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OECD Council Meetings at Ministerial Level

Meeting of the Council at Ministerial Level in May 1992

The Council of the OECD met on 18 and 19 May 1992 at Ministerial level. The meeting was chaired by Mr. Sigbjorn Johnsen, Minister of Finance and Mr. Bjorn Tore Godal, Minister of Trade and Shipping, of Norway. The Vice-Chairmen were Mr. Roland Dumas, Minister of State, Minister of Foreign Affairs. Mr. Michel Sapin, Minister of Economy and Finance, and Mr. Dominique Strauss-Kahn, Minister of Industry and Foreign Trade, of France; and The Hon. Maurice McTigue, Minister for State Owned Enterprises and Associate Minister of Finance of New Zealand. Prior to the meeting, the Chairman led consultations with the Business and Industry Advisory Committee (BIAC) and the Trade Union Advisory Committee (TUAC) to the OECD; both organisations submitted statements for the consideration of Ministers.

OECD Ministers welcome the historic developments in the world that have shown wider acceptance of the basic principles that the OECD Members hold in common: human rights, pluralist democracy, and market economy. These principles, pursued in a co-operative framework, have served Member countries well over the last forty years of pronounced economic and social development. At this time of rapid international change, Ministers have addressed three challenges facing the OECD and its Member countries:

There is a great potential for sustained non-inflationary growth, both in OECD countries and in the world more generally. To realise this growth potential fully Ministers are determined to pursue appropriate and coherent policies both at national level and through international co-operation. Ministers are resolved to keep the economic fundamentals firmly in place, and to pursue with renewed vigour structural reform across a range of areas. This will promote growth, while at the same time helping to fight unemployment.

Ministers recognise the need to reinforce the multilateral framework, and to fight protectionism. A substantial, comprehensive and balanced outcome of the Uruguay Round is needed urgently. This will benefit all countries. OECD Governments will do their best to this end. Ministers pledge their Governments full commitment to re-invigorate the negotiation and bring it to an early and successful conclusion. An open multilateral trading system conducive to competition and structural reform is essential for underpinning sustainable growth. OECD countries will therefore contribute to the development of those fair, transparent, and enforceable rules which the rapidly evolving international trading environment may necessitate. They also stress the important role that UNCED will play in launching a new global partnership for sustainable development.

Ministers reaffirm their strong commitment to enhanced co-operation with developing countries. They are determined to support strongly the reform process in central and eastern European countries and the New Independent States of the former Soviet Union, including through the provision of market access. Ministers welcome and support the rapid and diversified development of contacts and intensified co-operation between the OECD and an increasing number of nonmember countries, believing that such contacts can facilitate the spread throughout the world of respect for human rights, pluralist democracy, and market economy. They look forward to further strengthening of such links and call on the OECD to develop further its work on non-member economies.

To meet these challenges, the OECD requires a comprehensive, viable and lively work programme. Ministers affirm the unique role of the OECD in international co-operation. They call for reviews of priorities regarding OECD's work and resource allocation, and state their governments' continued preparedness to provide adequate funding.


The Economic Situation and Policy Imperatives

1. Ministers reflected on the nearly two years of slow growth in the OECD, recession in some countries, the weakness in the expected recovery, and the persistent rise in unemployment in most countries.
They noted that: inflation pressures have receded in most countries; short-term interest rates outside continental Europe have generally fallen, sharply in some cases; long-term interest rates over the past year have begun to fall, although they remain high in relation to inflation in a number of countries; and progress has been made in reducing household and business indebtedness and in addressing financial-sector problems. These factors are projected to induce a gradual recovery during the course of 1992, and next year growth in the OECD area should strengthen further.

2. The major task facing OECD governments, in order to reinforce confidence among consumers and investors, is to improve the prospects for sustained non-inflationary growth, building on the positive forces that are already at work. A stable and comprehensive medium-term policy framework, consisting of sound fiscal and monetary policies and accelerated structural reform, is essential in this respect. In this framework, Ministers agree, taking into account the particular circumstances of each country, to adopt appropriate and balanced monetary and fiscal policies to help ensure non-inflationary growth. Structural reform will not only be speeded up but will also be increasingly subjected to multilateral surveillance and peer review. Policy actions generally will be made more effective through concerted international co-operation, which the globalisation of the world economy makes more indispensable than ever. Continued co-operation in respect of exchange rates and in reducing very large external imbalances will contribute to greater exchange-market stability and thereby to a better functioning of the international monetary system.

3. A centre-piece of a stable policy framework is sound public finances, that is, budgets: whose financing, whether through taxation or debt, does not pre-empt private savings or create undue distortions to incentives to work, invest, and save; and whose composition contributes to sustainable growth and employment, and an efficient functioning of the economy. Over the past year the process of budget-deficit reduction in many countries has seen considerable slippage, which cannot in most cases be blamed wholly on the economic slowdown. Ministers undertake to reduce budget deficits and restrain the amount of outstanding public debt by taking action appropriate to their countries' circumstances: setting more ambitious budget targets in some cases; and adhering more rigorously to existing objectives in others. Ministers agree that countries with large budgetary imbalances should intensify efforts to reduce deficits in order to achieve a more balanced policy mix. In those countries where fiscal imbalances have been contained, appropriate measures should be pursued to enhance medium-term growth prospects while maintaining public expenditures under control. In those countries with large surpluses and declining growth, policy makers should be mindful of the possibilities of strengthening domestic demand through appropriate measures. These measures will be accompanied by improved public-sector management, to ensure greater cost effectiveness, transparency and accountability. Steps taken here will aim to: produce an optimal allocation of resources; control expenditures; raise effectiveness and efficiency in the public sector; and respond better to societal requirements and the needs of the users of public services.

4. The reduction of OECD inflation over the past year is welcome. It is essential to preserve and important to build upon recent improvements in price performance. Sound monetary policy is critical in this respect; it will therefore continue to be conducted with vigilance and prudence. Within that general perception, however, Ministers noted the importance of creating the conditions for further sustainable reductions in interest rates.

Creating More Jobs

5. Raising sustainable growth in the long term depends on accentuated structural reforms that will boost productivity. Human resources are paramount in this regard. After eight years of economic expansion with declining inflation, unemployment in the OECD area remains high and has been rising since 1990. Long-term as well as youth unemployment have risen in many countries. Fighting unemployment therefore remains a top priority.

6. OECD governments are resolved to reinforce further their efforts to foster the conditions for a revival of balanced growth. This will help to reduce unemployment. The substantial and durable reduction of unemployment will also be sought, as emphasized by Ministers of Labour at their meeting in OECD in January last [see SG/PRESS(92)4], through making operational without delay a coherent framework of structural policy actions, to improve the efficiency with which labour markets are able to accommodate economic and social change. These actions will:

Ministers invite the Secretary-General to initiate a comprehensive research effort on the reasons for and the remedies to the disappointing progress in reducing unemployment, by making full use of the Organisation's interdisciplinary potential, and by working towards a system of surveillance which may include cross-country monitoring and in-depth peer review. A progress report thereon should be presented to the next Ministerial meeting.

Societal Action on a Wider Basis

7. Policies to reduce unemployment will contribute to the creation of equal opportunities for all to succeed in working life. This is a crucial element for the maintenance of a social consensus and for an increased willingness to adjust to change. Labour market and social policies which strengthen the ability of individuals to return to gainful work rather than to remain dependent on income support will be an essential part of this approach. The interactions of education and training, labour market and social policies are complex and action needed will go beyond the responsibilities of governments alone. New and improved forms of co-operation among government authorities, the social partners and other private-sector institutions and groups will be developed.

8. Ministers commend the role of the OECD in monitoring and assessing of migration flows, causes, and trends and reaffirm its importance. Taking fully into account work already underway in other international organisations, the OECD should also give priority to evaluating the economic and social consequences of these developments for sending and receiving countries.

9. Economic, social and environmental problems are so severe in many urban areas that a large and growing part of the population risks drifting away from the economic and social mainstream. Ministers consider that governments, both central and local, will need to pursue new and reinforced policies to improve the quality of life in urban areas across its economic, social, and environmental dimensions.

10. The economic and social problems of rural areas, whose solution may be decisive for the success of agricultural reform in many countries, are particularly complex. They should be addressed in an integrated and cost-effective fashion. This would require adjustment policies, and policies to accommodate and capitalise on the diversity of economic, cultural, social, environmental, and resource bases of rural areas. Within the framework of a comprehensive rural development policy, local initiatives and partnerships will be of central importance.


11. A substantial, comprehensive and balanced outcome to the Uruguay Round is crucial for maintaining and strengthening an open multilateral trading system capable of underpinning an international environment of competition, structural reform and economic growth. An early conclusion to the Uruguay Round is needed urgently. For that purpose, the process of negotiations now stalled needs to be reinvigorated. Major participants have recently indicated renewed political commitment to see the negotiations concluded as soon as possible. This determination is shared by all members of the Organisation. Further delay risks losing the momentum necessary for the successful conclusion of the Round. The handling of this issue will be seen as a key test of the commitment of OECD countries to the open international trading system. The international trading environment is evolving at a rapid pace, subject to unrelenting pressures from a globalising network of producers and consumers. Without forthright movement toward market opening measures and a strengthened set of enforceable and predictable rules, international trading relations run the risk of fragmentation, conflict and inefficiency. The Uruguay Round is a vital step to anchor in firm ground the efforts that must continue in order to ensure liberal and improved market access in the future. An early, comprehensive and balanced outcome thus offers substantial benefits.

12. In the field of regional integration, important developments are taking place as shown, for instance, by the signing of the European Economic and Monetary Union, the recent conclusion of the European Economic Area Agreement and the negotiations underway for the creation of a North American Free Trade Area. Regional integration can stimulate the multilateral liberalisation process and should be in conformity with international obligations and with the objective of maintaining and strengthening the multilateral trading system. The Organisation will continue to monitor closely the developments in this field.

13. The collective effort to strengthen the global, multilateral framework of economic activity cannot be relaxed. In this context Ministers expressed their determination to fight protectionist tendencies. New concepts, guidelines and disciplines will be developed where appropriate to ensure that this framework keeps pace with events, and remains a fully satisfactory basis for the continued development of economic activity, in particular of international trade. Both outstanding and emerging problems across a broad range of policy areas will be addressed with renewed vigour. An important aim will be to promote coherence.

14. There is an urgent need for reform of agricultural policies. In 1991, progress in the implementation of the reform principles agreed in 1987 continued to be very limited and uneven. Ministers noted and endorsed the recommendations of the Ministers for Agriculture at their meeting of March 1992. They note the work underway in the Organisation on the inter-related issues of agricultural reform, the environment and rural development, and stress the need for an integrated approach to those issues. While reform would have benefits for the economy and the agro- food sector, it may involve hardship for some of the agricultural population and for some regions heavily dependent on agricultural income. Where appropriate, adjustment assistance may therefore be required and will be provided in a way that does not create further impediments to structural change and that reduces economic and, in particular, trade distortions.

15. World-wide sustainable development requires that policies in all countries take account of the close interrelationships between economic growth, social well-being and environmental quality. As emphasised by Ministers of Environment and of Development Co-operation at their meeting in OECD on December last, the truly collective responsibility and duty of all the nations of the world is involved here, because the basic life support systems of the earth are at stake. Success will require: better integration of national economic, social and environmental policies; in addition to regulations, expanded use of market mechanisms in such a way as to ensure that environmental are fulfilled in the most cost-effective manner; international co-operation, supported by the mobilisation of expanded technical and, as agreed, new and additional financial resources, to enable all nations, particularly developing countries, to play their full roles; and the encouragement of scientific research and development of environment-related technologies. Therefore, OECD governments are committed to using the forthcoming United Nations Conference on Environment and Development as a catalyst to build a strengthened partnership for sustainable development with non-member countries; and then to working with them to implement the agreed long-term policies, strategies and conventions that emerge from it. This partnership should be based on mutual commitments by all countries, taking into consideration their relative capacities and common but differentiated responsibilities. Ministers note with satisfaction that a United Nations Framework Convention on Climate Change was adopted by the INC on 9 May, which will be open for signature during UNCED in Rio de Janeiro. They consider that this Convention would provide a good basis for international action to tackle climate change, including the specific commitments by OECD countries, and invite the OECD to intensify its work on issues related to climate change in order in particular to support Member countries in their preparation and co-ordination of actions to implement commitments under the Convention.

16. Ministers welcome the agreements on officially-supported export credits and tied aid credits reached in the Arrangement on Guidelines for Officially Supported Export Credits and in the Development Assistance Committee on new measures aimed at greater transparency and discipline. They underline the importance of an effective implementation of these measures. Ministers expect further progress along the lines decided by the bodies concerned, including the Export Credit Group of the Trade Committee with its further work on subjects including export premium systems, and ask for reports at their 1993 meeting.

17. Ministers welcome the progress achieved over the past few years in the international co-operative efforts, in particular through the work of the Financial Action Task Force (FATF), to prevent the utilisation of the financial system for the purpose of money laundering. They express their determination to further reinforce multilateral co-operation in this area and invite all countries to participate actively in the fight against money laundering on the basis of the FATF recommendations.

18. Looking to the coming years, Ministers emphasise the need to address the important questions of trade policy, together with other domestic policies with trade relevance, that emerge from the increasing globalisation of the world economy. There is an increasingly close relationship between trade policies and, in particular, environment, competition, industrial support and technology development and innovation policies. Further progress will be made in better understanding the issues and identifying required policy adjustments:

19. Industrial subsidies and other public support measures can give rise to distortions in both national and international markets that can contribute to international trade friction. Industrial subsidies also generally impede rather than promote structural adjustment and add to pressures on public expenditure. Ministers remain firmly of the view that every effort should be made to eliminate or bring under enhanced discipline subsidies that have trade distorting effects. The current work on industrial subsidies and structural adjustment indicators in the OECD represents important progress towards greater transparency in this area and will facilitate the further task of the relevant international organisations in elaborating commonly acceptable international disciplines. Ministers invite the Organisation to intensify this exercise, whose key features are joint analysis and peer review, so as to allow a real international comparison, the essential starting point for systematic multilateral monitoring and surveillance. Specifically, work should continue on the concepts and methodologies necessary to allow comparability, quantification and analysis. Ministers stress the need to make progress in this area as quickly as possible.

20. Multilateral co-operation, in particular in the OECD, will also seek to identify problems and, where appropriate, strengthen disciplines in other areas where convergent national policy measures may improve the functioning of the global economy. In this regard, Ministers welcome the recent launching by OECD science and technology Ministers of a forum for exchange of information and open substantive discussion on large- scale science projects. Other areas might include: international aspects of taxation, liberalisation and supervision of financial markets, telecommunications, maritime transport, biotechnology and technology policy, as well as health, safety and environmental regulations, movement and qualifications of professionals and skilled workers and equal- opportunity legislation.

21. Ministers recognise the need for more attention to be given to the growing energy interdependence among nations inside and outside the OECD region and the importance of compatible approaches to energy and environment policies among both Member and non-member countries. They encourage Member countries to share their energy policy experiences and expertise, including access to information on energy technology innovations, as appropriate, with interested developing countries and countries in transition to market economies. They support the positive contributions made by the OECD and the IEA to the UNCED/INC process and urge them to continue to participate in and contribute to that process in the future, as appropriate.


22. In the world-wide move towards pluralist democracy, respect for human rights and a competitive market economy, an increasing number of countries which recognise the validity of these basic principles of OECD Member countries wish to establish contacts and develop relations with the Organisation. In an increasingly interdependent world this represents an evolution which Ministers welcome, and it presents a challenge and an opportunity for the Organisation. The Organisation must respond positively and effectively to this new situation, while at the same time maintaining and reinforcing the relevance and quality of its work, and its efficiency as a group of like-minded countries, with benefit both for Members and non-members. The necessary expansion of contacts with non-member countries should proceed in a manner consistent with the inherent values and working methods of the Organisation, taking into account the variety of situations, circumstances and policies of these countries in devising the appropriate structures and modalities of co-operation. These may include participation by non-member countries in those OECD activities where a mutual interest is clearly recognised, and membership of the Organisation for countries which fully share OECD values and characteristics and are willing and able to meet the obligations of membership.

Developing Countries

23. OECD countries will continue to give high priority to co-operation with developing countries. This requires a coherent and comprehensive approach which includes: pursuing macroeconomic policies conducive to non-inflationary growth and contributing to a stable global economic environment; further liberalising access to their markets for products from developing countries; substantial additional aid efforts both quantitatively and qualitatively, in particular in support of economic and democratic reform; and promoting co-operative approaches to relieving debt burdens, particularly for the poorest countries. Ministers therefore encourage the Organisation to marshal available analytic resources to foster coherent development policies in Member countries and a better mutual understanding of the problems facing developing countries. Donors who have made undertakings in respect of the ODA target of 0.7 per cent of GNP established by international organisations should make increased efforts to implement them and other donors should make their best efforts to increase their level of ODA. Co-operation with developing countries also requires developing constructive discussions in all appropriate fora, aimed at finding ways to deal in a coherent manner with fundamental issues such as environmental protection, excessive population growth, poverty, education and technology co-operation. The institutional reforms agreed at the recent UNCTAD meeting are a welcome step towards more constructive policy dialogue.

24. In developing countries, participatory development, including a greater role for the private sector, democratisation, respect for human rights, and good governance, including the reduction of excessive military expenditures, are basic to ensuring the conditions for broad based, sustainable economic and social development. Ministers welcome the world-wide trends in these directions. Nevertheless, situations in developing countries still differ widely. Many countries have moved resolutely to implement these principles. The benefits of such efforts are becoming visible, including in private investment flows. In many other countries, however insufficient efforts have been made, and in some of these countries, economic and social conditions have been consistently deteriorating. OECD governments acknowledge the complexities of the issues involved, but sustained and determined efforts to implement the above principles are an increasingly important consideration in development co-operation, including aid allocation. OECD countries are willing to encourage and support these efforts.

Central and Eastern European Countries and the New Independent States of the Former Soviet Union

25. OECD governments are deeply committed, both in their own interest and that of the countries concerned, to helping the process of transition succeed in Central and Eastern European countries (CEECs, which include Estonia, Latvia and Lithuania) and the New Independent States of the former Soviet Union (NIS). Ministers recognise that this transition to pluralist democracy, respect for human rights and a competitive market economy is indeed a difficult and complex process, which affects all aspects of the political, economic and social reality of these countries.

26. Success in transition demands the introduction or continuation by the countries themselves of comprehensive reform programmes aimed at creating the conditions under which economic agents, both national and foreign, can act effectively. Important among these conditions are:

27. External support, both by governments and international organisations, is geared towards helping recipient countries, whose numbers have augmented significantly over the past year, to create these conditions, taking into account the specific situations of each of them and the increased scale of the task overall, including to the OECD. This support is increasing. Ministers stress the importance of international organisations continuing to deepen their co-ordination in accordance with their respective areas of competence. They commend and confirm the role of the OECD and its CCEET in the provision to an increased number of recipient countries of technical assistance for policy formulation, in particular with regard to structural policies. They stress the usefulness of the OECD's on-line Register of technical assistance projects, and urge countries to contribute to it. They look forward to the OECD's role as the clearing house for information on technical assistance to the New Independent States of the former Soviet Union. They call upon the Organisation to develop further the most effective mechanisms, taking due account of the activities of other international organisations, to deliver its support for reforms in the New Independent States of the former Soviet Union and the Central and Eastern European countries, to consider in particular the proposed creation of a Liaison and Co-operation Committee that will bring together for discussions all OECD Member countries, the CEECs and the NIS, and to examine how best the OECD can assist in improving productivity growth in the CEECs and the NIS. They also support the International Energy Agency in its assistance efforts, and the contribution being made by the Nuclear Energy Agency to well co-ordinated international efforts to foster nuclear safety.

28. Central and Eastern European countries have already made progress, impressive in some cases, in establishing pluralistic democracy and making the transition to market economies. OECD Countries will continue to support strongly these efforts. Ministers note with satisfaction the implementation of Partners in Transition (PIT) programmes with Hungary, Poland and the Czech and Slovak Federal Republic. They expect the forthcoming meetings of Liaison Committees with these countries to provide an opportunity for assessing progress to date and further developments. They commend the efforts made by other Central and Eastern European countries, and call for an adequate response to the evolving needs of all these countries.

29. In the New Independent States of the former Soviet Union, the challenge of transition is an order of magnitude more daunting and demanding. OECD governments are resolved to do their best to help this historic change to be a success. Ministers instruct the OECD to offer its assistance to the NIS, focusing on those areas of its expertise best suited to the circumstances prevailing in these States. They instruct the OECD to define and make effective use of its function as a clearing house for information. They welcome the continued use of the Organisation as a forum for the exchange of information, and of experience with technical assistance.

30. Ministers recognise the crucial importance of expanding exports for the CEECs and the New Independent States (NIS) engaged in a process of commercial and economic opening. Member countries:

On the other hand, the CEECs and NIS should liberalise further their foreign trade regimes, resisting protectionist pressures by domestic industries and foreign investors alike.

Dynamic Asian Economies

31. The Dynamic Asian Economies have maintained their strong economic performance and this appears set to continue. Their increasingly important role in the global economy points to the desirability of developing further the informal dialogue begun four years ago. This dialogue has already contributed to a better understanding of OECD/DAE economic relationships, and to greater convergence of views about economic policies in areas of mutual interest, in particular trade and investment. It may be desirable to extend its scope to other global policy issues of mutual interest, such as environment, and education and training. Ministers noted the Republic of Korea's interest in membership and welcome increased formal contacts between it and the Organisation.

Latin America

32. A number of countries in Latin America have made considerable progress towards stabilising, liberalising and restructuring their economies, and the benefits are already tangible. This is particularly the case for Mexico, after several years of market-oriented reform. After having heard the report of the Secretary-General, Ministers noted Mexico's interest in membership and welcome the development of relations between it and the Organisation, and express their hope of a further strengthening of these relations. They ask the OECD to consider the desirability of increasing contacts between the OECD and other reforming countries in the region.

Source: The Annual Report of the OECD. Copyright OECD 1992. Reproduced by permission of the Organisation for Economic Co- operation and Development.

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