Lesson 8a The OECD.pptx

# The OECD: history, membership, and evolution This section details the historical origins of the OECD, tracing its lineage from the OEEC, examining its membership evolution, and outlining its expansion and the current accession process. ## 1. The OECD: history, membership, and evolution ### 1.1 Origins as the OEEC The Organisation for Economic Cooperation and Development (OECD) has its roots in the Organisation for European Economic Cooperation (OEEC), established in 1948. The OEEC was a direct response to the United States' Marshall Plan, designed to coordinate the allocation of American aid to Europe. Its primary objectives were to facilitate the reconstruction of war-torn Europe and to promote trade liberalization amongst European nations. These initiatives were intrinsically linked to the geopolitical context of the Cold War, serving as a part of the broader anti-communist containment strategy. The OEEC is sometimes described as an "Economic NATO" due to its role in fostering transatlantic economic cooperation within a Western bloc. ### 1.2 Transformation into the OECD In 1961, the OEEC underwent a significant transformation and was officially renamed the Organisation for Economic Cooperation and Development (OECD). This evolution marked a broader scope beyond European recovery, aiming to foster policies that would promote economic growth and social welfare globally. The headquarters of the OECD were established in Paris, France. From the 1990s onwards, a key criterion for membership became adherence to democratic principles, with members defined as "democracies." ### 1.3 Membership evolution The membership of the OECD has evolved considerably since its inception, reflecting changing global dynamics and its expanding mandate. #### 1.3.1 Early expansion (Post-1961) The initial membership of the OECD in 1961 comprised all the members of the OEEC, augmented by the United States and Canada. Further expansion in the early years included: * 1964: Japan * 1969: Finland * 1971: Australia * 1973: New Zealand #### 1.3.2 Post-Cold War expansion The period following the Cold War witnessed a significant expansion of OECD membership, with a deliberate strategy to broaden its global reach and avoid an exclusively Western or European focus. This expansion was characterized by the selective adoption of countries, often alternating between European and non-Western nations. The OECD aimed to counter the perception of being a Western-centric organization and chose not to admit all ex-communist European countries simultaneously. Key additions in this era include: * 1994: Mexico * 1995: Czech Republic, Poland * 1996: Hungary, South Korea * 2000: Slovakia * 2010: Chile, Israel, Estonia, Slovenia * 2016: Latvia * 2018: Lithuania * 2020: Colombia * 2021: Costa Rica Currently, the OECD has 38 member countries, representing diverse regions from all continents except Africa. #### 1.3.3 Current candidates and accession process The accession of new members to the OECD is a selective and often cumbersome process. Candidate countries must meet stringent political criteria and adopt the "OECD acquis," which refers to the body of OECD codes, principles, and standards. Countries that have expressed interest or are in the process of accession include Argentina, Brazil, Bulgaria, Croatia, Indonesia, Peru, Romania, and Thailand. > **Tip:** The OECD's membership expansion strategy post-Cold War was a conscious effort to achieve a more global representation and temper the image of a "rich men's club" or a purely Western organization. > **Example:** The case of Russian candidacy being shelved in 2014 due to its aggression against Ukraine highlights the political criteria now integral to the accession process. #### 1.3.4 Challenges and alternatives in enlargement The process of enlargement is not without its challenges. Some existing member states, particularly within the European Union, have been reluctant to admit major emerging economies, fearing a "dilution" of the OECD's influence or identity. Conversely, some major emerging economies may be hesitant to adopt the full OECD acquis, which often involves significant domestic reforms and a high degree of transparency characteristic of OECD peer review mechanisms. This has led to the development of alternative engagement models with non-member countries. #### 1.3.5 Relations with non-members and "Enhanced Engagement" Recognizing the limitations of full membership for all significant global players, the OECD has developed strategic partnerships with key non-member countries. Since 2007, the "Enhanced Engagement" initiative has brought countries like Brazil, China, India, Indonesia, and South Africa into closer collaboration, with the possibility of future accession. This engagement allows these key partners to participate in OECD committees and activities, fostering a dialogue on global policy issues and socialising them into OECD approaches. The OECD also engages with non-members through Global Forums and regional programs, demonstrating its commitment to global governance beyond its membership. > **Example:** The OECD Development Assistance Committee (DAC) is a prime example of the OECD's influence on global policy, working to enhance the quality and effectiveness of development aid, and engaging emerging donors like China and India in its principles. ### 1.4 Evolution of the OECD's role and influence The OECD's mandate has expanded significantly beyond its initial focus on European economic recovery. It now covers a vast array of policy domains, including economics, public administration, fiscal policy, social policy, education, and the environment. While it generally avoids direct political issues like defense and human rights, its economic and social policy recommendations have significant geopolitical implications. #### 1.4.1 Standard setting and "soft law" A core function of the OECD is standard setting, which it pursues through both "hard law" (legally binding international agreements) and "soft law" (non-binding recommendations and guidelines). Examples of hard law include the 1961 Code of Liberalisation of Capital Movements and the 1999 Convention on Combating Bribery of Foreign Public Officials. The vast collection of soft law outputs, such as the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, influences national policies and corporate behavior worldwide. #### 1.4.2 Knowledge hub and "OECD method" The OECD serves as an extensive knowledge hub, producing statistics, studies, and analyses on its member countries and beyond. The "OECD method" is characterized by a technocratic atmosphere, voluntary cooperation, and a reliance on consensus-building. Peer pressure and learning from best practices are key mechanisms through which the OECD stimulates domestic reform and international cooperation. > **Example:** The Programme for International Student Assessment (PISA) is a well-known OECD initiative that collects data on the educational performance of 15-year-olds in reading, mathematics, and science across approximately 80 countries. This data, standardized through comparable data collection, can lead to "naming and shaming" and exert pressure on national authorities to implement reforms. #### 1.4.3 Global governance ambitions and challenges The OECD actively seeks to exert global influence, believing that a coordinated approach to policy is necessary in an interconnected world. It aims to influence other countries' policies to ensure fair competition, stabilize the global economy, and facilitate international trade and investment. However, this ambition faces challenges, including perceptions of the OECD as a Western bloc, particularly in competition with rising economic powers like BRICS. The failed Multilateral Agreement on Investment (MAI) in the late 1990s, leaked and heavily criticized by civil society for being overly favorable to multinational corporations, illustrates the complexities and contestations surrounding the OECD's global policy-making efforts. #### 1.4.4 Relationship with the G20 The OECD plays a crucial role in supporting the G20, often acting as a de facto "G20 secretariat." While the G20 has a different membership, with significant overlap with the OECD, the OECD provides intellectual input, policy preparation, and machinery for the implementation and follow-up of G20 initiatives, particularly in areas like global taxation. The G20, in turn, provides high-level political impetus for these efforts. This dynamic highlights the OECD's role in translating political directives into concrete policy frameworks. --- # OECD governance and operational methods This section details the OECD's governance structure, its standard-setting influence through various legal instruments, its function as a critical knowledge hub, and the distinct 'OECD method' characterized by voluntary cooperation, peer learning, and consensus-building. ### 2.1 Governance structure The OECD operates with a distinct governance structure that underpins its policy-making and operational activities. #### 2.1.1 The Secretary-General The leadership of the OECD is embodied by its Secretary-General. As of 2021, Mathias Cormann holds this position. The role is crucial for outreach to non-member countries and establishing relationships with international bodies like the G20. #### 2.1.2 Membership and Expansion The OECD's membership has evolved significantly since its predecessor, the OEEC, was established in 1948. The organization transitioned to the OECD in 1961 and has gradually expanded its membership from its initial European and North American core to include countries from all continents. This expansion, particularly post-Cold War, has been a selective process aimed at avoiding European dominance and acknowledging global geopolitical shifts. Current membership stands at 38 countries. > **Tip:** Understanding the historical evolution of OECD membership provides context for its current global reach and its efforts to balance representation across different regions. ### 2.2 Outputs and standard setting The OECD plays a significant role in establishing norms and standards across a wide array of policy domains. This standard-setting function serves multiple purposes, including fostering a level playing field for fair competition, facilitating international exchange by removing cross-border barriers, and improving the quality of public policy within member states. #### 2.2.1 Hard and soft law The OECD employs two primary mechanisms for standard setting: * **Hard Law:** These are legally binding international agreements. Examples include the 1961 Code of Liberalisation of Capital Movements and the 1999 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. * **Soft Law:** This category encompasses legally non-binding instruments such as recommendations and guidelines. These are advised for member states and non-members to follow. Outputs can also target non-state actors, like the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. > **Example:** The OECD Guidelines for Multinational Enterprises are a prime example of soft law, offering principles for responsible business conduct that, while not legally binding, carry significant weight due to the OECD's influence and peer review mechanisms. #### 2.2.2 The 'OECD method' The 'OECD method' is a distinctive approach characterized by: * **Voluntary Cooperation:** Member states engage in cooperation on a voluntary basis, fostering a collaborative environment. * **Learning and Peer Pressure:** The organization acts as a platform for countries to learn from each other's experiences, with peer review mechanisms generating pressure for domestic reform and international cooperation. * **Consensus Building:** Decisions and recommendations are typically reached through a consensus-building process, ensuring broad agreement among member states. * **Technocratic Atmosphere:** The OECD often operates with a technocratic approach, emphasizing evidence-based analysis and expert input. > **Tip:** The 'OECD method' is highly effective due to its reliance on voluntary participation and the persuasive power of shared data and best practices, rather than coercive legal enforcement for most of its outputs. ### 2.3 Knowledge hub and dissemination The OECD functions as a formidable knowledge hub, producing and disseminating a vast amount of data, studies, and policy analysis. #### 2.3.1 Data and Statistics The organization collects and analyzes statistics on its member countries and non-members alike, providing a crucial resource for international comparisons and policy development. #### 2.3.2 Dissemination of Knowledge Knowledge is disseminated through various means, including publications, reports, and extensive meetings where policy experts and government officials convene to discuss pressing global issues. > **Example:** The Programme for International Student Assessment (PISA) is a key initiative where the OECD collects and analyzes data on the performance of 15-year-old students in reading, mathematics, and science across approximately 80 countries. This data-driven approach facilitates comparison and can lead to "naming and shaming," thereby pressuring national authorities towards reform. ### 2.4 The 'OECD system' and global influence The OECD's influence extends beyond its member states through a broader "OECD system" that includes affiliated agencies and initiatives. #### 2.4.1 Associated Institutions Several institutions operate under or in close association with the OECD, contributing to its global governance ambitions: * **Nuclear Energy Agency (NEA):** Provides assistance and regulation for civilian nuclear energy. * **International Energy Agency (IEA):** Focuses on oil stocks and general energy policy. * **Financial Action Task Force (FATF):** Works against money laundering and is composed of OECD countries along with non-members like China and India. #### 2.4.2 Global Governance Ambitions The OECD actively seeks to influence policies in non-member countries, recognizing that in a globalized world, the policies of any nation affect its trading partners and the global economy. This ambition is driven by the need to: * Smooth international trade and investment relations. * Stabilize the world economy. * Create a level playing field for fair competition. * Influence other countries' policies to align with OECD approaches. #### 2.4.3 Relations with Non-Members The OECD engages with non-member countries through several strategies: * **Enhanced Engagement:** Key partners, including Brazil, China, India, Indonesia, and South Africa, participate in OECD committees, offering the possibility of future accession. * **Global Forums:** These involve dozens of non-member states in discussions on specific policy areas. * **Regional Programs:** Initiatives targeted at developing regions. * **Studies for and about Non-Members:** The OECD produces research that impacts or analyzes the policies of non-member economies. > **Example:** The OECD Development Assistance Committee (DAC) is a crucial body for fostering policy consensus among traditional providers of development aid. Through High-Level Fora and successor initiatives like the Global Partnership for Effective Development Co-operation (GPEDC), the OECD has sought to socialize emerging donors into its approaches to aid effectiveness. #### 2.4.4 The OECD-G20 Relationship The G20 and OECD have distinct but overlapping memberships. The G20 relies heavily on the OECD for policy preparation and implementation, particularly in areas like taxation, effectively functioning as a 'G20 secretariat'. The G20 provides high-level political impetus, while OECD staff offer intellectual input and the machinery for policy execution and follow-up. #### 2.4.5 Geopolitics and Competition The OECD's role in geopolitics is complex. Membership is often seen as a "quality label" signifying stability, transparency, and adherence to the rule of law, making countries attractive to investors and legitimate in the eyes of their citizens. The organization serves as a strong network connecting national bureaucries. However, there are ongoing dynamics and potential competition with blocs like BRICS, with countries such as Indonesia seeking OECD membership while also joining BRICS, and Brazil navigating its position as both a BRICS founder and an OECD candidate. This highlights the evolving landscape of global governance and the strategic choices countries make regarding international affiliations. #### 2.4.6 Failed Initiatives: The Multilateral Agreement on Investment (MAI) A notable example of an OECD initiative that faced significant opposition was the proposed Multilateral Agreement on Investment (MAI) in the 1990s. This was envisioned as a "global constitution for investment." However, a leak of the draft in 1994 sparked a strong global alter-globalization movement, with civil society and parliaments criticizing the agreement as overly favorable to multinationals and placing undue obligations on governments. This opposition ultimately led to France withdrawing from the talks, resulting in the termination of the MAI negotiations. --- # The OECD's global influence and relations with non-members The OECD seeks global influence to foster a more stable and prosperous world economy that benefits its member states. ## 3. The OECD's global influence and relations with non-members The OECD actively pursues global influence to extend its policy frameworks and standards beyond its membership, aiming to shape international economic and social policies. This engagement with non-member countries is multifaceted, driven by the recognition that in an interconnected global economy, national policies have international repercussions, and conversely, global developments impact member states' economies and well-being. ### 3.1 The rationale for OECD's global influence The OECD's ambition for global reach stems from several key drivers: * **Globalization's impact:** In an increasingly globalized world, the OECD recognizes that policies enacted by non-member countries can significantly affect its members. This includes impacts on export markets, investment locations, and the overall strength of the global economy. * **Promoting fair competition:** Wide disparities in regulations concerning labor, health, environment, and corruption can distort fair competition. By encouraging non-members to adopt similar standards, the OECD aims to create a more level playing field for international businesses and trade. * **Facilitating international exchange:** The OECD works to reduce cross-border barriers to trade, capital movements, and tourism. Influencing non-member policies in these areas helps to smooth international economic relations. * **Enhancing global economic stability:** A stable world economy is crucial for the prosperity of all nations. The OECD's efforts to promote sound economic governance and policy coordination globally contribute to this stability. * **Anticorruption efforts:** Combating corruption is seen as essential for fair competition and good governance. The OECD actively promotes its anti-bribery conventions and guidelines globally. ### 3.2 Strategies for engaging and influencing non-member countries The OECD employs a range of strategies to engage with and influence non-member states, recognizing that formal membership is not always feasible or desirable for all nations. #### 3.2.1 Membership expansion and accession While membership is selective and involves a rigorous accession process, the OECD has gradually expanded its membership over time. New members are required to meet political criteria and adopt the "OECD acquis," which refers to the body of OECD standards, principles, and legal instruments. The accession process can be lengthy and may face reluctance from both the candidate countries (due to sovereignty concerns and the adoption of reforms) and existing members (who may fear a dilution of the organization's identity). #### 3.2.2 Enhanced Engagement and Key Partners Since 2007, the OECD has implemented an "Enhanced Engagement" strategy to deepen relations with major emerging economies. This program designates certain non-members as "Key Partners," including Brazil, China, India, Indonesia, and South Africa. These partners participate in OECD committees and global forums, with the understanding that future accession is a possibility. This approach allows these economies to engage with OECD standards and policy discussions while the OECD gains insights into their perspectives and challenges. #### 3.2.3 Global Forums and Regional Programs The OECD organizes Global Forums that bring together dozens of non-member states to discuss specific policy areas. Additionally, it runs regional programs tailored to the needs of developing countries, further extending its reach and influence. #### 3.2.4 Participation in Committees and OECD Activities Non-member states and economies are increasingly invited to participate in various OECD committees and activities. This co-option allows for direct involvement in policy formulation and knowledge sharing, embedding OECD approaches within these countries' governance structures. #### 3.2.5 Studies and Dissemination of Knowledge The OECD serves as a significant knowledge hub, producing extensive statistics, studies, and analyses on both member and non-member countries. This knowledge is disseminated through meetings, publications, and the promotion of its "OECD method," which emphasizes technocratic approaches, voluntary cooperation, soft law, peer learning, and consensus-building to stimulate domestic reform and international cooperation. #### 3.2.6 OECD Outputs: Hard and Soft Law The OECD produces both legally binding "hard law" agreements and non-binding "soft law" recommendations and guidelines. While hard law, such as the Code of Liberalisation of Capital Movements, is directly applicable, soft law, like the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, provides influential recommendations that member and non-member states are encouraged to follow. > **Tip:** The "OECD method" relies heavily on consensus-building and peer pressure. By generating robust data and evidence (often referred to as "soft governance through hard fact"), the OECD can exert influence through "naming and shaming" mechanisms, encouraging national authorities to implement reforms. #### 3.2.7 Specific Examples of Engagement * **OECD Development Assistance Committee (DAC):** Through initiatives like the High Level Fora on Aid Effectiveness and its successor, the Global Partnership for Effective Development Co-operation (GPEDC), the OECD has sought to influence and socialize emerging donors like China and India into its principles for aid quality and effectiveness. * **International Taxation Governance:** The OECD plays a central role in setting global standards for international taxation, often working in conjunction with or as a de facto secretariat for groups like the G20. ### 3.3 The OECD's relationship with emerging economies and blocs The OECD's relationship with major emerging economies, including blocs like BRICS (Brazil, Russia, India, China, South Africa), is characterized by both cooperation and potential competition. #### 3.3.1 The OECD-G20 Relationship The G20 and OECD have overlapping memberships, and the OECD often plays a crucial role in policy preparation and implementation for the G20. The OECD provides intellectual input and the machinery for policy follow-up, effectively acting as a "G20 secretariat" in certain areas, such as global taxation. The G20, in turn, provides high-level political impetus for OECD-led initiatives. > **Example:** The G20's endorsement of OECD initiatives on base erosion and profit shifting (BEPS) has significantly amplified their global impact. #### 3.3.2 OECD vs. BRICS The relationship between the OECD and BRICS countries is complex. While the OECD has historically aimed to foster closer ties and socialize emerging economies into its policy frameworks, the rise of blocs like BRICS presents a different model of global governance. * **Potential for Convergence:** Some observers believe the OECD could act as a bridge, bringing Western and BRICS perspectives closer through its socialization functions. * **Reinforcing Western Identity:** Conversely, deepening geopolitical tensions might lead to the OECD being perceived or deliberately positioned as a pro-Western club. * **Competition through Enlargement:** The competition for influence is evident in the enlargement process. For instance, Indonesia's desire to join the OECD contrasts with its recent membership in BRICS, highlighting the multifaceted allegiances of major emerging economies. Similarly, Brazil, a founding BRICS member, is also an OECD candidate, but political leaders may not prioritize OECD membership. #### 3.3.3 The Multilateral Agreement on Investment (MAI) The failed Multilateral Agreement on Investment (MAI) in the late 1990s serves as a case study of the OECD's ambition and the challenges of imposing its norms globally. Intended as a comprehensive investment treaty among OECD members, its draft was leaked, sparking significant opposition from civil society and parliaments worldwide. Critics argued the MAI was overly favorable to multinational corporations at the expense of governments and citizens. The strong global backlash, particularly from France and Belgium, ultimately led to the collapse of negotiations, demonstrating the limits of the OECD's ability to unilaterally set global rules in the face of widespread dissent. ### 3.4 Perceptions of the OECD among non-members Non-members and candidate countries often view OECD membership as a signal of stability, transparency, rule of law, and prosperity. This "quality label" can enhance their attractiveness to foreign investors and provide legitimacy to their governance structures. The OECD's strong network, which interweaves national bureaucracies, is also seen as a valuable asset. However, the OECD's historical image as a "rich men's club" and potential cultural gaps can present barriers to broader engagement and aspiring membership. The cumbersome accession process and the requirement to adopt the "OECD acquis" can also be significant hurdles, particularly for countries emphasizing sovereignty and domestic policy autonomy. --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Organisation for Economic Cooperation and Development (OECD) | An intergovernmental economic organization founded in 1961 to stimulate economic progress and world trade; it is a forum of countries that work together to share experiences and seek solutions to common problems. | | Organisation for European Economic Cooperation (OEEC) | The predecessor to the OECD, established in 1948 to help administer the Marshall Plan in Europe and promote trade liberalization as part of anticommunist containment efforts. | | Marshall Plan | A U.S.-sponsored program enacted in 1948 to provide economic aid to Western European countries for reconstruction after World War II. | | Hard Law | International agreements or conventions that are legally binding on the states that ratify them, creating enforceable obligations. | | Soft Law | Non-binding recommendations, guidelines, or declarations produced by international organizations that member states are advised to follow, influencing policy and behavior without legal obligation. | | Knowledge Hub | An institution that collects, analyzes, and disseminates vast amounts of data, research, and best practices across various policy domains, serving as a central resource for information and expertise. | | Peer Pressure | The influence exerted by members of a group on each other to conform to norms, beliefs, or behaviors, often used within the OECD to encourage domestic reforms and policy harmonization. | | Technocratic Atmosphere | An environment characterized by a focus on technical expertise, objective data, and rational problem-solving, often associated with the OECD's approach to policy development. | | Human Capital | The skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country. | | PISA | The Programme for International Student Assessment, a triennial international survey that aims to evaluate education systems worldwide by testing the skills and knowledge of 15-year-old students. | | Soft Governance | A form of governance that relies on persuasion, consensus-building, and the dissemination of information rather than coercive legal enforcement. | | Global Governance | The complex of formal and informal rules, norms, actors, and processes that regulate political, economic, and social interactions at the global level. | | Nuclear Energy Agency (NEA) | An agency that provides authoritative assessments and the technical and legal expertise to help governments ensure the safe, secure, and efficient use of nuclear power. | | International Energy Agency (IEA) | An autonomous intergovernmental organization that aims to ensure the reliable and affordable supply of energy, as well as to provide policy recommendations to its member governments. | | Financial Action Task Force (FATF) | An intergovernmental body established to combat money laundering and terrorist financing, setting international standards and monitoring compliance. | | Multilateral Agreement on Investment (MAI) | A proposed treaty in the 1990s, led by the OECD, intended to establish a comprehensive set of rules for foreign direct investment, which ultimately failed due to significant opposition. | | G20 | The Group of Twenty, an international forum for the governments and central bank governors from 19 countries and the European Union, aiming to address major issues related to the global economy. | | BRICS | An acronym for Brazil, Russia, India, China, and South Africa, representing major emerging economies that collectively hold significant global influence and often pursue parallel or complementary agendas to established Western institutions. | | OECD Acquis | The body of OECD standards, principles, and best practices that prospective member countries are expected to adopt and implement as part of the accession process. | | Modus Vivendi | A practical way of living or working together, especially by mutual tolerance of opinions or behavior, referring to the OECD's approach of selectively engaging with non-member countries. | | Enhanced Engagement | A partnership strategy initiated by the OECD to foster closer cooperation and dialogue with key non-member countries, including major emerging economies. | | OECD Development Assistance Committee (DAC) | The principal forum for major bilateral development assistance providers, working to increase the volume and effectiveness of aid. | | Global Partnership for Effective Development Co-operation (GPEDC) | A multi-stakeholder partnership that brings together developing and developed countries, civil society, and the private sector to implement and monitor commitments on effective development cooperation. |