Recognising the need to further expand the OECD’s global reach, policy impact and relevance, the ministers welcomed the report on Enlargement and Enhanced Engagement. They underlined the importance of Brazil, India, Indonesia, China and South Africa in the world economy, noting how their policies and activities have global impact and affect the issues addressed by the OECD.
They also considered that the OECD experience of ‘good policy practices’ could be of interest to these countries. They invited the organisation’s secretary-general to strengthen OECD’s cooperation with these major players through a process of enhanced engagement or as full members.
Russia was regarded as a special case because of its historical relationship with the OECD. The ministers considered that the accession process would help foster their reform agenda and ensure its implementation and sustainability. Chile, Estonia, Israel and Slovenia are said to have been actively engaged in OECD work for some time and benefited from OECD good practices. They have confirmed their wish to become members.
The OECD is a unique forum where the governments of 30 market democracies work together ostensibly to address the economic, social and governance challenges of globalisation as well as to exploit its opportunities.
The organisation is a group of like-minded countries. Essentially, membership is limited only by a country’s commitment to a market economy and a pluralistic democracy. It is rich, in that its 30 members produce almost 60 per cent of the world’s goods and services, but it is by no means exclusive.
Non-members are invited to subscribe to OECD agreements and treaties, and the organisation shares expertise and exchanges views on topics of mutual concern with more than 70 countries worldwide, from Brazil, China and Russia to least developed countries in Africa.
The OECD grew out of the Organisation for European Economic Co-operation (OEEC), which was set up in 1948 with support from the United States and Canada to co-ordinate the Marshall Plan for the reconstruction of Europe after World War II
Created as an economic counterpart to NATO, the OECD took over from the OEEC in 1961. The OECD is funded by its 30 member countries. National contributions to the annual budget are based on a formula related to the size of each member’s economy. The largest contributor is the US, which provides approximately 25 per cent of the budget, followed by Japan. With the approval of the Council, countries may also make separate contributions to particular programmes not funded from the main budget.
The size of the OECD budget – around 336 million euros a year – as well as its programme of work is determined by the Council of Ministers.
Countries of South East Asia, many of which are not real democracies in the true sense of the term are regarded as having highly dynamic and influential economies, and therefore deserving further attention of the OECD with a view to identifying possible members.
At the Paris meeting the ministers stressed the importance of a financing reform to take into account the implications of an enlarged organisation.
Clearly, the OECD appears to have decided to become more active in promoting globalisation as a major engine of economic growth. The organisation argues that more open OECD economies have tended to grow faster than less open ones and that the increased international economic integration of populous non-OECD countries has been instrumental in promoting prosperity and reducing poverty.
The organisation dismisses the severe side-effects of globalisation in developing countries as adjustment difficulties and argues that as open markets entail the creation of jobs in sectors where new opportunities arise, job losses are seen in declining sectors and occupations. Therefore perceptions of job insecurity – especially in high-unemployment countries – and other threats perceived as coming from increased global integration according to the OECD are wrong.
The ministers discussed the macroeconomic outlook as well. They welcomed the dynamism of the recovery and the fall in unemployment in Continental Europe, as well as the sustained momentum of the expansion in Asia. They glossed over the US slowdown attributing it to mostly adjustments in the housing market, which it believes did not seem to be spilling over to the rest of the economy. Some concerns were voiced with respect to energy prices, the role of hedge funds, the rich valuation of some types of assets and the evolution of current account imbalances, notwithstanding the recent decline in the external deficit of the United States.
Ministers noted that despite the disinflationary effects of globalisation, inflation is close to or even somewhat above comfort levels in some OECD countries, partly owing to higher energy prices but also as a result of shrinking economic slack. The main exception is Japan, where the exit from deflation is slow despite sustained growth in activity. On the fiscal side, ministers underlined the need to take advantage of revenue buoyancy to consolidate public finances, not least in view of the spending pressures that are building up as population’s age.
Though tottering , the Doha Development Agenda is seen by the OECD as providing a welcome opportunity for more open trade to contribute to growth of the world economy, and in particular to improve economic prospects for developing countries. The OECD believes that a successful conclusion of the Doha negotiations will endorse the multilateral trading system, and contribute to global economic governance and sustainable growth based on mutually agreed rules and concerted action, avoiding the risk of trade conflicts. Ministers stressed the importance of providing aid for trade to developing countries, so trade can work as an engine of growth.
They welcomed the suggestion from Sweden and the Netherlands for the OECD and the IEA to undertake further work on issues related to the production and use of bio-fuels, including the promotion of increased use of bio-fuels. The study would be presented prior to the 2008 OECD Ministerial Council. Representatives from Argentina, Brazil, Chile, China, Hong Kong, China, India, Russia and South Africa participated actively and enriched the deliberations of the session.