By Trevor Peacock*
The central place of the OECD’s core work in macroeconomic analysis and trade liberalisation, including agricultural reform, was consolidated through Australia’s efforts at the annual Council at Ministerial Level (MCM) meeting in Paris.
These activities constitute the main reason for Australia’s membership of the OECD, but their preeminence has been challenged in recent years as member countries have understandably sought to have the Organisation’s expertise and capability employed on an increasingly wide range of contemporary problems.
The OECD’s most pressing need is not for new activities but for organisational reform, to equip it to achieve more output from limited resources at a time of budgetary restraint.
The meeting provided a useful occasion for the Minister for Trade, Senator Bob McMullan, to focus the Organisation’s attention on that need, as did Ministers from the US, UK, Canada, Germany and New Zealand.
Parameters
The MCM is the highest decision making body of the OECD. The communique issued at its conclusion sets the parameters of the Organisation’s work for the succeeding 12 months.
It is attended mostly by the treasurers and foreign or trade ministers of the 25 member countries, although that can vary according to the subjects to be discussed. Last year, for instance, Australia was represented by the Minister for Employment, Education and Training, Mr Simon Crean, when the OECD’s Jobs Study was the main focus.
This year, Senator McMullan and the Treasurer, Mr Ralph Willis, attended. Participants from other countries included US Labour Secretary Reich, Commerce Secretary Brown and Trade Representative Kantor, Japanese Deputy Prime Minister Kono and Trade and Industry Minister Hashimoto, German Economics Minister Rexrodt and EU Commissioner Brittan.
The formal part of the two-day meeting is divided into three sessions, at each of which ministers speak to a broad agenda item.
The first of these sessions this year had the title Economic Growth, Employment and Social Progress. Particular concerns that emerged included that of the United States for the creation not just of jobs but of good jobs, compared to the problem of the ‘working poor’. But most ministerial interventions emphasised the continued need for structural economic change and fiscal consolidation to produce durable job creation and to equip members to meet the growing fiscal challenges from ageing populations.
Most also urged the need for better education and training, greater wage flexibility and improved tax/social security interaction to help the long term and young unemployed.
Canada pressed the need for better exploration of the contribution of technology to employment growth.
Mr Willis noted in his media conference that compared to US and European concerns, Australia looked pretty good, with the second fastest growth in employment in the OECD during the last decade or so, accompanied by welfare improvements, safety net increases in ages for those in a weak bargaining position, and the ‘Working Nation’ policies.
Coordinated activity
Though several members supported coordinated activity on exchange rates, the overwhelming majority view was that unilateral economic adjustment was the way to overcome exchange rate volatility.
Strengthening the Multilateral System was the second theme of the meeting, providing the opportunity for Ministers to renew their commitments to consolidation of the gains of the Uruguay Round, including implementation of the Round agreements, completion of the services negotiations and the successful establishment of the WTO.
This part of the Meeting was somewhat overshadowed by the dispute between the US and Japan on automobiles. Most ministerial interventions avoided any convincing commitments to work towards ambitious programs of liberalisation, although Australia’s delegation ensured the communique issued at the end of the meeting had appropriately positive references. Senator McMullan’s intervention emphasised the need for further trade liberalisation across a broad range of sectors, particularly agriculture.
New trade issues
The meeting supported the OECD’s work on the new trade issues, including trade and environment, trade and competition policy, and trade and labour standards. The last of these was the most controversial, with the majority concurring that it would as yet be inappropriate to consider any referral of the issue to the WTO. The US made clear in its post-MCM media conference that it was disappointed with that outcome.
One important initiative at the MCM was the launching of negotiations on a Multilateral Agreement on Investment (MAI) with high standards of liberalisation and a dispute resolution mechanism, and open to non-members.
Senator McMullan said Australia looked forward to an agreement that would be satisfactory to all OECD member countries, and noted potential difficulties for Australia in regard to binding of State governments and the removal of screening processes in foreign investment policy.
Convergence of views
On the final agenda item, which covered The OECD in Tomorrow’s World, we were pleased to see a convergence of views towards Australia’s careful attitude to new memberships and outreach activities. Following last year’s admission of Mexico the OECD is currently negotiating five membership applications: the four Partners in Transition (Czech Republic, Hungary, Poland and the Slovak Republic) and the Republic of Korea. In particular the Korean application has been encouraged by Australia and we are keen to see it succeed.
These admissions would bring membership to 30, and there is an increasingly widespread view that the Organisation should then pause and take stock before actively considering any new applications.
Membership applications are only one consequence for the OECD of the changed global environment following the end of the Cold War. The other has been a demand for outreach programs of assistance to the economies in transition in east Europe, and the desire of many countries not on the Organisation’s membership track to participate in OECD Committees, as either committee members or observers.
These have proven deeply unsatisfactory as means for the OECD to deal with non-members, threatening on one hand to spread the Organisation’s resources too thinly and on the other to expand its committees to the point of unworkability. It was, therefore, pleasing that at this year’s meeting the US launched an initiative for an Emerging Market Economy Forum, which should absorb to a considerable extent the wishes of non-members for engagement with the OECD. The initiative was well received by Australia and other countries.
Expectations that development cooperation would have a higher profile at this MCM were largely unmet. But Ministers, including Senator McMullan, did launch the OECD’s Development Assistance Committee’s Special Exercise of Reflection, a short program of work designed to form a strategic vision of development cooperation into the next century.
Australia’s interests were well served overall at this year’s meeting.
Trevor Peacock is Executive Officer in DFAT’s OECD Section.