The OECD of the futureJuly 25, 2007 - nr.54
Conclusions and recommendations
This chapter sets out the main conclusions and recommendations.
Enlargement and tasks
In the AIV’s view, the question of enlargement cannot be viewed in isolation from the OECD’s future duties and aspirations. The AIV would therefore offer the following conclusions and recommendations:
- Unless the OECD incorporates the major emerging economies in some way, it will soon lose relevance.
- It must swiftly identify the countries which have not only indicated a wish to join the organisation on the basis of the four Noboru criteria (‘like-mindedness’, ‘significant player’, ‘mutual benefit’ and ‘global considerations’) and the fifth criterion proposed by the AIV – acceptance of and (eventual) compliance with the OECD acquis, consisting of its main conventions, schemes and principles – but are actually eligible for membership, as well as the countries which do not want to join or are not yet eligible to do so but should be associated with the OECD in some way. The former category could include such countries as Brazil, Chile, Israel and South Africa. If so desired, a transitional period in which the country can progress towards full membership in stages can be mutually agreed. The second category could include China, India and Russia. These countries have such major rule-of-law and/or economic problems that the AIV does not feel they should become members at the present time.
- The AIV has taken due note of the EU’s decision that eight of the new members of the Union should join the OECD. The AIV agrees, though it is concerned about what the consequences would be if they all joined at once. When these new EU countries join, the AIV feels there should be an agreement that the European Commission will act on behalf of EU member states on OECD matters covered by the first (economic) pillar of the Union.
- The AIV considers it risky to allow too many informal kinds of à la carte cooperation, as this will erode the core of the organisation. One essential part of the (broader) acquis, which should also apply to associate members, is willingness to provide the required statistical data.
- In combining closer cooperation with major countries that are unwilling or unable to join the OECD with the desire for more influence over the globalisation process, the organisation runs the risk of gradually becoming more political. In the light of this, the AIV would advise the government to re-examine the benefits and drawbacks of the ‘twopillar’ structure. The think tank and research functions for the purpose of national comparative policy studies could be accommodated within ‘pillar’ and the international policymaking task in the other. Each ‘pillar’ could then contain not only different decision-making mechanisms, but also different kinds of membership.
International institutional structure
The AIV has taken a mainly practical approach to the question of the OECD’s position within the international institutional structure (particularly in relation to the EU, the World Bank, the IMF, WTO and the G8). Its conclusions and recommendations are as follows:
- In general terms, the OECD’s position is unchallenged – indeed, it is very highly valued.
- Participants in OECD meetings often turn out to have an active role in other organisations, which naturally makes for a high degree of consensus. In general, practical cooperation between the various organisations is satisfactory. They complement rather than compete with one another.
- When it comes to coordination of monetary policy, the AIV does not believe the OECD has any real advantages over, say, the World Bank and the IMF, or indeed the G8.
- In addition to its traditional tasks, there are many who would like to see the organisation act as ‘co-manager’ of globalisation. As the AIV sees it, there seems to be little leeway for a guiding role in that area, and it is unrealistic to think that a group such as the G8 would accept the OECD as its secretariat. However, on the basis of its core task (comparative policy research), the OECD can provide important services for other organisations and forums, such as the G8.
- The AIV envisages an important role for the OECD in a number of specific areas of global coordination, such as consultation on development cooperation (in the DAC), taxation (and hence also corruption), science and technology, structural economic policy, the environment, migration issues, energy security and the supply of statistics.
Priority areas of work
The question of topics and areas of work that are suitable for priority treatment by an enlarged OECD and the question of the organisation’s specific benefits for Dutch policy are related, and the AIV has answered them together. Its conclusions and recommendations are as follows:
- The OECD decision-making process lacks a coherent long-term perspective.
- To issue well-founded statements on priorities, the AIV would need to make a thorough study of all OECD activities and correlate its findings with present and future Dutch policy on the broad range of topics that the organisation has to deal with. Only then can it determine where there is overlap and a need for change. The AIV does not believe it is the right body to perform such a task.
- This report may lead the various ministries to ask themselves how relevant the OECD currently is to their field of work, and in which areas they could derive greater benefits from the organisation than they do at present. Moreover, periodic reviews of the OECD’s activities and the adoption of ‘sunset clauses’ for OECD committees and working groups could lead to a attitude of permanent vigilance: why are ministries working in cooperation with the OECD, what do they get in return and what are they prepared to invest in this?
- It is the AIV’s feeling that strong ‘ownership’ on the part of the OECD is also of importance to the Netherlands. It therefore recommends that the government examine whether the OECD can be placed higher on the national agenda, among other things through good interministerial and ministerial policymaking activities, maintenance of contacts with businesses and NGOs, and efforts to promote the appointment of qualified Dutch nationals to OECD posts.
The AIV’s assessment of the importance of maintaining the OECD’s traditional working methods has led to the following conclusions and recommendations:
- The AIV is very pleased with the range of instruments that the OECD has developed in its more than 45-year existence (peer pressure, peer reviews, best practices and soft law). These methods are not based on the threat of sanctions, but rather on such concepts as voluntary compliance with agreements, cooperation, persuasion, proposal of alternative views and systematic comparison of strengths and weaknesses.
- One of the OECD’s main strengths is that its ‘products’ are accepted by those who make and implement policy in the member countries. Indeed, the organisation is able to produce such well-researched reports partly because those countries provide it with data to which private research bodies have little or no access.
The question of which organisational changes the OECD should make in order to function effectively after taking on new members and rethinking its priorities has led to the following conclusions and recommendations:
- The current decision-making process must be modified further in order to make the organisation more decisive. The qualified-majority decision-making system (including consensus-minus-one or consensus-minus-two) should be extended to include truly important decisions, although the positive aspects of consensus should not be overlooked.
- The membership criteria should be reviewed. In this connection, the AIV would propose that the criterion ‘acceptance of and compliance with the acquis’ be added to the four ‘Noboru criteria’.
- The SG’s authority in relation to the internal organisation and the Council should be increased. It is important for the SG to acquire his or her own authority, and one way of doing this is setting satisfactory priorities. The aim of strengthening the SG’s position should be to further improve supervision of the OECD’s work and to ensure that priorities are set more effectively on the major issues of concern to the organisation.
- The OECD has a number of conventions that provide for mandatory forms of oversight. The AIV is not in favour of extending this system. However, it does believe that the OECD can use its traditional working methods of peer review, peer pressure and best practices (if these are applied more strictly and worked out in greater detail) to encourage fuller compliance with agreements. Much can also be gained by improving external relations and communication and publicising the organisation’s successes more widely.
F. Korthals Altes Economic and Ecological Cooperation
Chairman of the Advisory Council Department
on International Affairs Transport and OECD Division
PO Box 20061 PO Box 20061
2500 EB The Hague 2500 EB The Hague
Date 7 March 2006 Contact Ciska Dijk
Our ref DES/TO-79/06 Tel. 070-3484984
Re: Request for advice on the OECD’s place in the international institutional architecture and its priority areas of work
Dear Mr Korthals Altes,
The Organisation for Economic Cooperation and Development was founded in 1960. OECD member countries belong to a group of like-minded countries that are committed to the market economy and forms of pluralist democracy. These countries began working together on macroeconomic and social topics, initially in the Organisation for European Economic Cooperation set up under the Marshall Plan. Increasing internationalisation and further interweaving of economies have made financial, social and economic policy coordination necessary. Over the years the number of subjects that the OECD deals with has risen considerably. The economic dimension of subjects like education, an ageing population, sustainable development, health care and migratory flows is also on its agenda. Highly valued by the Netherlands, the OECD has increasingly developed into an authoritative, normative international think tank in these areas. Using tools like soft law, peer pressure and best practices, it often serves a pre-negotiating forum.
The sharp increase in the number of subjects the organisation deals with, combined with relatively limited funds and a number of countries’ desire to join, is compelling it to rethink its aims, activities and membership. Internal reforms to make the OECD function more effectively and efficiently are made by consensus and are then implemented step by step. Until now, however, these initiatives have not gone far enough. Doubts have also arisen about the OECD’s relevance, not only because there are now major economies not included under its umbrella, but also because of developments in other forums whose activities partly overlap or resemble the OECD’s. An additional problem is that member states are becoming less willing to fund adequate increases in the regular budget, but are prepared to have the OECD perform specific activities by means of voluntary contributions. This increasing à la carte approach may require rethinking its habitual working methods.
At the moment the OECD is considering expanding its membership. Its member states and secretariat ascertained in 2004 and 2005 that to be and stay relevant the OECD must maintain active relations with, and at least in the long run include, major emerging economies like China, India, Russia and Brazil. Other, often smaller countries, including the Baltic States, Slovenia, Cyprus, Malta and Israel, have also applied for membership; this is also part of the discussion on accession.
It is unclear whether accession of or closer ties with less like-minded countries like China and Russia would be compatible with or strengthen the OECD’s current functions, as an instrument for world order, an organisation that sets norms for ODA spending, and an apolitical think tank for international and national policy planning and analysis of poverty reduction and globalisation. The question can also be posed to what extent other institutions – the EU, international financial institutions like the World Bank, the UN and specialised UN agencies – have in part taken over such OECD activities as policy planning and comparison and standard setting. Enlarging the OECD to include the big emerging economies would seem to give it the potential to make a greater contribution to shaping the international order, which is necessary in a globalising world. But here too the question can be posed whether other organisations like the UN and G8 are already playing this role. This seems therefore a good moment to reconsider the OECD’s priority working areas and subjects.
To better understand the role of an enlarged OECD in the international institutional architecture and for the Netherlands, and contribute to determining the Dutch standpoint on the OECD’s future, I would particularly like you to address the following questions in your advisory report:
- With which countries, at what pace, in what form and possibly on what conditions should OECD enlargement take place?
- Partly in view of question 1, how does the AIV see the OECD’s place in the international institutional architecture, particularly in relation to the EU, World Bank, IMF, WTO and G8?
- From an international perspective and given the importance the Netherlands attaches to international cooperation, what main working areas and subjects most lend themselves to being dealt with by an enlarged OECD?
- How important is it in the AIV’s view (both for the international community and for the Netherlands) that the OECD continue to use its characteristic working methods, such as soft law, benchmarking, peer review and peer pressure?
- What does the AIV see as the OECD’s specific added value for Dutch policy, and consequently what are the subjects that the OECD should preferably focus on?
- How must the OECD change as an organisation in order to be able to function effectively after enlargement and determination of its substantive priorities?
Given that the discussion of OECD internal reforms is currently under way in Paris, I would like to ask you to address the last question, on the organisational changes needed, with dispatch, with a view to deciding the Dutch contribution to the OECD’s deliberations at the end of April and the end of May.
I look forward to reading your advisory report soon.
Copies of this letter are being sent to the President of the Senate and President of the House of Representatives of the States General.
Minister of Foreign Affairs
Response to the AIV report “The OECD of the future”
I read the advisory report “The OECD of the future” by the Advisory Council on International Affairs (
Although the time now (2007) may not yet be ripe for reopening the reform debate, the
The general opinion of the
1. Enlargement and tasks
OECD enlargement came to a stop for a while following the accession of a new member (Slovak Republic) in 2000. It was unclear as to whether, and to what degree, the OECD would be able to absorb new members without first undergoing internal reforms. At the same time, there was also increasing pressure to reopen the debate on further enlargement. This pressure was caused not only by new applications for membership and the OECD’s pledge to Russia in 1996 that its membership was a shared goal, but primarily by a growing awareness that the OECD’s relevance would benefit from active cooperative partnerships with, and the eventual accession to the organisation of, important emerging economies such as China, the Russian Federation, South Africa, Indonesia, India and Brazil.
The enlargement discussions seemed to be going well in 2004 with the adoption of the Noburu criteria (like-mindedness, significant player, mutual benefit and global considerations) by the OECD ministerial meeting. A breakthrough, however, remained elusive since the member countries were unable to agree unanimously on which countries should be allowed to join.
I share the view of the
It is important to establish clear membership criteria to avert the scenario sketched by the
The idea that new members must comply with the OECD acquis has now found acceptance at the enlargement talks in Paris. In this regard, the
I have taken due note of the
I share the
While I understand the
Second, the OECD can create an additional platform for conducting a dialogue with Russia on the macroeconomic and financial situation in the country. Furthermore, Russia’s membership of the G8 and its future membership of the WTO must be included in any assessment for OECD membership.
Moreover, a third point emerged during the run-up to the ministerial meeting of May 2007, which included talks on enlargement. The discussion, which was almost deadlocked, seemed to be heading for a decision to enlarge the OECD by just a few smaller countries (including Chile, Israel and two EU member states). However, the Dutch position in the debate on enlargement was that at least one major emerging economy should join in the short term, since the OECD needed to boost its relevance (as measured by the portion of the world economy that it represents). Given that the other major emerging economies had not expressed any interest in joining and enlargement with only smaller countries could send the wrong message about the significance current members attach to the OECD, the Netherlands supported the proposal to begin talks with the Russian Federation on possible membership.
I agree with the
The ministerial meeting held in May 2007 did eventually result, after the inevitable round of negotiations, in an important, albeit first, step toward OECD enlargement. This was essentially an agreement on a negotiating mandate for the OECD Secretary-General to do the following:
· conduct talks with the Russian Federation, Estonia, Chile, Slovenia and Israel on OECD membership, with the OECD acquis forming an integral part;
· conduct exploratory talks with Brazil, India, China, South Africa and Indonesia on closer cooperation and possible OECD membership in the long term.
It was also agreed that countries that have submitted or are expected to submit an application for membership will be assessed individually. This latter category includes Bulgaria, Cyprus, Latvia, Lithuania, Malta and Romania.
One of the biggest challenges facing the OECD in the near future is therefore the successful completion of the enlargement process. This is primarily to be achieved by determining the method and the conditions by which countries may either become OECD members or be allowed to participate in the organisation’s activities.
On the other hand, more joint action at EU level is desirable with respect to institutional and governance issues. This was evident in some measure during the enlargement talks, but has not yet been apparent in discussions on financial dossiers. In line with practice at UN organisations, the EU Presidency could speak on the Union’s behalf, supported by the member states if necessary.
I do not share the
I share the
Owing to this uncertainty and the lack of any progress in Paris regarding future reforms of the OECD, I do not consider the examination of the benefits and drawbacks of the two-pillar structure with different tasks and types of membership, as advocated by the
2. International institutional architecture
I noted with satisfaction the
Closer cooperation in specific areas between the OECD and global organisations, such as the World Bank, WTO and specialised UN agencies, will be encouraged. Due in part to the resulting synergy, these types of cooperative partnerships yield higher-quality better-received products and often result in lower costs. Making the OECD’s analyses more globally oriented, as proposed by the
Regarding the global coordination of development cooperation that the
With respect to international trade, a larger role for the OECD within the WTO framework would seem difficult to reconcile with the non-global nature of the organisation. As the
Finally, I feel that the OECD’s visibility within the international institutional architecture could be improved further. A recognisable profile, a clear mandate vis-à-vis other international organisations and a coherent and consistent setting of priorities will boost visibility and help create a clearer image for the organisation. Greater political involvement by the OECD will make it easier to focus attention on the organisation.
3. Priority areas of work
It is no surprise that the
As for the
This, however, does not alter the fact that the OECD needs to make choices of its own since it lacks sufficient financial resources to comply with the wishes of all members. Consequently, a number of different instruments have been developed. In addition to the system of ‘sunset clauses’ recommended by the
4. OECD methods and organisational changes
Equally, I share the view of the
With respect to the proposed changes in the area of external relations and communication, I feel that the OECD should make more resources available to raise awareness of the organisation and its products and services.
 Bulgaria, Cyprus, Estonia, Latvia, Lithuania, Malta, Romania and Slovenia are not yet members of the OECD.
A press release is not available.