Making the world economy work better

Secretary-General of the OECD

©OECD Observer

As political leaders gathered in Heiligendamm in northern Germany this June and before that at the OECD in Paris in May, the concern on everyone’s minds was the future shape of the global economy.
The reason is simple: the economic and political map of the planet has changed, and it is increasingly clear that progress on major challenges will only be achieved by intensifying co-operation between the world’s major players. We have started to respond.The OECD’s 2007 Ministerial Council Meeting in May, chaired by Spain’s deputy prime minister and finance minister, Pedro Solbes, addressed some key issues.Take innovation. Though crucial for competitiveness, productivity and progress, it is weak in too many countries. Governments need to “harness the cross-cutting nature of innovation”, from education and the supply of researchers, to intellectual property rights and public and private investment. A new OECD Innovation Strategy will provide a framework to help them. Like our influential Jobs Strategy, it will be evidence-based and identify best practices.Climate change is one challenge which innovation could help us address. A “great push” is needed to accelerate a transition to a low-carbon economy. The OECD and our sister organisation, the IEA, will contribute to a blueprint for action, which will include a range of market-based policy instruments.Meeting global challenges sometimes demands painful reforms. However, marshalling the political economy of reform is not easy. Countries could learn from each other’s experiences about policy design, communications and partnerships, for instance. The OECD has much to offer in this area and we have decided to go beyond policy design and intensify our work in support of our governments’ reform efforts.The OECD must also help the wider world economy work better and in a more inclusive way. More open trade is a gateway to progress. The Doha trade round, if successful, will improve many countries’ development prospects. But there are challenges beyond Doha, in strengthening aid-for-trade, for example, adjusting to competition, liberalising services or trading in a world criss-crossed by multilateral, bilateral and regional deals. Members will need our support in these areas too.Trade and development are important for engaging with global partners. But they are not enough. To strengthen our influence by promoting sound economic policies and good governance, we must develop a more global structure. That means talking about a broader membership and closer relations with economically strategic countries.Our members have decided to begin accession discussions with Chile, Estonia, Israel, the Russian Federation and Slovenia.The Council’s Resolution issued in May further proposes the need for a more global reach very clearly, by inviting the OECD “to strengthen co-operation with Brazil, China, India, Indonesia and South Africa through enhanced engagement programmes with a view to possible membership.”These countries are now the “locomotives” of the world’s growth. Our members believe that while the policies and activities of these countries have an impact on the OECD, our experience of good policy practices could benefit them. We already collaborate closely with several of these countries, but would now like to forge a more structured relationship with them. Welcoming some of these countries as new members to the OECD would be momentous. But we are not there yet and will have to deal with technical and political issues in the process. Accession will involve commitments, policy challenges, and institutional and financial reforms. Nor will the process end there. Other strategic relationships will be developed, particularly in South-East Asia.At the May meeting, ministers also discussed the possibility of enhancing OECD collaboration with the G8, particularly by supporting their efforts to forge closer relations with larger emerging economies.The idea took hold at the G8 summit last June. The G8 will strengthen its relations with five countries– Brazil, China, India, Mexico and South Africa–the so-called O5. The OECD will provide a platform for a dialogue in what has been named the Heiligendamm Process. It is a breakthrough that owes much to the leadership of Chancellor Angela Merkel and her G8 sherpa, Bernd Pfaffenbach, and we are proud to play our part. Our collaboration makes good sense. The G8 are all OECD members, except for Russia, which is now a candidate for accession. As for the O5, Mexico is already in the OECD, while the remaining four feature in our enhanced engagement programme. The main areas earmarked for discussion reinforce this natural fit: investment; intellectual property rights; development; and energy. Opening up is a historic response to our changing world. The goal is improved national and international policies, less tension and closer co-operation for a better, fairer, more dynamic global economy. It is possible to achieve it and the OECD, by becoming an effective “hub of globalisation”, must play a critical role in doing so.
For a full Chair’s summary and more on the Heiligendamm Process, see and ©OECD Observer No 262, July 2007

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