The OECD in a changing world

Highlights from the Chair's summary

Mexico joined the OECD in 1994 and this year, on the 10th anniversary of its accession, had the honour of chairing the OECD Ministerial Council Meeting. Ministers from all OECD and some non-OECD countries attended, and there were consultations with representatives from business and industry, trade unions and civil society more broadly, notably at the fifth OECD Forum held on 12-13 May.

The Chair’s summary report covers the wide range of issues discussed by ministers at the annual summit: the economic outlook, ageing populations, health financing, and world trade and development. On OECD current work, ministers warmly welcomed the recently revised OECD Principles of Corporate Governance and encouraged “their wide dissemination and active use”. They also praised the results of the three-year project on sustainable development, pointing out that “governments could achieve the same results in protecting the environment at significantly lower cost through the greater use of more cost-efficient instruments in many countries.” They adopted recommendations for further work on sustainable development in the OECD. Ministers also paid tribute to the significant achievements of the Financial Action Task Force over recent years in combating money laundering and terrorist financing, and welcomed the decision of their FATF colleagues to extend the mandate of the task force for a further eight years.

On the global economic outlook, the feeling was that while “the fundamentals are healthy for future growth”, appropriate policies are needed to make the expansion robust and durable. That means interest rates rising in countries furthest into recovery, for instance, while most countries recognised the need for fiscal discipline, and “deficits now need to be rolled back”.

Ministers were conscious of risks associated with rising oil prices. They also looked at the issue of outsourcing, which they said was “in itself (…) part of the continuing trend towards international integration, and should be welcomed because it leads to higher productivity and real incomes.”Nonetheless, they concurred that at least in the short term, OECD countries needed policies to help people adjust to their new environment when they are dislocated because of outsourcing.

Population ageing may be a good thing in that people are living longer, healthier lives, but OECD ministers are aware of the policy adjustments that are essential to sustain growth and healthy public budgets. “There is much to do and, in many countries, not much time to get it done”, the chair’s summary points out. Retirement patterns must change, and more done to link retirement ages to life expectancy. Programmes should not encourage older workers to leave the labour market prematurely, though opinions among ministers differed on the role of tax/benefit policies.

Absorbing a large supply of older workers would not be easy in many countries without more dynamic labour markets. Ministers noted the importance of upgrading skills, while some stressed that attitudes among employers and older workers would need to change.

Another challenge for governments is how to fund healthcare, particularly as more people live longer. OECD health and finance ministers are concerned that this growing demand and further technological advances in modern medicine will increase pressure on public sector budgets. Maximising value for money has become a focus. This does not necessarily mean spending cuts, and a number of ministers recognised that scope existed for some increase in public spending on healthcare. But they also agreed on the need to ensure cost-effectiveness, as well as on individuals taking greater responsibility for their own health. Many households could pay a larger share of healthcare costs, though low income households and the chronically ill had to have access to healthcare.

Controls, such as budgetary caps, have successfully contained costs in many countries, but care had to be taken to minimise negative effects on the efficiency and quality of healthcare. Also, ministers' views differed on the role of private insurance. Some argued that it could offer greater consumer choice and help to limit public expenditure, but others doubted that private health insurance helped to contain costs and were concerned that increasing its role would put universal coverage at risk.

There is no substitute for the multilateral trading system, ministers agreed, and were determined to reach basic agreements on frameworks for key issues in the current round of trade talks under the so-called Doha Development Agenda. Agricultural reform holds the key to progress. There have been encouraging signs, but much work needs to be done on export competition, domestic support and market access. A focus of discussion was trade and development, where much has been accomplished since the launch of the Doha round, but further progress is needed.

Reform not just in OECD countries, but in the organisation’s own secretariat was also the subject of some discussion. All international organisations are under pressure to perform and stay relevant to their stakeholders in today’s fast changing world. Ministers welcomed the recent agreement to a number of measures concerning the future role and governance of the OECD, including a strategy for enlargement and for strengthening relations with non-OECD economies; the establishment of a new decision-making method for special cases; and the amendment to the scales of contribution by member countries to the budget of the organisation. Some countries called on the OECD to develop a more strategic approach to its work with non-member economies, including in the Middle East and North Africa, in a bid to increase its global impact.

©OECD Observer No 244, September 2004

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