GLOBAL TAX CO-OPERATION
The OECD published in April a list of seven jurisdictions identified as uncooperative tax havens: Andorra, Liechtenstein, Liberia, Monaco, Marshall Islands, Nauru and Vanuatu.
But “the real success of the project so far is that we have received commitments from 31 jurisdictions to the OECD principles of transparency and effective exchange of information,” said Gabriel Makhlouf, chairman of the OECD’s Committee on Fiscal Affairs.
The OECD engaged in bilateral and multilateral discussions with a number of countries after publishing a list of tax havens in 2000, and as a result 31 have taken action to end various harmful tax practices. This is “an important milestone in this project”, Makhlouf said. “But it is not the end of the project. We look forward to working with all the jurisdictions towards the twin goals of transparency and information exchange. We are disappointed that some jurisdictions have chosen not to make commitments and we will want to maintain contact with them in order to encourage them to do so as soon as possible.”
The non-cooperative havens have another year to take up this offer – possible defensive measures against non-cooperative havens would not be implemented before April 2003, Makhlouf said.
The OECD has also released the text of a model agreement for effective exchange of information in tax matters, drawn up with several non-member jurisdictions (Aruba, Bermuda, Bahrain, Cayman Islands, Cyprus, the Isle of Man, Malta, Mauritius, the Netherlands Antilles, the Seychelles and San Marino). This marks the first results of OECD collaboration with co-operative jurisdictions in the work on harmful tax practices. One of the key criteria in identifying such practices is the lack of effective exchange of information.
For more on the OECD’s work on harmful tax practices: www.oecd.org/taxation/
ECONOMY ON RECOVERY PATH
Growth momentum is returning to the OECD area as the causes of the recent slowdown dissipate, but recovery is initially likely to be uneven across the major regions, the latest OECD Economic Outlook says. While confidence has returned more rapidly than previously expected in the wake of 11 September, and downside risks have lessened, policymakers still face uncertainty.
GDP growth in the OECD is expected to reach nearly 2% in 2002 and 3% in 2003 following a contraction in the second half of 2001, with the US leading the upturn. US GDP growth is forecast to more than double to 2.5% in 2002 from 1.2% in 2001 and to rise again to 3.5% in 2003, with a gradual strengthening in business investment expected to underpin the recovery in the second half of 2002 and into 2003.
Euro area recovery is expected to be more gradual. Economic activity is likely to remain sluggish in the first half of 2002 but growth should gather pace thereafter. Euro area GDP growth is forecast at 1.3% in 2002 and 2.9% in 2003, up from 1.6% in 2001. In Japan, activity is expected to stop contracting in the near term as exports are responding to exchange rate depreciation and the revival of global demand, and inventories have fallen to more normal levels. But growth in output is likely to remain very anaemic. GDP is forecast to shrink 0.7% this year, after contracting by 0.4% in 2001, before showing 0.3% growth in 2003.
Outside the OECD, overall activity is likely to accelerate, the Asian economies having weathered the downturn well. Growth in China is expected to remain around 7% and activity in the Asia-Pacific region as a whole is set to strengthen. The Russian economy, while slowing, has shown some resilience. Latin America presents a mixed picture, but in general the Argentine crisis has had limited spillover effects. Overall, the global recovery will boost world trade growth from 2.5% in 2002 to 9.5% in 2003.
OECD Economic Outlook, No. 71, preliminary version, 2002. A summary of projections is available on www.oecd.org/macroeconomics
The unilateral approach on climate change from the world’s largest emitter of greenhouse gases “cannot be expected to deliver an absolute reduction in greenhouse gases from the energy sector,” a recent International Energy Agency (IEA) review of US energy policy said. The US has announced targets for greenhouse gas emissions per unit of GDP. “It would be in the interests of both the US and the IEA as a whole if policies in this area were developed in a manner consistent with future US participation in an international trading system for greenhouse gases,” the IEA said. Such a system is provided for in the Kyoto Protocol on climate change.
The IEA welcomed the new emphasis on energy policy from the Bush Administration but said that proposed demand-side measures would benefit from more precision. The National Energy Policy places particular emphasis on increasing domestic production of oil and gas. The government is encouraged to make a major effort to convince the public that environmental problems can be overcome by appropriate measures.
Energy Policies of IEA Countries – The United States, IEA, 2002.
SHIP SHAPE –
OECD countries have agreed on key areas for action to promote safer and more environmentally sound shipping by eradicating sub-standard shipping around the world.
The key areas cover improved effectiveness in identifying and removing sub-standard ships, and improving training and on-board working conditions and incentives for responsible shipowners. They also call for greater use of information disclosure about sub-standard ships and their owners as a deterrent, and the development of a legal framework to prove negligence when owners, charterers or others have intentionally benefited from the use of sub-standard ships.
The non-binding policy statement issued by the OECD Maritime Transport Committee emphasises that if sub-standard shipping is to be eradicated, industry itself must play a major role. Irresponsible operators and users must not be permitted by the international system to profit unfairly from their actions. On the other hand, responsible shipowners should also be recognised and encouraged through effective incentives.
– FOR MORE COMPETITION
Separately, a new OECD study on liner shipping said that the sector should no longer be granted anti-trust immunity for price-fixing and freight rate discussions as there is no convincing evidence that these practices offer more benefits than costs to shippers. However, recognising the strong views held by different sectors of the shipping industry on this issue, the report also calls on governments to work to overcome these disagreements by strengthening provisions for confidential contracts in liner trades.
The report, Liner Shipping Competition Policy, also calls for freight capacity agreements to be carefully scrutinised to ensure they do not distort markets. The report offers three principles to guide liner-shipping policy even if anti-trust exemptions are retained: freedom to negotiate rates on an individual and confidential basis; freedom for carriers and shippers to protect key terms of contracts, including information regarding rates; and freedom of carriers to pursue operational and/or capacity agreements with other carriers as long as they do not confer undue market power to the parties involved. Because these principles are based on elements that have already received support by both carriers and shippers the report concludes that they represent the best opportunity for a way forward.
Steel producers expect to cut capacity by some 91 to 95 million tonnes by the end of 2002, with an additional 23 to 33 million tonnes expected to be permanently closed by 2005, it was announced after a high-level meeting on steel organised by the OECD. The meeting was attended by OECD member and non-member steel-producing countries. Participants also agreed that the frictions currently arising in world steel markets are a symptom of the serious structural problems in the industry.
OECD deputy secretary general Herwig Schlögl, who chaired the meeting, said the purpose of the OECD talks was not to resolve specific disagreements, but rather to find a longer-term solution to avoid the same cycle repeating itself. “The Secretariat works on the understanding…That we cannot solve the overcapacity problem by trade measures as such,” Mr Schlögl told a news conference after the meeting. “This is a process…we contribute to reduce the underlying cause of trade friction, and that is the capacity problem of the industry.” The talks at the OECD began in September 2001 and have continued despite ongoing WTO actions on steel by some producers. Participants in the April meeting expressed concern that the current expansion of trade restrictions could delay needed industry restructuring. They agreed that the OECD exercise should be accelerated. A working group on capacity will hold its first meeting in September to examine to what extent the capacity reductions forecast by each economy are realised. The high-level group will meet again before the end of the year to evaluate the situation and to discuss the results of the work being conducted on capacity and market-distorting measures.
For more about OECD work on steel: www.oecd.org/enterprise/steel/
“Only a decade ago, the conventional wisdom lamented an America in decline. Bestseller lists featured books that described America’s fall. Japan would soon become “Number One”. That view was wrong at the time…But the new conventional wisdom that America is invincible is equally dangerous…”
Joseph Nye, author of “The Paradox of American Power: Why the World’s Only Superpower Can’t Go It Alone”, Oxford University Press, 2002, quoted in The Economist, 23 March 2002, Vol 362, No. 8265
“The more you work, the less you are efficient. If you work less, you are smarter.”
Christian Boiron, chief executive of the Boiron homeopathic laboratories, in praise of France’s 35-hour week. BBC radio interview, quoted on www.BBC.co.uk, 12 March 2002.
“It is not public aid that will help our countries to develop…Only a massive inflow of private capital will trigger a virtuous circle of growth…Aid helps to address problems the private sector cannot solve, like health and education. But doubling aid will change nothing. Half as much has got us nowhere. By participating more in international trade we will acquire what we need to develop and grow. The main obstacle to development in Africa is political: the lack of transparency, of respect for the basic rules of democracy. It is up to us to find the solution.”
President Abdoulaye Wade of Senegal, in an interview with Xavier Harel, La Tribune, 25 March 2002.
©OECD Observer No 231/232, May 2002