ECONOMIC GROWTH, THE GLOBAL IMPLICATIONS OF THE ASIAN CRISIS AND THE MULTILATERAL SYSTEM
2. Ministers noted that the Asian financial crisis has highlighted the growing interdependence of countries in the world economy as well as the importance of having well-functioning markets and efficient economies and supportive mechanisms of international co-operation and solidarity. They believe that recent events have confirmed that good governance and effective structural policies -- concerning financial systems, regulatory reform, corporate governance, and labour and product markets -- together with stable macroeconomic policies based on sound and transparent public finances and control of inflation, are critical to good economic performance, employment, social cohesion and the smooth functioning of the global economy. Ministers stressed the importance of a quick return to financial stability and economic growth in Asia through the rapid implementation of the macroeconomic and structural reforms necessary for recovery. They called on OECD countries to contribute to that recovery with policies that sustain growth and domestic demand, further open markets and improve conditions for investment. In this regard, domestic demand-led growth in Japan would contribute significantly.
3. Ministers welcomed reforms being undertaken by countries in Asia and recognised their growth potential over the longer term but also urged countries affected by the crisis to implement fully and expeditiously the recommended reforms agreed with the IMF, the World Bank and other relevant international institutions. The events in Asia have underlined the importance of international monetary and financial co-operation and of the advantages of all parties working together in a co-ordinated manner to prevent, manage and contribute to overcoming crises of a global nature.
4. Bearing in mind the upcoming WTO Ministerial, Ministers also noted that the impact on trade and investment of the current financial and economic situation in Asia poses challenges for the multilateral system. All countries have a substantial stake in economic stability and development in the Asian region. Ministers agreed on the importance of all countries maintaining open markets, resisting protectionist pressures, sustaining the momentum for future broad-based liberalisation building further on current levels of market access, undertaking regulatory and structural reform, and providing a receptive climate for investment. Ministers confirmed the importance of stable trade financing facilities and of providing development assistance, as appropriate, targeted to help address the economic and social implications of the financial crisis for affected Asian countries.
5. Ministers reaffirmed the Organisation's commitment to contribute to the international effort, led by the international financial institutions, to overcome the Asian financial crisis as rapidly as possible, through policy dialogue and co-operation in its areas of expertise. They stressed the important role of the OECD's peer review mechanism in contributing to sound macroeconomic and structural policy environments in Member countries. They endorsed the establishment of an OECD special programme addressing structural issues arising from financial instability in non-member economies, to complement on-going co-operation with emerging and transition economies in Asia and elsewhere. In this context, Ministers welcomed the commitment on the part of many non-OECD countries to a path of continued liberalisation, structural reform, good governance and the maintenance of a favourable investment climate, which contribute both to the good performance of those economies and to a strengthened multilateral system.
6. Ministers noted that, despite the effects of the Asian financial crisis, the underlying economic situation in most OECD countries is generally good, with sustained output growth and low inflation expected in nearly all. Economic growth in 1998-99 is projected to average around 2 1/2 per cent in the OECD area, though with very different prospects across the regions, including some strengthening of growth in continental Europe, marked weakness in Korea and the prospect of a resumption of growth in Japan with its stimulus package. Nevertheless unemployment remains at over 7 per cent, some 35 million persons, for the area as a whole and it is forecast to remain around 10 per cent in Europe.
7. In this context, Ministers discussed recent policy developments and challenges facing OECD countries. They confirmed their commitment to pursue policies to achieve strong sustainable growth and reaffirmed the need for macroeconomic policies focused on sound public finances and effective control of inflation. They also agreed on the need for fiscal consolidation over the medium term in most OECD countries, in order to reduce debt levels and help meet the challenge of ageing populations. Where tax burdens are high and action is still needed to reduce deficits, the main efforts should involve containing expenditures, although tax reform may also have a role to play. Different cyclical positions may call for different policy settings in the short term, however. In particular:
9. Ministers agreed to a statement on the Multilateral Agreement on Investment, which is annexed to this Communiqué.
10. Ministers are convinced that globalisation offers great opportunities to enhance economic growth and improve welfare, both in Member and non-member economies. They recognised that these benefits will be fully realised and widely shared only if structural reforms are adopted which encourage and facilitate governments, firms, and citizens to successfully adjust and innovate, taking into account the needs of the most vulnerable and the need to prevent people from drifting into long-term unemployment and social exclusion. Ministers agreed to pursue policies to that effect, taking into account the need to integrate economic, social and environmental objectives in promoting sustainable development.
11. In that context, Ministers agreed that action is needed to secure: sound macroeconomic conditions and financial systems; comprehensive reforms in both labour and product markets and tax and welfare systems; strategies for lifelong learning in the public and private sectors; an adequate response to the social, fiscal and financial implications of ageing populations; better corporate governance and regulatory practices; the effective development and utilisation of new technologies including in electronic commerce; the full benefits of trade and investment liberalisation; and sustainable development. Ministers called on the OECD to contribute to this ambitious agenda by charting the way in which countries can best take advantage of the opportunities and meet the challenges of globalisation.
PROMOTING STRUCTURAL REFORM AND ADJUSTMENT
Implementing the Jobs Strategy
12. Ministers agreed that reducing high and persistent unemployment remains a top priority for many countries, especially in Europe. Ministers are particularly concerned about the persistence of high long-term and youth unemployment, as well as decreasing employability among older workers, in many OECD economies. There is evidence that unemployment is now largely structural in OECD countries, although there are still some where cyclical unemployment remains high. There is also mounting evidence that the OECD Jobs Strategy, implemented comprehensively and tailored to the specific conditions in each country, represents an effective means of promoting employment and responding to countries' labour market problems. Ministers therefore emphasized the importance of the full implementation of the Strategy. They requested a comprehensive review of progress in this area in 1999, to aid them in implementing necessary reforms. Ministers also noted growing regional disparities in unemployment and widening income disparities in a number of countries and the importance of addressing these issues . They welcomed the specific initiative by the Organisation focusing on youth unemployment, which OECD Labour Ministers had recommended at their meeting in October 1997.
13. Ministers agreed that, as discussed at the OECD Industry Ministers' meeting in February, fostering entrepreneurship and improving the conditions for the creation and growth of small- and medium-sized enterprises are important for achieving better economic performance and improved job prospects, as well as for reducing regional economic disparities. They aim to improve the conditions for entrepreneurial activity, in particular by ensuring that capital markets, tax systems, administrative and regulatory conditions, infrastructure, and the labour and product market environment, provide a suitable setting. They noted the rapid growth and stressed the increasing importance of services, their connections with industry, and their impact on competitiveness.
14. Ministers also recognised the important role of technology in driving productivity advances and thus economic growth. Technological change leads to shifts in the pattern of labour demand, reducing the demand for some types of employment and increasing the demand for others. Policy should thus be geared not only to fostering innovation and technology diffusion, but also to facilitating the ability of both firms and individuals to adapt to technological change, thereby reaping the full benefits of productivity improvements and generating positive effects on jobs.
15. Taking full advantage of technological opportunities requires an appropriately-skilled workforce. Ministers agreed on the importance of effective education and training systems, as well as lifelong learning for all, to ensure that people are adequately equipped, or re-equipped, for the jobs of the future. Particular attention should be paid to efficiently assisting the most vulnerable in society who may be less able to take advantage of education and training programmes.
Improving Strategies for Ageing and Social Policy
16. Ministers discussed the challenges of ageing populations, a major priority for policy-makers, recognising that demographic and labour market trends in most OECD countries are likely to result in increasing numbers of people who are not working relative to working people, especially from 2010. They welcomed the report "Maintaining Prosperity in an Ageing Society" which proposes principles for interrelated reforms in many areas of social, economic and financial policy, in particular for health care and pensions systems. Societies must foster a climate conducive to "active ageing", providing support for people to lead active lives as they grow older. Ministers agreed to take into account these principles in developing national strategies and to monitor progress through the OECD.
17. Reform of social policy more generally figures high on the agenda of most OECD countries. The "Initiative for a Caring World" is contributing to a useful sharing of national experiences. Social policy should be more cost-effective and emphasize integration into the labour market in order to be more responsive to the needs of all people, especially the most vulnerable, and thereby strengthen social cohesion and contribute to overcoming poverty. Ministers look forward to the recommendations of OECD Social Policy Ministers, who will meet in June, on how the Organisation might best contribute to achieving these objectives.
Governance and Regulatory Issues
18. Ministers welcomed the analytical work of the OECD on corporate governance. They called on the OECD to develop, in conjunction with national governments, other relevant international organisations and the private sector, a set of standards and guidelines in this field, taking into account factors which influence business practices in each country, and to report on these by the 1999 Ministerial.
19. Ministers also noted that the quality of public sector management is essential for effective government and encouraged comparative analysis in this area. They welcomed the recent approval of the OECD Recommendation on Improving Ethical Conduct in the Public Service in Member countries, and asked to receive a report on this issue in 2000.
20. Ministers also reiterated the importance of regulatory reform in increasing economic growth and efficiency, and the ability of economies to adapt. The launch of the country review process, initially involving the Netherlands, United States, Japan and Mexico, will contribute to Member countries' efforts in this regard. They look forward to receiving a synthesis report on these reviews in 1999. They wish to enhance this process with reviews of additional Member countries in 1999 and beyond.
The Electronic World
21. The electronic world has potentially far-reaching implications for many facets of life, including the organisation of work and employment, the means of conducting commercial transactions, and the operation of government and the private sector. It also provides new business challenges and opportunities, including for small and medium-sized enterprises. To help this technology reach its potential, Ministers expressed their intention to work for agreement in the WTO on trade aspects relating to electronic commerce. Ministers welcomed the OECD's work on electronic commerce, recognising that the Organisation is well placed to examine the economic and social implications of these new technologies, and to contribute in specific areas such as trade policy, taxation, electronic authentication, consumer protection, privacy and security. They look forward to the ministerial Conference on electronic commerce, to be held in Ottawa in October. That Conference will seek to develop, in consultation with the private sector and other international organisations, a coherent 'action plan' for public policy and self-regulatory action, with the goal of realising the potential of global electronic commerce.
22. As the year 2000 approaches, Ministers agreed on the importance of rapidly adapting computer systems in order to avoid the potential for significant disruption due to the so-called "millennium bug". They stated their intention to meet this challenge and recognised the need to exchange information among governments and to work with the private sector, as appropriate, to ensure that the problem is resolved in a timely and comprehensive manner. They also called on the OECD to promote global awareness of the Year 2000 problem and its potential economic impact, and to report to the Ottawa ministerial Conference on electronic commerce.
STRENGTHENING THE MULTILATERAL SYSTEM
23. In view of the upcoming WTO Ministerial, which is being held in conjunction with the 50th anniversary of the multilateral trading system, Ministers reaffirmed their strong commitment to the multilateral system. They attached the utmost importance to maintaining open markets and sustaining the momentum of liberalisation. They stressed their resolve to ensure full and timely implementation of the Uruguay Round agreements, to strictly adhere to WTO rules, and to pursue the process of broad-based trade liberalisation, including in new areas. To this effect Ministers encouraged vigorous efforts in the WTO based on the built-in agenda agreed at the end of the Uruguay Round, together with the WTO work programme as agreed at Singapore. Ministers welcomed that exploration of the possible scope and modalities for further liberalisation and rulemaking had begun and stressed the importance of advancing toward an international consensus. In this context, Ministers expressed their support for complementing existing WTO mandates by addressing remaining barriers to trade in industrial products and for further liberalisation in the information technology area. Ministers reaffirmed the OECD's important role in support of the multilateral system and the WTO's preparations for future negotiations. They recognised that further integration of developing and transition countries into the multilateral system remains a high priority, and that it is important to remain responsive to their needs. In this context, particular attention should be given to enhancing opportunities for the least developed countries, and to helping them build the capacities needed to benefit from those opportunities. Ministers also supported the early accession on commercially viable terms of applicants to the WTO, while preserving the integrity of WTO rules.
24. Ministers noted that OECD Agriculture Ministers had, at their March meeting, reaffirmed that, in conformity with the conditions of Article 20 of the Uruguay Round Agreement on Agriculture and including all the elements contained therein, further trade negotiations are due to continue the ongoing process towards the long-term objective of substantial progressive reductions in support and protection resulting in fundamental reform. Ministers also noted that Agriculture Ministers had adopted a broad set of shared goals and policy principles covering all aspects of agricultural policy reform, and that those Ministers had: stressed that agro-food policies should seek to strengthen the intrinsic complementarities between the shared goals, thereby allowing agriculture to manifest its multifunctional character in a transparent, targeted and efficient manner; and had agreed that the challenge in pursuing the shared goals is to use a range of well-targeted policy measures and approaches which can ensure that the growing concerns regarding food safety, food security, environmental protection and the viability of rural areas are met in ways that maximise benefits, are most cost-efficient, and avoid distortion of production and trade.
25. Ministers also renewed their support for the observance of internationally recognised core labour standards and the goal of reaching agreement on an ILO declaration and follow-up mechanism. They noted the important role of the social partners in the process. Ministers also rejected use of labour standards for protectionist purposes.
26. Ministers reaffirmed their commitment to the OECD Guidelines for Multinational Enterprises, and to continue to update them in a timely manner, to ensure their relevance and effectiveness.
27. Ministers urged the early ratification of the OECD Shipbuilding Agreement by all participants to establish normal competitive conditions within the international shipbuilding market and to encourage other countries to become parties to the Agreement. Noting that the Agreement's original target date for implementation was January 1996, Ministers called on all signatories to ratify the Agreement as quickly as possible.
28. Ministers noted with satisfaction the 20th anniversary of the Export Credit Arrangement. It has proved to be a highly successful means of achieving rules-based disciplines on export credits. They welcomed the positive efforts undertaken in the area of premia following the adoption of the 1997 Guidelines. Ministers regretted, however, that an Understanding covering agricultural export credits has not been concluded, but remain convinced that the appropriate forum in which to continue debating the matter is provided by the meetings of the Participants to the Arrangement. Noting the outstanding undertaking on this issue in the Uruguay Round Agreement on Agriculture, they urged the Participants to reach an agreement as soon as possible and to report back on this matter at their 1999 Ministerial meeting.
29. Ministers welcomed the signing in December 1997 of the Convention on Combating Bribery of Foreign Public Officials and the subsequent legislative steps taken by Participating countries. They underlined their commitment to speedy ratification and implementation to allow the Convention to enter into force by 31 December 1998. They stressed the importance for all Participating countries to eliminate tax deductibility of bribes. Finally, they asked for a report in 1999 on the implementation of the Convention and on the progress made in the work planned on the following issues: bribery acts in relation with foreign political parties; advantages promised or given to any person in anticipation of that person becoming a foreign public official; bribery of foreign public officials as a predicate offence for money laundering legislation; the role of foreign subsidiaries and of offshore centres in bribery transactions. Ministers asked the OECD to promote wider participation in the Convention and its follow-up among non-participating countries.
30. Ministers welcomed the decision of the Financial Action Task Force (FATF) Ministerial meeting to extend its work for a further five years and the new strategy it has adopted. They also noted the FATF decision to promote the establishment of a world-wide anti-money laundering network based on adequate expansion of membership.
31. Ministers* welcomed the Report "Harmful Tax Competition: an Emerging Global Issue" and recognised that it represents a step forward towards curbing harmful tax practices. Ministers underlined the commitment to intensify efforts in this area at the national, bilateral, and multilateral levels. They welcomed the establishment of Guidelines on Harmful Preferential Tax Regimes, the commitment to draw up a list of tax havens and the creation of a Forum on Harmful Tax Practices. Ministers look forward to receiving periodic reports on the progress in implementing the recommendations set out in the Report.
32. Ministers encouraged the OECD to pursue further, and to broaden, its work in order to carry out fully the mandate given by Ministers in 1996 to develop measures to counter the distorting effect of harmful tax competition on investment and financial decisions, including real economic activities, and to associate non-member countries with this work.
33. Ministers* also welcomed the OECD Recommendation on measures against "hard core" cartels which was agreed in March. They called on Member countries to halt and deter the operations of such cartels, which have damaging effects on consumers and businesses around the world and to co-operate in their efforts to this end. They invited non-member countries to associate themselves with the Recommendation.
OECD'S CURRENT AND FUTURE CHALLENGES
34. Ministers noted with satisfaction the measures undertaken over the last year to improve the coherence and efficiency of the OECD's co-operative relations with non-members. They urged the Organisation to continue to strengthen these relations in a flexible and open but differentiated way, on a basis of mutual interest, with both emerging and transition economies. The ongoing, mutually beneficial dialogue should focus increasingly on the core activities of the Organisation, and on issues of particular importance for the successful integration of these economies into the international economic system. Ministers welcomed the growing interest of non-members in participating in the work of the Organisation.
35. Ministers reiterated that the OECD must remain open, on the basis of mutual interest, to membership by countries sharing the same values, while being selective and preserving the Organisation's tradition of high standards for membership, as well as its efficiency and relevance to its Members. Ministers also welcomed the continuing commitment to market-oriented reform by the Russian government. They called on the Russian Federation to participate more fully in co-operative activities with the OECD, which aim to help Russia establish a fully-fledged market economy within the framework of effective democratic institutions, as well as to meet and sustain the necessary conditions for future membership of the Organisation, the ultimate shared goal of both parties. They welcomed the continuing interest of certain emerging and transition countries in OECD membership. Ministers agreed that the accession process of the Slovak Republic should be concluded as soon as this country is ready and able to share the common values and assume all the responsibilities of OECD Members.
36. Ministers welcomed the steady progress being made in implementing the OECD's partnership strategy to help developing countries build their own capacities for development. Dialogue and joint review with partner countries are pointing to concrete changes in strengthening their local ownership and reducing aid dependency. This strategic agenda involves work on: agreed indicators of progress in economic well-being, social development, environmental sustainability and good governance; as well as on tested poverty-reduction strategies. Its success will be based on increased policy coherence, especially to help developing countries secure sustainable development, assemble the necessary financial resources and integrate successfully into the global economy. Ministers requested the Secretariat to submit a report to their meeting in 1999 on the links between trade and investment and development, and the role that the OECD might play in promoting greater policy coherence. At the same time, Ministers recognised the importance of substantial levels of official development assistance, in particular for the poorest countries, as a means of helping developing countries maximise their prospects for growth and for achieving the goals of the partnership strategy. They welcomed the work being undertaken to stem unproductive expenditure, including excessive military expenditure, in developing countries and recognised the importance of improving the coherence of Members' relevant policies and programmes with this aim. Ministers look forward to the scheduled full review in 1999 of the implementation of the development partnership strategy. Ministers welcomed the agreed mandate to work on a Recommendation on untying of official development assistance for the least developed countries, with a text to be proposed in 1999. They also welcomed the new Guidelines on Gender Equality and Women's Empowerment in Development Co-operation.
37. Ministers agreed that the achievement of sustainable development is a key priority for OECD countries. They encouraged the elaboration of the Organisation's strategy for wide-ranging efforts over the next three years in the areas of climate change, technological development, sustainability indicators, and the environmental impact of subsidies. They welcomed the Shared Goals for Action adopted by OECD Environment Ministers at their April meeting. Ministers recognised that all OECD countries, on the basis of their differentiated responsibilities, need to play their part in combating climate change by implementing national strategies, including measures such as clear targets and effective regulatory and economic measures, as well as through international co-operation. In this regard, OECD analysis will be critical in helping Member countries find the most efficient and effective ways to meet Kyoto targets. Ministers asked the OECD to enhance its dialogue with non-member countries in these areas and to engage them more actively, including through shared analyses and development of strategies for implementing sustainable development. Ministers further noted that, as part of the Shared Goals, Environment Ministers stressed the crucial importance of strong environmental policies in the implementation of sustainable development. Ministers agreed to interpret the term 'sustainable' as including social and environmental, as well as economic, considerations. The Organisation is well-placed to exploit its multidisciplinary expertise in this area and to pursue the integration of economic, environmental and social policies to enhance welfare. In this regard, Ministers stressed the importance of promoting effective integration of environmental considerations in the multilateral system.
38. Ministers welcomed the Secretary-General's achievements in reforming the Organisation and emphasised the importance of the work currently underway on committee and directorate restructuring and on the decision-making process. They believe that continued efforts to renew, streamline and refocus the Organisation can further enhance its value as a resource for Member countries at a time of rapid change. They recognised the importance of returning the Organisation to a stable and predictable budgetary climate as soon as possible. Ministers called for renewed efforts to prioritise the OECD's work, recognising the important role that Members themselves must play in working with the Secretary-General in this regard. They stressed that the multidisciplinary, forward-looking nature of the Organisation's work is important in helping countries deal with the complex problems of a globalising world. Ministers noted the positive accomplishments of the OECD and encouraged the Organisation to continue to adapt to the changing needs of its Members. Ministers reaffirmed their strong support for the Organisation and committed to work toward strengthening its role in the global economy of tomorrow.
|*||Luxembourg and Switzerland (for the reasons set out in Annex 2 of the Report) abstained in Council on the approval of the Report and the adoption of the Recommendation and are not bound by this text and its recommendations; accordingly they do not associate themselves with this paragraph.|
1. Ministers regard investment, like trade, as an engine of economic growth, employment, sustainable development and rising living standards in both developed and developing countries. They re-affirm the importance they attach to achieving a comprehensive multilateral framework for investment with high standards of liberalisation and investment protection with effective dispute settlement procedures, and open to non-member countries. They also recognise the importance of the public debate on the implications of globalisation.
2. Ministers welcome the Report by the Chairman of the Negotiating Group on the progress made since the Ministerial meeting of May 1997 in developing a Multilateral Agreement on Investment (MAI).
3. Taking into account the positive results produced by the Negotiating Group, as well as the remaining difficulties and the concerns that have been expressed, Ministers decide on a period of assessment and further consultation between the negotiating parties and with interested parts of their societies, and invite the Secretary-General to assist this process. Ministers note that the next meeting of the Negotiating Group will be held in October 1998. Ministers direct the negotiators to continue their work with the aim of reaching a successful and timely conclusion of the MAI and seeking broad participation in it. In the same spirit, they support the current work programme on investment in the WTO and once the work programme has been completed will seek the support of all their partners for next steps towards the creation of investment rules in the WTO.
4. Ministers recognise the need to complete work on MAI disciplines and exceptions with a view to achieving a high standard of liberalisation and a satisfactory balance of commitments, which takes full account of economic concerns and political, social and cultural sensitivities. A solution is also needed for particular issues relating to extraterritoriality.
5. Ministers confirm that the MAI must be consistent with the sovereign responsibility of governments to conduct domestic policies. The MAI would establish mutually beneficial international rules which would not inhibit the normal non-discriminatory exercise of regulatory powers by governments and such exercise of regulatory powers would not amount to expropriation.
6. Ministers note the increased convergence of views on the need for the MAI to address environmental protection and labour issues, and the broad support for including a strong commitment by governments not to lower environmental or labour standards in order to attract or retain an investment.
7. Ministers are committed to a transparent negotiating process and to active public discussion on the issues at stake in the negotiations.
8. Ministers welcome the full participation as Observers of Argentina; Brazil; Chile; Estonia; Hong Kong, China; Latvia; Lithuania and the Slovak Republic with a view to their becoming founding members of the MAI. Ministers are committed to pursue an active dialogue with non-members, including on their development interests, particularly with those non-members willing and able to meet the obligations of the agreement.
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