News brief- September 2003 edition

OECD Observer

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Shipping warning 

It would cost ship operators over a billion dollars to introduce new security measures to counter the threat of terrorist attacks, but that figure is a lot less than the potential cost of a terrorist attack. This is the conclusion of a new OECD report entitled Security in Maritime Transport: Risk Factors and Economic Impact.

World trade is dependent on maritime transport – more than 80% of goods traded worldwide are transported by sea – and great strides have been made in recent years to render this system as open and frictionless as possible in order to spur even greater economic growth. However, the very openness that has allowed maritime transport to flourish and help drive economies also renders it uniquely vulnerable to terrorist attacks that could shut down the entire system as governments put emergency measures into place, the report said.

The risks are numerous and encompass both containerised and bulk shipping. The stakes are high, since any important breakdown in the maritime transport system would damage the world economy. Governments have stepped up security in the maritime transport network in the wake of the terrorist attacks in the US in 2001, for example, by requiring ship and port security plans and alarm systems for vessels, with most of the measures becoming effective in July 2004. The US has developed its own set of maritime security measures ranging from advance notification of cargo contents for US-bound ships to pre-screening of high-risk cargos at the port where they are loaded.

To implement the new rules, ship operators will have to install security systems and add staff at an estimated cost of US$1.3bn in initial investment and annual increase in operating costs of US$730m thereafter, the report found. But this is far less than the potential cost of a large attack on the US maritime system, which could be as high as US$58bn according to a simulation by the Conference Board and consultant Booz Allen Hamilton Inc.

To read the full report, visit

Combat against terrorist financing continues 

Two years after the events of 11 September in the US, the Financial Action Task Force (FATF), based at the OECD, is continuing to lead global efforts to detect, prevent and dry up the flow of funds to terrorists. “Terrorism and its financing pose serious threats to national, regional and international stability and economic growth. Countering this threat requires a swift and co-ordinated approach” said the new FATF president, Claes Norgren.

In order to assist countries in implementing effective measures to combat the financing of terrorism, the FATF is devising a robust mechanism to freeze and confiscate the assets of terrorists. This mechanism, an interpretative note to the third of the Eight Special Recommendations on Terrorist Financing, will guide countries as they adopt and implement measures which will enable authorities to seize and confiscate assets that are linked to the financing of terrorism. In conjunction with other instruments, like the FATF’s new best-practice guidance relating to informal money transfer systems and wire transfer requirements, it will provide a comprehensive framework for combating terrorist financing.

A joint FATF-IMF-World Bank initiative is currently under way to assess compliance by countries across the globe with FATF’s anti-money laundering and counter-terrorist financing standards. In a separate initiative, the FATF will be teaming up with the United Nations and other partners to identify terrorist financing weaknesses in national financial systems so that the technical assistance needed to protect them can be provided.


Corruption busting 

Six transition economies from the former Soviet Union have adopted a new OECD-backed regional action plan to fight corruption. Armenia, Azerbaijan, Georgia, the Russian Federation, Tajikistan and Ukraine formally adopted the plan at a meeting hosted by the OECD and the Turkish government in Istanbul on 10 September.

The plan requires participating countries to increase integrity and transparency in the public services through measures such as fostering impartiality in the civil service and putting an end to patronage and nepotism. The countries also agreed to strengthen anti-bribery systems, and to ensure that anti-bribery legislation is used to prosecute offenders, as well as to encourage public discussion of corruption and citizens’ involvement in combating it. It features systems for monitoring and for disclosure of officials’ personal assets and sets out ways of giving civil servants, business employees and the general public a greater role in fighting corruption, for example by protecting those who report misconduct.

The action plan was the fruit of co-operation in the Anti-Corruption Network for Transition Economies and was adopted as the Network held its annual meeting at the OECD Centre for Private Sector Development in Istanbul.

The Anti-Corruption Network for Transition Economies includes national governments from 24 transition economies, civil society, international organisations, financial institutions and donors active in the region. The OECD provides secretariat facilities for the Network and will administer the action plan in this capacity.

Visit www.anticorruptionnet.organd

Chemical safety 

OECD guidelines for the safe design and operation of chemical plants as well as for action to take in the case of an accident have just been updated. The OECD Guiding Principles for Chemical Accident Prevention, Preparedness and Response will help public authorities, industry and communities worldwide to prevent chemical accidents resulting from technological and natural causes, as well as possible terrorist acts. They will also help plan for emergencies and ensure effective communication when they occur, as well as responding to accidents and minimising their adverse effects. The guidelines also cover follow-up actions including clean-up and accident reporting.

The new guiding principles update those agreed in 1992. They apply to all hazardous installations, meaning fixed plants or sites producing, processing, using, handling, storing or disposing of hazardous substances. That means not just chemical production or processing plants, but other industrial and commercial operations where hazardous substances are handled or stored.

The updated guidelines do not cover radioactivity, which is addressed in other international instruments, nor do they specifically cover transport of hazardous substances by pipelines, road, rail, sea or air. However, the principles do apply to transfer facilities where hazardous substances are loaded or unloaded. The guidelines are based on the premise that all hazardous installations should be expected to comply with the same overall safety objectives, whether publicly or privately owned and whatever their size and location. The guiding principles are designed to be applicable worldwide and to be consistent with the concept of sustainable development.

For the full text of the Guiding Principles and to find out more about the OECD’s work on chemical safety, visit

Steel progress 

The world’s major steel-producing economies have made progress on defining elements of an agreement for reducing or eliminating subsidies on steel, and have agreed to continue work on an expedited basis for the rest of 2003 and in 2004.

Senior government officials agreed at a meeting at the OECD headquarters in Paris in July to push ahead with work looking at a blanket prohibition on specific subsidies to the steel industry. This will include work on a limited number of exceptions, such as support to help offset costs of closures of steel plants to reduce capacity. The Disciplines Study Group working on the agreement will also look at special and differential treatment for developing economies and, possibly, for transition economies. The meeting welcomed progress to date, and officials were encouraged by reports of continued adjustment in the steel industry. Economies taking part in the talks closed down 105 million tonnes of steel capacity between 1998 and 2002, and a further 36 million tonnes are expected to close down between 2003 and 2005.

At the same time, the gap between steel production and capacity is narrowing because consumption growth – at an annual rate of 4% so far in 2003 – is exceeding capacity growth. This favourable development should be reinforced through market-driven restructuring and investment and the elimination of distorting supports and practices, officials agreed.

For more on the OECD’s work on steel, visit, under “Industry Issues”.

Signs of recovery 

The OECD area is headed for moderate growth, with the United States on the way to a strongly improved performance while the euro area and Japan are in line for moderate growth, according to the latest OECD Composite Leading Indicator (CLI).

The CLI for the OECD area, seen as an indicator of coming economic trends, rose by 1.1 points to 122.1 from May to June. Its six-month rate of change has also risen significantly since April 2003, after a decline that began in May 2002. The CLI for the US increased by a strong 1.7 points in June, while that for the euro area rose by 0.4 points and that for Japan by 1.1 points.

The six-month rate of change for the US also rose substantially for the third consecutive month. The euro area and Japan each saw their six-month rate of change rise for the second month in a row. However, Italy saw its CLI decrease in June.

The CLIs cover a wide range of key short-term economic indicators and are designed to provide early signals of turning points (peaks and troughs) in economic activity. The chart shows these early signals; e.g. a trough for December 1998 was predicted three months earlier (-3).

Click here to view the graph that corresponds to this article

Cancún setback 

The Cancún Ministerial Conference ended as we were going to press on 14 September after the meeting’s chairperson, Luis Ernesto Derbez, concluded that despite considerable movement in consultations, members remained entrenched, particularly on the so-called Singapore issues – trade and investment, trade and competition policy, transparency in government procurement and trade facilitation. Mr Derbez finally proposed a six-paragraph ministerial statement, which was approved in the closing session. This instructs member governments’ officials “to continue working on outstanding issues with a renewed sense of urgency and purpose”. Director-General Supachai Panitchpakdi said there was no hiding the fact that the deadlock was a setback. He said he was disappointed but not downhearted. If the Doha Development Agenda fails, the losers will be the poor of the world, he said.

The implications of this latest setback will be discussed in the next OECD Observer and online at

Mixed trade picture 

Merchandise trade slowed in the major industrial nations in the first quarter of 2003 in volume terms, with imports into G7 countries falling 1.2% from the previous quarter and exports shrinking by 0.8%. US imports fell 1.7% from the previous quarter, but exports rose 0.5%. Japan showed an increase in both exports, up 0.5%, and imports, up 0.7% from the previous quarter, and also recorded the highest export increase year on year among the G7, up 9.4%.

Germany’s export volumes were little changed in the first three months of 2003 in volume terms, up 0.4% from the previous quarter, but import growth for the period was the highest in the G7 at 2.5%. Both France and Italy showed a fall in both imports and exports from the previous quarter. France’s export volume was down 4.5% and its import volume 5.7% lower, while Italy saw its exports fall 3.0% in volume terms and its imports drop 4.4%.

For the OECD as a whole, quarterly merchandise trade in value terms remained positive in the first quarter of 2003, with both exports and imports up 5.3% from the previous quarter, while exports were 18.1% higher than a year earlier and imports were up 20.4%.

Click here to view the graph that corresponds to this article

For details of quarterly trade statistics and other regular economic indicators, visit

Jobless lower 

The standardised unemployment rate for the OECD area fell to 7.2% in July from 7.3% in June, but 0.2 percentage points higher than a year earlier. The jobless rate in the euro area was unchanged from the previous month at 8.9% in July, but was 0.5 percentage points higher than a year earlier. In the United States, the jobless rate fell to 6.2% in July from 6.4% in June, but was 0.4 percentage points higher than a year earlier. In Japan the unemployment level was unchanged from June at 5.3% and fell 0.1 percentage points from a year earlier.

Over the 12 months to July, the standardised unemployment rate in France rose to 9.4% from 8.9%, while in Germany it rose to 9.4% from 8.6% and in Canada it rose to 7.8% from 7.6%. The UK unemployment rate fell over the 12-month period to 4.9%, from 5.1% a year earlier.

Unemployment figures are considered as a lagging indicator, and so they bear out the OECD’s forecast from last April of a cautious recovery in the OECD area, but with difficulties in the euro area economy (see Economy section, page 9).

For full details of standardised unemployment rates in OECD countries, visit, under “Labour Statistics”.

©OECD Observer No 239, September 2003   

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