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OECD Council Meetings at Ministerial Level

Meeting of the Council at Ministerial Level
Paris, 21-22 May 1996


1. The Council of the OECD met on 21 and 22 May 1996 at Ministerial level. The meeting was chaired by Mr. Franz Vranitzky, Federal Chancellor, and Mr. Viktor Klima, Federal Minister of Finance, of Austria. Vice-Chairmen were Professor Antonio Luciano de Sousa Franco, Minister of Finance, and Mr. Francisco Manuel Seixas da Costa, Secretary of State for European Affairs, of Portugal, and Mr. Joseph Stiglitz, Chairman of the Council of Economic Advisors, of the United States. Prior to the meeting, the Chair 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. Ministers endorsed the conclusions of the recent OECD meetings of Ministers of Science and Technology, of Education, of Environment, of Public Management and of Development Co-operation.

2. Ministers welcomed the accession of the Czech Republic and Hungary to the Organisation since they last met in 1995.

3. Ministers expressed their deep appreciation and gratitude to the Secretary-General, Mr. JeanClaude Paye, for his strong leadership and outstanding dedication to the Organisation and to the cause of international economic co-operation over the past 12 years. They wished him well for the future. The Council welcomed Mr. Donald Johnston as his successor, with effect from 1st June 1996.

4. Ministers considered that the strong fundamentals in many OECD countries strengthen prospects for better economic growth after the recent and unexpected slowdown in activity in some. Inflation is generally low; interest rates have come down substantially; and the broad movements in the exchange rates of the major currencies have improved the prospects for non-inflationary growth. However, there are serious challenges. Though high budget deficits and public debt are now being seriously addressed in most countries, they remain key problems. Unemployment remains unacceptably high in many OECD economies. The unequal distribution of income is a concern in some. Structural rigidities weaken resiliency and adaptability to change. Recognising that conditions in OECD countries are inextricably linked to events and conditions in non-member countries, Ministers resolve to work together to generate sustainable development and non-inflationary growth in the OECD and beyond by creating more jobs, reducing poverty and exclusion, protecting the environment, and increasing confidence.

5. The globalisation of the economy is the product of the interaction between trade and technological progress. It gives all countries the possibility of participating in world development and all consumers the assurance of benefiting from increasingly vigorous competition between producers. To take advantage of these prospects for improved living conditions and progress, individuals, enterprises and countries must show themselves capable of rapid adjustment and continuous innovation. This is the challenge, particularly for Member countries.

6. Ministers intend to rely in particular on the OECD's capacity to undertake analysis and develop policy proposals in order to meet together this challenge, on the basis of a jointly-agreed strategy whose principal elements are:

(i) -- the search for sustainable economic development at as high a level as possible, while maintaining social cohesion;

(ii) -- the continuous strengthening of the system of multilateral rules necessary for the proper functioning of a globalised economy;

(iii) -- diversified interaction with non-member countries.

7. Ministers adopted the following plan for action by OECD governments and guidelines for the work of the Organisation:


8. Ministers resolve to:

(i) -- implement macroeconomic and structural policies which should be mutually reinforcing and which will raise growth potential, increase job creation, maintain inflation at a low level and promote sustainable development;

(ii) -- continue to fight unemployment as their most urgent challenge, particularly as it affects the low-skilled, youth and the long-term unemployed and risks increasing social and regional disparities: in order to do so they will implement with firm determination the recommendations of the OECD Jobs Strategy; positive results from policies consistent with this strategy have begun to show up in several Member countries;

(iii) -- reduce fiscal deficits, by limiting public expenditure where appropriate, restore sound public finances and improve public sector management in order to improve growth prospects and help prepare for social and economic changes in the future;

(iv) -- pursue sound monetary policy and, in so doing, contribute to securing price stability and to creating a more favourable and predictable environment for investment and consumption decisions;

(v) -- continue to co-operate on economic policies and exchange rates, thereby helping to improve the fundamentals for sustained growth, to promote greater stability in financial markets and to contribute to continued expansion of international trade and investment;

(vi) -- further promote adequate prudential supervision of banking and non-banking financial institutions and greater transparency and better dissemination of information in financial markets;

(vii) -- strengthen structural reforms in order to take full advantage of the beneficial effects of globalisation and technological advances and to create favourable business conditions, including for small and medium-sized enterprises (SMEs);

(viii) -- promote innovation systems and use the full potential of information and communication technologies;

(ix) -- ensure that everyone has a sound foundation for lifelong learning and has or can acquire the necessary qualifications and skills to enhance employability in an evolving labour market and a knowledge-based society;

(x) -- pursue regulatory reform, particularly by improving the quality of regulation and easing the transition to ever more competitive markets, thereby facilitating in a non-discriminatory way enhanced trade and investment opportunities;

(xi) -- pursue the integration of environmental with economic and other policies;

(xii) -- underscore equal opportunities as a priority objective of society and promote the role of women in the labour market.

9. Ministers stress that strengthening the open and rules-based multilateral system will give renewed impetus to ongoing multilateral trade liberalisation efforts, and will map future directions for the multilateral trading system in support of sustainable real growth, employment and development. To that end they commit to:

(i) -- reaffirm the very high priority they attach to an effective and dynamic multilateral trading system, in particular by:

working to strengthen the confidence in and credibility of the multilateral trading system by avoiding taking trade and investment measures that would be in contradiction with World Trade Organisation (WTO) rules and OECD codes, and by using and complying with any applicable provisions for consultation and dispute settlement when differences arise;

adhering to WTO rules, resisting all forms of protectionist pressure, ensuring full and effective implementation of commitments in accordance with the agreed timetables, including notification requirements, and pursuing focused efforts to achieve a successful conclusion to unfinished negotiations in certain service sectors and on non-preferential rules of origin;

ensuring and enhancing, through the use of the WTO Committee on Regional Trade Agreements and other appropriate fora, the consistency of regional integration with an open multilateral trading system;

working to widen WTO membership on agreed terms while safeguarding the integrity of the system as a whole; in this connection, effective market access in goods and services and effective enforcement of intellectual property rights is critical;

(ii) -- work for a successful first WTO Ministerial Conference to consolidate and build on the momentum of the Uruguay Round through a balanced, consensual agenda reflecting the interests of all WTO Members, including developing and transition economies;

(iii) -- co-operate actively in ensuring progress on the WTO "built-in" agenda for review, further work, or negotiations, including:

continued preparatory work already under way in the various WTO Committees and Working Groups;

as mandated at Marrakesh, review of the report and recommendations of the WTO Committee on Trade and Environment with a view to making substantive progress on this issue;

establishment of a work programme for the preparation and pursuit of the built-in agenda, where this is not already defined;

(iv) -- address the growing need for the further development of the multilateral trading system by:

pursuing all possibilities for further trade liberalisation, noting current work towards an information technology agreement; recalling OECD work on new issues , giving further consideration to these issues with a view to determining how to proceed;

giving new impetus to non-discriminatory multilateral liberalisation and rule-making, including through building on the momentum of regional co-operation;

looking ahead beyond Singapore, noting the priority of the WTO in providing a forum for trade liberalisation and the future expiry of the mandates of the built-in agenda, and exploring various possibilities and modalities to ensure that the process of comprehensive multilateral trade liberalisation continues into the next century;

(v) -- begin an examination of trade and investment in the WTO and work towards a consensus which might include the possibility of negotiations;

(vi) -- further the progress made so far in the negotiation of a Multilateral Agreement on Investment (MAI):

reach an agreement by the Ministerial meeting in 1997, with high standards of investment liberalisation and protection and effective dispute settlement procedures and aim at achieving a higher level of liberalisation;

engage in an intensified dialogue with non-member countries, in particular those interested in acceding to the MAI;

(vii) -- maintain the momentum of work on OECD Transfer Pricing Guidelines and work towards a common approach to the problems posed by harmful tax competition;

(viii) -- further work for liberalising, in the interests of all, international air transport within bilateral and multilateral frameworks in order to ensure that the aviation sector contributes fully to economic development in OECD countries and in the world more generally;

(ix) -- continue to encourage the removal of remaining capital controls in Member countries;

(x) -- re-examine the tax deductibility of bribes to foreign public officials, with the intention of denying this deductibility in those Member countries which do not already do so, recognising that such action may be facilitated by the trend to treat bribes of foreign officials as illegal; and criminalise such bribery in an effective and co-ordinated manner in order to combat bribery in international business transactions, and for that purpose, further examine the modalities and appropriate international instruments to facilitate criminalisation and consider proposals in 1997;

(xi) -- continue working for the promotion of core labour standards around the world. They welcomed the conclusions of the OECD report on trade, employment and labour standards as making an important contribution to the understanding of this issue. They encouraged Member governments to discuss these conclusions, as well as the Secretariat's analytical report on the subject, with a wider, non-member audience, with a view to considering any further action; this discussion could start in the context of the Policy Dialogue with Dynamic Non-Member Economies due to take place in the autumn;

(xii) -- maintain the momentum of the work of all participants of the "Export Credit Arrangement", especially on the guiding principles for premia setting and on the Outline Understanding on agricultural products with a view to concluding agreements by the 1997 Ministerial meeting;

(xiii) -- make every effort to obtain ratification of the "Shipbuilding Agreement" by all participants within the agreed timeframe so that the Agreement enters into force by 15 July 1996, and encourage other countries to become parties to the Agreement;

(xiv) -- proceed with the agricultural policy reform process in line with OECD principles and by fully implementing Uruguay Round commitments, and develop innovative and better targeted ways to address policy objectives such as those related to the environment, the rural economy and food security, and undertake work in preparation for the next meeting of OECD Agriculture Ministers.

10. Ministers recognise that sustainable progress in developing countries is of increasing global importance and that the linkages between developing and developed countries should be mutually reinforcing and supportive of development. In a spirit of new global partnership they agree to:

(i) -- work together as bilateral donors and with multilateral development institutions to promote the integration of developing countries into the globalising world economy and to maximise the effectiveness and co-ordination of the global aid system;

(ii) -- endorse the long-term development strategy approved at the High-Level meeting of the Development Assistance Committee and, in particular, call on the developing countries to make efforts together with the developed countries towards the achievement of its output-oriented development objectives;

(iii) -- while recognising the need to increase the volume of development assistance, mobilise as much official bilateral and multilateral financing as possible, particularly adequate levels of Official Development Assistance; promote the flow of private resources and investment; and encourage the efficient and effective use of all these resources while reinforcing the self-help efforts of developing countries;

11. As ever more countries embrace the market economy, pluralistic democracy and respect for human rights, as the world economy undergoes globalisation and as the overall architecture of international organisations evolves, the OECD must respond by adapting ever more rapidly. It must tackle new problems and reach out to new partners -- both among and within States -- while at the same time preserving the shared values and characteristics on which its relevance and effectiveness are based.

12. In addition to the three countries for which the accession processes are well underway, several other non-member countries have expressed their wish to adhere to the OECD Convention. Some of these are participating in various Committees of the Organisation. Ministers welcome this interest and re-affirm that the OECD must remain open to countries sharing the same values, but also remain selective and maintain the tradition of high standards for OECD membership. OECD's membership has to continue to evolve, in accordance with a changing world and the interests of its Members. In order to prepare the Organisation for future enlargement, while preserving its efficiency and usefulness, there is a need to take stock, define and introduce any necessary changes. Ministers expect a report on this subject in 1997.

13. Ministers are pleased with the quality of the dialogue and co-operation that has been established with a number of emerging and dynamic market economies and economies in transition. They firmly support these activities and will ensure that they continue to evolve in a coherent way and fulfil the mutual interest in an effective and differentiated manner.

14. Ministers conclude that the OECD is an essential component of the multilateral system. The ambitious plan of action agreed by Ministers underscores the vital role of the Organisation in reinforcing democracy and demonstrating the values and dynamism of the free market. Ministers, while bearing in mind the constrained budgetary environment, call on the Secretary-General to meet the challenges of bringing the OECD into the 21st century, working with Member countries to provide them with an OECD which continues to be ever more focused, efficient and effective.


15. To facilitate the implementation of their commitments, bearing in mind the requirement to fit new work within a constrained budget, by concentrating on core priorities, Ministers request the OECD to:

Growth and Employment

(i) -- carry out analysis and exercise monitoring of macroeconomic and structural policies and provide recommendations for sustained high non-inflationary growth, particularly on issues of common interest or with significant international spillovers;

(ii) -- follow up the Jobs Study work, including elements requested by G-7 Ministers, summarised in the report Pushing Ahead with the Strategy and support more rapid implementation of its recommendations by:

undertaking further work on the interaction between macroeconomic policies and structural reforms;

continuing the analysis and surveillance of country-specific issues and policies in the economic surveys and reporting to Ministers in 1997 on the common themes and lessons learned from the first full cycle of reviews;

working with Member countries in a well co-ordinated horizontal manner to find practical policies, strategies and programmes to implement the findings of the Technology, Productivity and Job Creation report, and developing new work to identify "best practices" in policies for innovation and technology diffusion and providing an interim report to Ministers by 1997, as well as continuing the analysis of the interaction between trade and technology;

continuing the reviews of labour markets and education and training policies, including with respect to the young, as well as completing the thematic work on entrepreneurship and job creation;

continuing to analyse issues and identify the policies relating to supporting the most vulnerable groups and to enhancing their ability to increase their participation in work and in society and to increase their living standards over time; including a review of the impact of social protection policies and their interactions with macroeconomic and structural policies;

(iii) -- pursue forward-looking work on approaches that ensure that the public service is dynamic and well-equipped to respond to the challenges facing governments and to implement public policy effectively and efficiently;

(iv) -- deepen its work on a comprehensive policy framework to facilitate further development of the Global Information Infrastructure and related products and services, including the development of cryptography policy guidelines which would enhance security and protect intellectual property rights in this area, and analyse the economic and social impacts;

(v) -- endorse the work plan on regulatory reform, bearing in mind that well-founded reform will improve economic efficiency and growth, promote technological innovation, serve consumer interests, support international trade and investment, and enhance government effectiveness;

(vi) -- disseminate the first report on the policy implications of ageing populations and further the analysis of the challenges in key policy areas such as pensions, health and long-term care, and report back in 1998;

(vii) -- continue its work on international migration;

(viii) -- develop an initial set of indicators of human capital investment based on existing data, analyse areas where significant gaps remain in internationally-comparable data, identify the costs of development and data collection for new measures and performance indicators, and report to Ministers in 1998;

(ix) -- undertake further examination of the potential for environmental (or "green") tax reform and analysis of the elimination or reform of environmentally-harmful subsidies, with a view to presenting reports to Ministers in 1997 and 1998 respectively;

(x) -- continue work on territorial policies, including for urban and rural areas;

Strengthening the Multilateral System

(xi) -- explore future directions for the further development of the multilateral trading system, making full use of its capacity for interdisciplinary analysis to identify important trade issues for possible future multilateral discussions and negotiations and trade disciplines in areas insufficiently or not currently covered by multilateral trade rules;

(xii) -- continue monitoring of regional and inter-regional developments, including their impacts on the multilateral system;

(xiii) -- deepen understanding of new dimensions of market access and market presence, with a particular focus on the interaction between trade and competition policies;

(xiv) -- develop its work on corporate governance and framework conditions;

(xv) -- monitor the implementation and extend the application of the OECD Transfer Pricing Guidelines and analyse and develop measures to counter the distorting effects of harmful tax competition on investment and financing decisions, and the consequences for national tax bases, and report back in 1998;

Development Co-operation into the 21st Century

(xvi) -- follow up the intensive reflections on the strategic orientations for development co-operation into the next century and develop a work programme that supports more intensified work in the area of comprehensive approach and policy coherence;

(xvii) -- complete, by 1997, policy orientations for donors on Conflict, Peace and Development Cooperation, together with an agenda addressing excessive military expenditures in developing countries and the implications for development assistance effectiveness, peace and global security;

(xviii) -- follow up on the effect given to the recommendation on anti-corruption proposals for bilateral and multilateral aid procurement endorsed by the Development Assistance Committee;

Charting the Future of the OECD

(xix) -- bring to an early and satisfactory conclusion the accession processes for Poland as well as for Korea and the Slovak Republic as soon as each of these countries is ready and able to assume all the responsibilities of OECD membership;

(xx) -- define and implement measures now becoming necessary as the Organisation evolves and its relations with non-members become more diversified;

(xxi) -- develop and rationalise, on the basis of a comprehensive, coherent and efficient strategy, the various forms of dialogue and co-operation with non-member economies. Within this framework, support further reform efforts in transition economies; strengthen co-operation with Russia; develop dialogue with dynamic non-member economies and, more generally, with emerging market economies; and intensify co-operation with the major economies of the various regions of the world;

(xxii) -- complete the study on Globalisation and Linkages to 2020: Challenges and Opportunities for OECD Countries and submit a report in 1997.

16. Ministers call on the OECD to accelerate the process of structural change in the Organisation, in particular by adopting more stringent priority-setting and by formulating and implementing reforms of management and working methods, with a view to further enhancing the relevance, efficiency and effectiveness of the Organisation, consistent with available resources. In light of this, Ministers request the Secretary-General to convene a special Council meeting at the earliest possible date in order to address these issues, and in particular to consider the Organisation's budgetary situation and prospects.

17. Ministers recalled that the origins of the OEEC and its successor, the OECD, grew out of the vision George Marshall expressed in a speech at Harvard nearly 50 years ago. Ministers expect to celebrate this anniversary at their meeting next year. Looking to the future, and recalling the OECD's global context, Ministers expressed their expectation that the OECD will continue to play its role as catalyst and pathfinder in international economic co-operation and development.

Source: OECD Press Release. Copyright OECD 1996. Reproduced by permission of the Organisation for Economic Co-operationand Development.

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