changes in the Acts that are submitted to the 2004 Congress are to be based on this draft rather than on the 1999 convention.
Many countries expressed their gratitude and praise for Young-su Kwon, of the Republic of Korea, chairman of the HLG, and for members of the HLG, for their hard work over the past two years. In the spirit of the moment, UPU Director General Thomas Leavey (U.S.) presented Kwon with an award in appreciation of his dedication to UPU reform.
Comment: The United States is especially pleased with this move toward openness and transparency, which U.S. representatives had promoted throughout the eight meetings of the High Level Group. Despite strong divisions on this issue at the 1999 Beijing Congress, and despite continuing concern about the requirements of openness from a few countries -- notably Barbados, Japan and Canada -- the HLG over its two-year cycle gradually evolved a spirit of consensus in order to put these proposals forward. The United States believes that private-sector stakeholders should take advantage of the opportunities that have been created and demonstrate over the period leading up to the 2004 Abidjan Congress that private-sector participation in UPU activities and meetings will be constructive and mutually beneficial to all participants. End comment.
Advisory Group Support for Reform
The chairman of the private-sector Advisory Group, Felix Muriel (Spain), summarized the group's meeting in Geneva on October 11, 2001. Members of the Advisory Group had been pleased with the report of the High Level Group. They considered it a great contribution to UPU, he said, and approved all of its recommendations about the new Consultative Committee and its role in the future structure of the UPU. Muriel said the HLG proposals offered light and hope, and infinite possibilities for the future, especially in regard to help for developing countries. He said the private-sector organizations were ready to be cooperative colleagues and fair competitors. The time has come for change, he said, because a "sleeping shrimp can be carried away by the current." During the Advisory Group meeting, Muriel said, the Director General had urged that the Advisory Group disseminate its work and expand its membership. He had stressed that the new Consultative Committee marked a major step forward towards greater UPU openness.
In regard to the financing of Advisory Group activities, previously a contentious subject, the chairman was pleased to announce that after much discussion, the Group had agreed that the UPU would charge a "membership fee" for the private members of the Advisory Group, basically to cover the costs of documentation and interpretation, and that it recommended implementation of the same arrangement in the new Consultative Committee. The agreed-upon fee, referred to as the "annual contribution and subscription fee," would amount to 2,000 Swiss francs per member per year (about $1,200).
Continuation of Reform
Following up on another HLG recommendation, the Council agreed that UPU reform must continue and that its Committee 1 (headed by B. N. Som of India) should carry on the work identified and begun by the HLG. To pursue this, Committee 1 established two new project teams. The "Management of the Work of the Union Project Team" will study the use of the term "postal administration," regulation of postal market players, respective responsibilities of operators and regulators, the transition of the private-sector Advisory Group to the new Consultative Committee, including criteria for membership in the Consultative Committee, and the role of the UPU in extraterritorial offices of exchange (ETOEs). The 13 members of Project Team 1 will be Brazil, Cote d'Ivoire, Germany, Hungary, India, Japan, Korea, Morocco, Netherlands, Russia, Spain, United States of America, and United Kingdom. Jan Wright of the UK was elected as chairman. Canada, Portugal, and China will be observers.
The "Acts of the Union Project Team" is charged with continuing the work of the HLG ad hoc group on the recasting of the Acts. Areas to be studied include the legal status of reservations to the UPU Acts, proposals to harmonize language and clarify provisions of the Acts, and development of guidance for the Terminal Dues Action Group, the Liability Project Team, and other groups regarding definitions for terms used in the Acts. Project Team 2 consists of seven members: Cote d'Ivoire, India, Japan, Switzerland, Tanzania, the United States of America, and United Kingdom. William Alvis (U.S.) was elected chairman. Belgium will act as observer.
The UPU and the Terrorist Attacks of September 11, 2001
Significant amounts of time were devoted during the CA meeting and the accompanying one-day session of the Postal Security Action Group (PSAG) to discussion of misuse of the mail for terrorist or criminal activity. Making special note of the tragic events of September 11, 2001, the Council paused in silence for one minute in memory of those who lost their lives and in support for the postal workers presently in danger of anthrax exposure in the United States. U.S. chief delegate Southwick expressed appreciation for the many expressions of concern and condolence, noting that citizens of more than 80 countries had lost their lives in the New York City attacks.
The CA adopted a resolution reaffirming the UPU's solidarity and commitment to the recent resolutions adopted by the UN Security Council and General Assembly in response to terrorism. The resolution also focused on a commitment to combat the use of the post as a vehicle for terrorism and appealed to members to coordinate security activities with the UPU in the global fight against terrorism. The Director General stated that he would be certain to transmit the resolution to the UN Secretary General and other UN bodies.
Director General Leavey also discussed his participation in a recent meeting of the UN's Administrative Committee on Coordination, convened by UN Secretary General Kofi Annan. Leavey said he had pledged to the Secretary General that the UPU would work to ensure safe delivery and security of the post and work with authorities to track down criminal activity occurring via the universal post.
The report to the CA of the Postal Security Action Group (PSAG) focused on prevention of injuries and preservation of confidence in the post. PSAG stressed that, although there was a real fear about misuse of the mail, it was important to respond with facts. It reiterated the statistics that there had been only three confirmed cases of anthrax but that 21 billion pieces of mail had been processed and delivered from September 11th up to the date of this meeting. Russia expressed its concern with the media's role, arguing that it was dangerous to create hysteria and stressing that the public need for objective information and trust in the post had to be retained. PSAG directed members of the CA to the U.S. Postal Service website (www.usps.gov), which contained accurate and comprehensive information about anthrax and precautions that postal services should take to counter the threat. UPU said it had established a new email address email@example.com for postal services worldwide to report incidents.
Relations with the World Trade Organization (WTO)
Anthony Alverno of the U.S. Postal Service was elected chairman of the CA's project team on relations with the World Trade Organization. At the meeting of the project team on October 19, 2001, the team approved a revised work plan proposed by the chairman. The major objective of the plan is to provide UPU members with information to enable them to understand and address the implications and developments in wider trade policy as they affect postal services at the national level.
The Advisory Group chairman reported that at the group's October 11 meeting, a representative from the WTO had presented an overview of the progress of WTO work on services. According to the Advisory Group chairman, the WTO representative said that the issue of terminal dues was not very well understood in the WTO, in particular its relationship with the "most favored nation" obligation. The chairman of Terminal Dues Action Group (TDAG) said that the WTO's concern with the most favored nation clause played an important role in the work of the TDAG, which wished to further develop its cooperation with the WTO. The UPU secretariat later told the CA plenary that it was working on a paper to explain to the WTO the situation concerning the relationship between WTO policies and UPU terminal dues; the paper should be available to UPU members by March of 2002. In response to a question about the trumping order of WTO regulations and the UPU Convention, the UPU staff said that the newest act generally prevails. Although the UPU convention is older, it had been revised in Beijing as recently as 1999.
At the project team meeting, questions had been raised about the status of the Memorandum of Understanding (MOU) between the WTO and the UPU that had been proposed by the CA in 2000. The UPU had transmitted the draft MOU to the WTO on November 6, 2000, with information about the UPU and the benefits of an MOU between the UPU and WTO. However, at the WTO meeting in December 2000, there was an apparent dispute over establishment of observer status between the WTO and a number of other organizations, and many delegations had said that they would not like to see an MOU signed with UPU or other organizations until observer status had been approved. Mercosur had advocated stronger cooperation between the WTO and the UPU, including mutual granting of observer status at relevant meetings. The issue was awaiting further clarification from the WTO.
Extraterritorial Offices of Exchange (ETOEs)
The Council devoted a considerable amount of time to the emerging concerns about postal administrations that establish extraterritorial offices of exchange (ETOEs). Attention focused on the recent emergence of exchange offices established by developing countries in industrialized countries in order to attract business that could benefit from the lower terminal dues. (The U.S. Postal Service had announced to UPU member states in early October 2001 that it would not accept items tendered by ETOEs established for commercial purposes on the basis of UPU documentation and for compensation at UPU terminal dues rates. Such items would be subject to appropriate domestic postage. The U.S. view is that UPU policies do not apply in these cases and that national law in each country should determine how such items are handled.)
The CA requested its Committee 1 to study the issue and determine: 1) whether ETOEs are included under the concept of the "single postal territory"; 2) whether it is necessary to clarify the issue in the UPU Convention; 3) whether the status of items exchanged by these offices should continue to be a matter for national legislation; and 4) whether Article 43 of the UPU Convention, dealing with remailing, may be applied to items received from these offices.
The UPU staff provided the CA with a detailed presentation of what constitutes extraterritorial offices of exchange and the implications for UPU. There followed extended debate over a proposed resolution. Many countries expressed their concern with ETOEs and supported the proposal for further study. However, others argued there was no need for a resolution and that if one was approved, it would set a precedent that ETOE traffic should fall under the UPU Acts. The UPU staff said it should be clear that nothing in the resolution could be construed as requiring an administration to accept items from an ETOE as mail under the UPU Acts. After extended debate, the resolution was approved, and a study will be undertaken by the CA's Committee 1.
At the end of the discussion, several countries expressed a desire to know where ETOEs currently existed, arguing that they appeared to be undertaking a type of ABC remailing that was covered by Article 43 of the convention. The Director General replied that UPU does not have specific information on ETOEs, including their location. He said that only the destination country could supply the information. Pakistan made a final plea to UPU brotherhood and urged member states to refrain from flouting the laws and rules of the UPU by engaging in the development of ETOEs.
A report from the Terminal Dues Action Group (TDAG) indicated that the group is fine tuning its work on proposals for revision of the terminal dues system for presentation to the next Congress, including the new one rate per country. It anticipates that testing for a quality of service link to terminal dues (e.g., higher payment for better service) will begin by 2003 and implementation by 2004.
Following a report by the Standards Board, which seeks to set technical standards for a range of postal activities, a question was raised as to whether the UPU standards should be mandatory for its members. The SB representative said that, since the standards are not part of the Acts of the Union, members do not have an obligation to adhere to them. The standards should be viewed as "enabling" rather than "enforcing." However, the SB did note that it is possible that some standards might become mandatory for the UPU membership.
The Director General inquired as to whether the CA believed the SB should issue the standard codes for extraterritorial offices of exchange. France added that there first needed to be a secure understanding of ETOEs before work could be done on them. The SB stated that it would make available to the project team that is handling the issue of ETOEs codes for the "International Mail Processing Centers" (IMPCs) that could be used to identify the ETOEs. However, it reminded the CA that the SB would have to rely on information provided by member states regarding the location of ETOEs.
The Postal Development Action Group (PDAG) reported that it had decided to focus on the following goals for its projects for 2002-2004: 1) increase access to multilateral investor resources; 2) raise awareness among postal reform "decision makers"; and 3) monitor success. Additionally, PDAG would consider regional workshops on the postal reform process a priority. PDAG reported that following the meeting held on April 20, 2001, the UPU Director General, the PDAG Chairman, and senior World Bank officials, had signed a Letter of Intent on cooperation between two organizations. The Director General stressed the importance of PDAG for future development and said the World Bank had pledged to support projects submitted by the UPU. However, he also noted that economic analysis must be done for all project proposals to justify the loans.
Members and UPU staff on several occasions made reference to the recent assignment by USPS of postal development and reform expert Juan Ianni to the World Bank, and expressed optimism that this new role would lead to increased World Bank interest and cooperation in postal development. Great Britain said it had developed a booklet stressing the importance of economic reform to the post, and this would be available to UPU members in the near future.
Financial and Administrative Issues
The CA considered a number of financial and administrative questions:
Reduction of Contribution Units. The CA was asked to take a decision regarding Guatemala's request for a reduction in contribution class, from 3 units to 1. UPU staff said that retroactive changes were not possible, but a two-year temporary change could be made if the CA approved. Staff said that under UPU policy requests for a reduction in contribution class were granted in the instance of a natural disaster. However, Guatemala had not cited a natural disaster, but rather financial difficulties. The staff had asked Guatemala to provide documentation to support its request, specifically the occurrence of a natural disaster, such as a hurricane, but Guatemala did not respond.
The U.S. delegation said that the CA needed to be careful in considering these questions. The UPU regular budget was supported entirely by the contribution units accepted by each country (the United States provides 50 units, which equals about 5.7% of the regular budget). The cost of each unit would increase if the budget remained the same and a reduction in units was approved for any UPU member. In that event, contributions required of all members would increase. The U.S. delegate proposed that the decision be deferred until next year and the staff should ask Guatemala to provide additional information to support its request. China supported this proposal, and the CA agreed.
External Audit Report. The external auditor submitted his report on the audit of the Union's 2000 financial statement and issued his audit certificate without reservation. In regard to a recommendation from the previous audit regarding the need for cooperation with the internal auditor, he noted that the UPU staff had been willing to release the internal auditor from his other duties during the account-closure period so that he could assist with work on closing the-end-of-period accounts.
Report of the Internal Auditor. The internal auditor presented his first report to the Geneva Group and the plenary session of the Council of Administration. The creation of the position for internal audit and oversight has been a major initiative of the United States throughout the agencies of the UN system. The broadened function in UPU had been approved by the CA in 2000. The auditor said his activities were in three primary areas: 1) development of reports for the Director General; 2) drafting working documents for the external auditor; and 3) participating in working groups within the organization. The U.S. delegation said it was pleased to receive the report, but it would like to know more about the auditor's recommendations, the financial savings that had accrued to UPU, and the intentions for future studies; it hoped that such information could be included in future reports. The staff said this was a reasonable request.
The U.S. delegation expressed its satisfaction with the efforts for oversight and transparency, but was concerned that the internal auditor position was only part-time, rather than full-time. The delegate argued that the amount of work expected from the internal auditor merited a full-time position. The staff said that, due to the zero nominal growth policy, the budget did not permit the position to be full-time and that work would be allocated appropriately in light of the part-time schedule.
Evaluation. A special report on evaluation of the complex tactics in the 2000 program and budget was presented. This included, for each tactic, a symbol showing a smiley or neutral or sad face indicating whether progress was being made. The evaluation coordinator stressed the importance of the performance indicators, which were being continuously improved. The U.S. delegation noted that there were no sad faces in the report and wondered why, since it was inevitable in any organization that some projects would not work out as expected. The U.S. delegate argued that the staff should have no fear in presenting the CA with a frank and open audit so that member states who were paying the bills could get an accurate assessment of what was going right and what was not. Participants in the strategy group said there had not been time to refine the evaluative mechanisms for this first review of the new program budget, but the next report certainly would show some sad faces.
UPU Financial Status. The chairman of the finance committee introduced the Financial Operating Report for 2000 and stated that, although he found the Union's financial position satisfactory, attention should be paid to the Reserve Fund (approximately 2.3 million Swiss francs), which had fallen sharply in comparison with its status in the financial year 1999. The drop was due to the increase in late payments and arrears of contributions. He also noted that the drop was disturbing for the reason that the next Congress would be financed out of the fund and the cost of the last Congress had been over 2.5 million Swiss francs.
UPU Financial Regulations. The UPU staff had requested an amendment to the UPU Financial Regulations to allow the Director General authority to transfer 3% of the total budget between the three chapters of the budget accounts over the period of a biennial budget, if necessary. This would be a change from the current regulations that prohibit the Director General from transferring funds between chapters without the specific approval of the CA. U.S. Delegate Boyer said the United States recognized the need for flexibility, but thought the proposal permitting movement of 3% of the total budget was excessive, as it would permit shifting of approximately 2.1 million Swiss francs. The United States would prefer to allow the Director General to transfer a maximum of 5% into or out of each chapter, rather than 3% of the total budget. The Director General could always return to the CA to request specific authority to move larger amounts of money in exceptional circumstances. However, there was no support for the U.S. proposal, and the Director General's request was approved. The U.S. delegate expressed his hope that the Director General would use this authority sparingly.
The UPU staff had presented to the CA a proposal that it recommend approval by the UPU Congress of UPU accession to the 1986 Vienna Convention on the Law of Treaties between States and International Organizations or between International Organizations. However, Committee 1 reported that in order to allow member countries to consult their ministries of foreign affairs on the issue, it would postpone any decision regarding the accession until the 2002 CA.
UPU 2004 Congress
The Cote d'Ivoire presented its plan for the organization of the 23rd UPU Congress to be held in 2004 in Abidjan, stressing that it was preparing for the Congress both politically and economically. The delegation said it is currently in the process of national reconciliation and has recently renewed economic cooperation with the European Union, the International Monetary Fund and the World Bank. It was proud to report that a national and international security plan was currently in place, as well as emergency medical facilities. It noted that authorities are still assessing offers pertaining to the necessary technological capabilities and transportation that will be needed for the event. Tentatively, the Congress will be held from September 22 to October 16, 2004.
The Postal Operations Council will meet in Bern on April 8-19, 2002.
The next meeting of the Council of Administration will be held in November 2002. Morocco pointed out that the originally scheduled dates for the annual meeting conflicted with Ramadan, and the staff subsequently altered the dates to accommodate the holiday. Thus, the CA meeting will open in Bern on Friday, November 1, 2002, and run through Thursday, November 7.
The UPU Strategic Conference will be held in Geneva on October 29-31, 2002, immediately preceding the CA session.
The private-sector Advisory Group will meet in April and October 2002, adjacent to the POC and CA meetings.
The CA Committee 1 project teams dealing with further reform will meet twice a year, also on a timetable coinciding with the POC and CA meetings.