The 2008 OECD Ministerial Council Meeting and Forum, the high points of the OECD calendar, could not be more timely. The issues we will be dealing with and the policy responses we will discuss should pave the way for a better world economy. Christine Lagarde, the minister of economy, finance and employment of France–the OECD’s host country–will chair the ministerial meeting.
This year we will be welcoming the five candidates for OECD membership, Chile, Estonia, Israel, Slovenia and Russia, to the meeting for the first time, and we will also be welcoming Brazil, China, India, Indonesia and South Africa as partners in the organisation’s Enhanced Engagement programme.These are complex times. Fallout from financial market turmoil, the subprime debacle and high commodity prices has led us to revise down our growth forecasts since last year. Energy and food prices have soared, stoking inflationary pressures. Unemployment is rising in several countries, and world trade growth is slowing.It is precisely at such moments that OECD governments must keep their heads and stay focused on the fundamentals. And indeed, strengthening the world economy is vital, and forceful action by governments and central banks has started to restore confidence among market participants.The most challenging issue that concerns the future of us all is climate change. It is a problem that confronts us with the fierce urgency of “now”, which is why we have chosen the economics of climate change as the main theme of this year’s ministerial meeting.The OECD has been dealing with climate change for over two decades and is well placed to contribute to producing a sound economic foundation for the post-Kyoto architecture.The 2008 OECD Environmental Outlook delivered a strong, positive message which OECD environment ministers echoed at their meeting in April: with new policies we can overcome climate change, while maintaining economic competitiveness.The OECD is helping to build consensus on the key questions, such as the costs of action and inaction, and to design policies for promoting innovation, clean technologies in energy and transport, and actions for developing countries. OECD ministers must seize that common ground now, by making greater use of economic instruments, including putting a price on carbon, to spur efficient, low-carbon growth.Another development we will be addressing is sovereign wealth funds (SWFs). Their size, growth and the fact that they are owned by governments have raised eyebrows about whether these funds’ decisions could be politically motivated or target security-sensitive assets.The OECD has been responding to requests from members to devise guidelines and best practices for recipient country policies towards these funds, complementing IMF work on the funds themselves.We have discussed the issue with OECD and non-OECD countries, social partners, and SWFs too. OECD countries already have longstanding rules on investment and see no need for new legally-binding codes on SWFs. Instead, governments must keep investment regimes open and fair, and restore trust between SWFs and recipient countries. After all, these funds have a good track record, and could become a formidable force for development.This raises another vital issue OECD ministers must address at this year’s meetings, because once again the world’s poor are suffering, this time from higher food prices. This impacts the economies of all countries, but high prices punish the urban poor and major food importing countries in particular, not least in Africa. Many factors can explain higher food prices, from bad harvests and rising demand to competition from biofuels and speculation.
Humanitarian aid will be needed, but one thing is certain: trade protectionism will not bring food prices back down. Open trade can, however, and more trade is therefore vital for meeting the Millennium Development Goals. Members must redouble their efforts to bring the Doha Development Round of trade talks to a successful close. A 50% reduction in tariffs and other trade-distorting support would generate over $40 billion in global welfare gains, which would benefit developing countries in particular.This year’s ministerial meeting is crucial for the organisation’s future, so we can deepen ongoing reforms. Finance is important for the OECD’s long-term capacity and to boost its responsiveness and impact in the interests of our members. There will always be fresh challenges ahead, in areas like inequality, migration, poverty, governance and healthcare, and from resource scarcity, notably freshwater. The OECD must be ready for such challenges if it wants to fulfil its mission of contributing to a better world economy.We are on our way to becoming a more open, representative and relevant organisation, and a hub for discussion on global issues. This demands action on many fronts, from investing in the quality of our work, to building strategic alliances with other organisations and strengthening communications at every level.I am looking forward to an enlightened discussion at our 2008 Ministerial Council Meeting. With the right policies, experience and resolve, we can address the challenges with confidence and build a brighter future for all.
©OECD Observer No 267 May-June 2008