This chapter sets out the main 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.
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.
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 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 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.
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.
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.
I read the advisory report “The OECD of the future” by the Advisory Council on International Affairs (AIV) with gratitude and appreciation. The report is very informative and balanced and, by including a summary of the organisation’s history, gives a good impression of the development of the Organisation for Economic Cooperation and Development (OECD) since its foundation in 1961. By combining the summary with a strengths and weaknesses analysis, the report highlights very clearly the challenges that lie ahead: challenges regarding the nature of the OECD’s work and challenges concerning the organisation’s institutional structure, which, consequently, also influence the OECD’s role and place in the international institutional architecture.
When the AIV was asked in March 2006 to produce an advisory report on the OECD, discussions had already been ongoing for some time at the OECD on internal reform and enlargement. These issues, together with the requested evaluation of the OECD and its position in relation to other multilateral institutions, formed the basis for the request for advice. High-level discussions in April 2006 resulted in agreement sooner than expected on a number of changes to the OECD’s governance structure (confirmed in May 2006 by the organisation’s ministerial meeting).
Although the time now (2007) may not yet be ripe for reopening the reform debate, the AIV’s recommendations have lost none of their relevance. The expected long-term enlargement of the organisation will undoubtedly place issues such as effectiveness, decision-making, priority-setting, etc. back on the agenda at some future date. The AIV advisory report could serve as a useful tool and guide for the Netherlands on undertaking such discussions in the future. The report is also a valuable source of inspiration for the Dutch position on subjects currently on the table.
The general opinion of the AIV that the existence of the OECD is extremely valuable reflects my own fundamental view of the organisation as an international, authoritative, standard-setting think-tank. Consequently, I largely endorse the recommendations of the AIV and will substantiate my reasons below.
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 AIV that since there are no important emerging economies among its members, the OECD is not globally representative and is unable to implement a global agenda effectively. I therefore consider it of prime importance that the OECD, if it wishes to remain a relevant player, involve the major emerging economies in its activities to a greater extent. Of equal importance is the positive effect that closer cooperation or membership will have on enhancing international convergence on macroeconomic, financial and social issues.
It is important to establish clear membership criteria to avert the scenario sketched by the AIV in which new members attempt to change the nature of the OECD’s work and possibly compromise the character and quality of the organisation. Although the existing Noburu criteria provide good starting points, the inclusion of a fifth criterion, namely the acceptance of the OECD acquis, as proposed by the AIV, would build in additional guarantees.
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 AIV calls the acquis the ‘main conventions, schemes and principles’ of the OECD. While certainly valid, this standpoint still requires further fleshing out so that the organisation can properly assess whether candidate countries are approaching or, indeed, already meet the requirements of full membership.
Like the AIV, I believe that a form of association (known in OECD terminology as ‘enhanced engagement’) should be entered into with countries that either do not wish to join the organisation or do not yet qualify for membership. Tailored arrangements or association schemes, regional or otherwise, can provide a good alternative for these countries. Although these forms of cooperation should not, in my opinion, automatically lead to membership, we have had positive experiences in the past with countries that have been guided toward full membership under similar ‘supervision’.
I have taken due note of the AIV’s assessment that while Brazil, Chile, Israel and South Africa are eligible for OECD membership (perhaps via a transitional period involving progress in stages), China, India and Russia, owing to serious rule of law and/or economic problems in those countries, have some way to go yet.
I share the AIV’s opinion with respect to Chile, Israel and South Africa. India and Brazil appear to have an ambiguous attitude toward OECD membership since accession to the organisation would mean relinquishing their roles in the G77. China has not yet expressed any interest in joining the OECD. Closer cooperation with these countries in the form of an association scheme would therefore seem reasonable.
While I understand the AIV’s hesitant attitude with respect to full membership for the Russian Federation, there are a number of other considerations that must be included in the final analysis. To begin with, the Russian Federation is the only major economy that has actually applied for OECD membership (10 years ago) and both Russia and the OECD have declared Russia’s eventual membership to be a shared objective. This has created a historic bond with the OECD which cannot simply be ignored.
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 AIV that eight new members of the EU should join the OECD, although not necessarily at the same time. The larger OECD countries have, after all, repeatedly expressed their lack of enthusiasm for the accession of, in their eyes, ‘small’ countries and the increasing Eurocentricity of the OECD.
· 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.
The AIV’s recommendation that, as new EU member states accede to the OECD, 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) EU pillar is an interesting one that deserves more in-depth specification. In the interest of making membership of all EU member states acceptable to the other OECD members, we should not rule out the future prospect of increased joint action by the EU countries in certain areas within the OECD; one obvious example of this being dossiers where the European Commission has exclusive competence. Dossiers involving shared competence may not be quite as straightforward, if only because the EU member states currently do not tend to accept the European Commission as their joint representative. The OECD’s comparative policy research, in particular, would not benefit from a single EU voice. Indeed, it is in the diversity of experiences and expertise that we can find the wealth of information and opinion that is so important for high-quality OECD products.
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 AIV’s reservations regarding informal à la carte forms of cooperation that may result from increased ad hoc contributions at the expense of the regular budget. Although I believe we must do everything to prevent the impression that some members have carte blanche to disregard OECD standards and agreements, a more à la carte approach, with the appropriate financial structure, may increase the OECD’s diversity and, consequently, the organisation’s significance for the Netherlands.
I share the AIV’s view that in combining closer cooperation with major countries (OECD members and non-members alike) with the desire for more influence over the globalisation process, the organisation runs the risk of becoming more political. It is impossible to foretell whether this will actually be the case. We first need to know exactly which countries intend to become OECD members and what form the closer cooperation will take.
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 AIV, to be expedient at this time. However, I certainly consider it plausible that the Secretary-General, now that he has had a year in which to focus much of his attention on a breakthrough in the enlargement debate, will wish to direct more of his efforts at structuring the post-enlargement OECD. Should that be the case, I would warmly welcome the AIV’s recommendation.
I noted with satisfaction the AIV’s assertion that there is little evidence of overlap or duplication between the activities of the OECD and those of other international organisations. Indeed, I was also pleased to note that, owing to the OECD’s methods and its relatively informal character, the organisations complement rather than compete with one another. This serves as confirmation by the AIV of the independent role the OECD plays in the international institutional architecture. It is obviously the task of the OECD member countries to prevent duplication and overlap.
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 AIV, will create opportunities for it to play a greater role in the area of globalisation and to become more closely aligned with the organisations mentioned above. This should also serve as a point of departure in determining how the major economies interact with the OECD.
Like the AIV, I see little merit in the idea of the OECD’s formally becoming the G8 secretariat. The G8 is not an institution but a high-level political forum that steers existing institutions such as the OECD. However, I do feel that the OECD should play a more proactive role in setting the international agenda and that the G8, in turn, could use the OECD more effectively. I therefore view the fact that the G8 is drawing more and more on the services of the OECD as a positive development. During the G8 summit in Heiligendamm, the OECD was asked to facilitate the ‘G8 outreach’ efforts (‘Heiligendamm process’) toward Brazil, Mexico, India, China and South Africa. As yet, however, no exact details are available on the eventual form of this task or on its funding.
Regarding the global coordination of development cooperation that the AIV refers to, a similar trend is visible. For example, the DAC and the World Bank drew up the Paris Declaration, which has been endorsed by more than 100 countries and to which the World Bank, the IMF, the UN, the regional development banks and the members of the DAC have committed themselves. The partner countries are encouraged to formulate an effective development policy and improve public finances. Furthermore, the DAC is also involved in establishing an ECOSOC Development Cooperation Forum, a UN initiative aimed at stimulating its role in development cooperation. Whether this will result in the DAC remaining a donor group or striving for a more differentiated membership will partly depend on the outcome of UN discussions on more effective development cooperation. For the time being, DAC membership remains open only to OECD member countries that endorse the DAC acquis. This, of course, is not to say that cooperation between non-members, the DAC and associated working groups and networks should not be promoted whenever possible.
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 AIV correctly observes, OECD analyses are often identified with economically developed countries. This makes the OECD – certainly given its current composition and current reputation – unsuitable as an organisation that could compensate for any failings of the WTO’s support services. I share the view of the AIV that any increased role of the OECD in global trade must be coupled with greater involvement of the emerging economies in the activities of the OECD.
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.
It is no surprise that the AIV is unable to indicate the areas of the OECD’s work that are of benefit to the Netherlands, given the difficulty of the task. The working methods proposed by the AIV represent existing practice. The various ministries consider the OECD to have a positive effect on their own areas of work, both with regard to current dossiers and issues that lie further in the future. However, I do feel that we should aim to boost the Netherlands’ influence on setting the agenda wherever possible.
As for the AIV’s recommendation that the ministries be free to make their own choices, this is a view I share with regard to specific ministerial themes. When it comes to more horizontal issues, such as sustainable development, however, I favour a whole-of-government approach. I consider it important that the OECD maintain a certain measure of cohesion between the organisation’s various disciplines and that this cohesion be consolidated wherever possible. The Netherlands can encourage this by propagating an unambiguous and consistent standpoint with respect to horizontal issues.
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 AIV, the OECD has developed instruments such as programme implementation reviews (PIR) and medium-term orientations (MTO). These ensure that the organisation deploys the available people and resources as efficiently as possible in pursuing the objectives set out in the Programme of Work and Budget.
The AIV’s conclusions and recommendations with regard to OECD methods deserve wholehearted endorsement as do, by and large, those concerning organisational changes. For example, I share the AIV’s view that, if the OECD wishes to continue its work in the future, it must keep reviewing the decision-making process. Modifying the decision-making process (in particular, extending the qualified majority decision-making system) remains a goal for the Netherlands. However, given that a reform process has only recently been completed, I do not consider it the appropriate time to focus too much attention on this issue.
Equally, I share the view of the AIV that the system of mandatory forms of oversight does not necessarily require extension since the methods of peer pressure, peer review and best practices work sufficiently well. Also, the proposal that current member countries be requested to observe the acquis and comply more strictly with standing agreements is self-evident and should primarily be seen as the responsibility of the member countries themselves.
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.