[Type text]

GUIDE: PROF. RAVI KUMAR

OECD COUNTRIES AND

CONTEMPORARY ISSUES emerging

economies’ perspective

Source:OECD

WHO ARE OECD COUNTRIES

Twenty countries originally signed the Convention on the Organisation for

Economic Co-operation and Development on 14 December 1960. Since then

fourteen countries have become members of the Organisation.

Here is a list of the Member countries of the Organisation and the dates on which

they deposited their instruments of ratification.

Current membership:

1. Australia

2. Austria

3. Belgium

4. Canada

5. Chile

6. Czech Republic

7. Denmark

8. Estonia

9. Finland

10. France

11. Germany

12. Greece Hungary

13. Iceland

14. Ireland

15. Israël

16. Italy

17. Japan

18. Korea

19. Luxembourg

20. Mexico

21. Netherlands

22. New Zealand

23. Norway Poland

24. Portugal

25. Slovak Republic

26. Slovenia

27. Spain

28. Sweden

29. Switzerland

30. Turkey

31. United Kingdom

32. United States

Other countries joined in, starting with Japan in 1964. Today, 34 OECD member

countries worldwide regularly turn to one another to identify problems, discuss and

analyses them, and promote policies to solve them.

The track record is striking. The US has seen its national wealth almost triple in the

five decades since the OECD was created, calculated in terms of gross domestic

product per head of population. Other OECD countries have seen similar, and in

some cases even more spectacular, progress.

In a Supplementary Protocol to the Convention on the OECD of 14 December

1960, the signatory countries agreed that the European Commission should take

part in the work of the OECD.

European Commission representatives work alongside Members in the preparation

of texts and participate in discussions on the OECD’s work programme and

strategies, and are involved in the work of the entire Organisation and its different

bodies.

While the European Commission’s participation goes well beyond that of an

observer, it does not have the right to vote on decisions or recommendations

presented before Council for adoption..

Currently, 25 non-members participate as regular observers or full participants in

OECD Committees. About 50 non-members are engaged in OECD working parties,

schemes or programmes.

The OECD conducts a policy dialogue and capacity building activities with non-

members (Country Programmes, Regional Approaches and Global Forums) to share

their views on best policy practices and to bear on OECD's policy debate.

The OECD's Centre for Co-operation with Non-Members develops and oversees the

strategic orientations of the relations with non-members.

On 16 May 2007, the OECD Ministerial Council decided to strengthen OECD's co-

operation with Brazil, China, India, Indonesia and South Africa, through a

process of enhanced engagement.

The countries listed are key partners to the OECD. The countries contribute to the

OECD's work in a sustained and comprehensive manner by direct and active

participation in substantive bodies of the Organisation determined by mutual

interest.

The OECD explores the possibilities for enhanced co-operation with selected

countries and regions of strategic interest to the OECD, giving priority to South

East Asia with a view to identifying countries for possible membership.

The OECD has been criticised by several civil society groups and developing

countries. The main criticism has been the narrowness of the OECD because of its

limited membership to a select few rich nations.

HISTORY:

The Organisation for European Economic Cooperation (OEEC) was established in

1948 to run the US-financed Marshall Plan for reconstruction of a continent

ravaged by war. By making individual governments recognise the interdependence

of their economies, it paved the way for a new era of cooperation that was to change

the face of Europe. Encouraged by its success and the prospect of carrying its work

forward on a global stage, Canada and the US joined OEEC members in signing the

new OECD Convention on 14 December 1960. The Organisation for Economic

Co-operation and Development (OECD) was officially born on 30 September 1961,

when the Convention entered into force.

Way of OECD

OECD uses its wealth of information on a broad range of topics to help

governments foster prosperity and fight poverty through economic growth and

financial stability. We help ensure the environmental implications of economic and

social development are taken into account.

OECD's work is based on continued monitoring of events in member countries as

well as outside OECD area, and includes regular projections of short and medium-

term economic developments. The OECD Secretariat collects and analyses data,

after which committees discuss policy regarding this information, the Council

makes decisions, and then governments implement recommendations.

Peer reviews

Mutual examination by governments, multilateral surveillance and a peer review

process through which the performance of individual countries is monitored by their

peers, all carried out at committee-level, are at the heart of our effectiveness.

An example of the peer review process at work is to be found in the Working Group

on Bribery, which monitors the implementation by signatory countries of the OECD

Convention on Combating Bribery of Foreign Officials in International Business

Transactions.

Agreements, standards and recommendations

Discussions at OECD committee-level sometimes evolve into negotiations where

OECD countries agree on rules of the game for international co-operation. They can

culminate in formal agreements by countries, for example on combating bribery, on

arrangements for export credits, or on the treatment of capital movements. They

may produce standards and models, for example in the application of bilateral

treaties on taxation, or recommendations, for example on cross-border co-operation

in enforcing laws against spam. They may also result in guidelines, for example on

corporate governance or environmental practices.

Publications

OECD publications are a prime vehicle for disseminating the Organisation's

intellectual output. OECD publishes regular outlooks, annual overviews and

comparative statistics. Among them:

OECD Economic Outlook assesses prospects for member and major non-

member economies.

OECD Fact book is a key reference tool for everyone working on economic

and policy issues.

OECD Economic surveys provide individual national analyses and policy

recommendations.

Going for Growth presents comparative indicators and evaluations of national

performance.

Uruguay Round

The Uruguay Round was the 8th round of multilateral trade negotiations (MTN)

conducted within the framework of the General Agreement on Tariffs and Trade

(GATT), spanning from 1986 to 1994 and embracing 123 countries as "contracting

parties".

The Round led to the creation of the World Trade Organization, with GATT

remaining as an integral part of the WTO agreements. The broad mandate of the

Round had been to extend GATT trade rules to areas previously exempted as too

difficult to liberalize (agriculture textiles) and increasingly important new areas

previously not included (trade in services, intellectual property, investment policy

trade distortions).

The Round came into effect in 1995 with deadlines ending in 2000 (2004 in the

case of developing country contracting parties) under the administrative direction of

the newly created World Trade Organization (WTO).

One of the achievements of the Uruguay round would be the Uruguay Round

Agreement on Agriculture, administered by the WTO, which brings agricultural

trade more fully under the GATT. The Agreement on Agriculture (AoA) brought

national agricultural policies under multilateral rules and disciplines, with the long-

term objective of establishing "a fair and market-oriented agricultural trading

system ... through substantial progressive reductions in agricultural support and

protection." The AoA includes specific binding commitments by WTO members to

improve market access and to reduce production- and trade-distorting domestic

support and export subsidies.

Prior to the Uruguay Round, conditions for agricultural trade were deteriorating

with increasing use of subsidies, build-up of stocks, declining world prices and

escalating costs of support

It provides for converting quantitative restrictions to tariffs and for a phased

reduction of tariffs. The agreement also imposes rules and disciplines on

agricultural export subsidies, domestic subsidies, and sanitary and phyto-sanitary

(SPS) measures through the Agreement on the Application of Sanitary and Phyto-

sanitary Measures.

Criticism

Uruguay Round was mainly criticized for paying insufficient attention to the special

needs of developing countries. The developing countries’ lack of experience in

WTO negotiations and lack of knowledge of how the developing economies would

be affected by what the industrial countries wanted in the WTO new areas; the

intensified mercantilist attitude of the GATT/WTO’s major power, the US.; the

structure of the WTO that made the GATT tradition of decision by consensus

ineffective, so that a country would not preserve the status quo, were the reasons for

this imbalance.

OECD MUST GROW TO ABSORB THE GROWING TALENT POOL:

The Organisation for Economic Cooperation and Development (OECD) has just

released a new report, which is part of the Education Indicators in Focus series,

looking at higher education graduates between the ages of 25 and 34 in OECD and

Group of Twenty member countries – 42 countries in total.

The expansion of higher education in rapidly-developing G20 nations has reduced

the share of tertiary graduates from Europe, Japan and the United States in the

global talent pool.

If current trends continue, China and India will account for 40% of all young people

with a tertiary education in G20 and OECD countries by the year 2020, while the

United States and European Union countries will account for just over 25%.

The strong demand for employees in “knowledge economy” fields (i.e., STEM)

suggests that the global labour market can continue to absorb the increased supply

of highly-educated individuals.

China is expected to produce 29% of all higher education graduates aged 25-34 (up

from 18% in 2010); United States is expected to produce 11% of all those graduates

(down from 14% in 2010);

India, which produced 11% of graduates in 2010, is expected to overtake the United

States and produce 12% of the share of graduates by the end of this decade;

UK’s share should increase from 3% in 2010 to 4% in 2020; significant declines are

forecasted for Japan (from 7% to 4%) and the Russian Federation (from 11% to

7%); in 2020, 6% of young graduates will hail from Indonesia.

Share of 25-34 year-olds with a tertiary degree across OECD and

G20countries(2000, 2010, 2020)

SOURCE: OECD

In 2000, there were 51 million 25-34 year-olds with higher education (tertiary)

degrees in OECD countries, and 39 million in non-OECD G20 countries.

More importantly, between 1998 and 2008, employment in HRST occupations

increased at a faster rate than total employment in all OECD and G20 countries

with available data.

SOURCE: OECD

Over the past decade, however, this gap has nearly closed, in large part because of

the remarkable expansion of higher education in this latter group of countries. For

example, in 2010 there were an estimated 66 million 25-34 year-olds with a tertiary

degree in OECD countries, compared to 64 million in non-OECD G20 countries.

By contrast, the United States and the European Union countries are expected to

account for just over a quarter of young people with tertiary degrees in OECD and

G20 countries.

In fact, these projections may underestimate the future growth of the global talent

pool, because a number of countries are pursuing initiatives to increase tertiary

attainment rates even further.

For instance, in 2009 the United States established a goal to become the nation with

the highest proportion of 25-34 year-old university graduates by 2020. To meet this

target, officials estimate that the proportion of younger adults in the US with a

tertiary degree will need to reach 60% by the end of the decade.

It’s likely that the global talent pool

will continue to grow across most

OECD and G20 countries, and that the

fast-growing G20 economies will

continue to account for an increasingly

large share. According to OECD

calculations, there will be more than

200 million 25-34 year-olds with

higher education degrees across all

OECD and G20 countries by the year

2020

SOURCE: OECD

In addition, the European Union established a goal to increase the percentage of 30-

34 year-olds who have completed tertiary education by at least 40% in each EU

country by 2020. In 2009, Belgium, France, Ireland, Luxembourg, the Netherlands,

Sweden, Switzerland and the United Kingdom already reached this goal for the

larger 25-34 year-old population.

Meanwhile, China – which has quintupled its number of tertiary graduates and

doubled its number of tertiary institutions in the last 10 years – is also pursuing

ambitious objectives. In many ways, the rapid expansion of the global talent pool –

and its expected growth in the future – is no surprise. Since higher levels of

education are strongly linked to higher employment rates and larger earnings

premiums, individuals have strong incentives to pursue more education.

Similarly, as national economies continue to shift from mass production to

“knowledge economy” occupations, countries have strong incentives to build the

skills of their populations through higher education.

At the same time, the explosive growth of the talent pool raises an important

question: ‘Will the global labour market continue to absorb the increased supply of

higher-educated workers in the future?’

Evidence from science and technology occupations – jobs emblematic of the

knowledge economy – may provide some insights.

On average across OECD countries, human resources in science and technology

occupations (HRST) represented more than a quarter of total employment in 2010.

In Luxembourg, Sweden, Denmark, and Switzerland, HRST workers accounted for

more than 40% of all employees, while in India, China, and Indonesia, they

accounted for less than 10%.

The average annual growth rate was uniformly positive, ranging from 0.3% in

China to 5.9% in Iceland. This consistently upward trend – and even the

comparatively smaller shares of HRST occupations in fast-growing economies like

China – signals that the demand for employees in this knowledge economy sector

has not reached its ceiling.

Applied to the overall labour market, these findings suggest that individuals from

increasingly better-educated populations will continue to have good employment

outcomes, as long as economies continue to become more knowledge-based.

These findings also suggest that countries would be well-advised to pursue efforts

to build their knowledge economies, in order to avoid skills mismatches and lower

private and public returns on education among their higher-educated populations in

the future.

The global talent pool has never been larger – and will continue to expand, with

rapidly-growing G20 nations likely leading the way.

INCOME INEQUALITY IS RISING IN MOST OECD COUNTRIES:

According to a new OECD report, Growing Unequal? Income Distribution and

Poverty in OECD Countries, a combination of globalization, economic growth, and

other societal changes has not only led to a larger gap between rich and poor

nations; it’s also led to a growing gap between rich and poor in more than three-

quarters of OECD countries over the past two decades.

Growing inequality is divisive. It divides societies, it divides regions within

countries, and it carves up the world between rich and poor. Greater income

inequality stifles upward mobility between generations, making it harder for

talented and hard-working people to get the rewards they deserve. Ignoring

increasing inequality is not an option.

Of the OECD countries, except for Mexico and Turkey, the United States has

highest inequality level and poverty rate. Since 2000, income inequality has

increased rapidly, accentuating a long-term trend that began in the 1970s.

In the two decades from 1980 to 2008, most OECD countries carried out regulatory

reforms to strengthen competition in the markets for goods and services and to

make labour markets more adaptable.

All countries, for example, significantly relaxed anti- competitive product-market

regulations and many also loosened employment protection legislation (EPL) for

workers with temporary contracts. Minimum wages also declined relatively to

median wages in a number of countries between the 1980s and 2008.

Wage- setting mechanisms also changed: the share of union members among

workers fell across most countries, although the coverage of collective bargaining

generally remained rather stable over time.

A number of countries cut unemployment benefit replacement rates and, in an

attempt to promote employment among low-skilled workers, some also reduced

taxes on labour for low-income workers.

These changes in policies and institutions affected the ways in which globalisation

and technological changes translated into distributional changes. On the one hand,

past empirical evidence points to the significant positive impact of reforms on

employment levels (e.g. OECD, 2006).

Greater product market competition in particular has been found to increase

aggregate employment by reducing market rents and expanding activity, which in

turn leads to stronger labour demand .

There is

also some

evidence

that

lower

unemploy

ment

benefit

replacem

ent rates

and lower

tax

wedges

are

associate

d with

higher

employm

ent. On

the other

hand,

most policy and institutional reforms also contributed to widening wage disparities,

as more low-paid people entered employment and the highly skilled.

Report further finds that the economic growth of recent decades has benefitted the

rich more than the poor. In some countries, such as Canada, Finland, Germany,

Italy, Norway and the United States, the gap also increased between the rich and the

middle-class.

Countries with a wide distribution of income tend to have more widespread income

poverty. Also, social mobility is lower in countries with high inequality, such as

Italy, the United Kingdom and the United States, and higher in the Nordic countries

where income is distributed more evenly.

ECONOMIC OPPURRTUNITIES WITH OECD:

Countries that a few decades ago were still only minor players on the world stage.

China, India and Brazil have emerged as new economic giants.

Most of the countries that formed part of the former Soviet bloc have either joined

the OECD or adopted its standards and principles to achieve our common goals.

Russia is negotiating to become a member of the OECD, and now OECD has close

relations with Brazil, China, India, Indonesia and South Africa through “enhanced

engagement” programme. Together with them, the OECD brings around its table 40

countries that account for 80% of world trade and investment, giving it a pivotal

role in addressing the challenges facing the world economy.

TRADE POSSIBILITIES WITH OECD COUNTRIES:

The OECD's "Enhanced Engagement" outreach to China, Brazil, Indonesia,

Indonesia and South Africa promotes market-based and rules-based policies in

these major emerging economies. In turn, this raises growth and increases the

openness needed to generate U.S. exports and U.S. jobs.

Although OECD members continue to represent 60.5 percent of world trade and

71.9 percent of global GNI, their share of global GDP is shrinking as major new

emerging economies assume a greater global share.

In 2007, OECD members agreed that an outreach to major emerging economies

China, Brazil, Indonesia and South Africa and to the South East Asia region would

expand the OECD's global reach, policy impact and relevance.

Participating countries contribute to the OECD's work in a sustained and

comprehensive manner under the "Enhanced Engagement" partnership. A central

element of the program is the promotion of direct and active participation of these

countries in the work of substantive bodies of the Organization. Each country

participates in OECD work through a program containing a mix of several

elements, notably:

participation in OECD committees,

regular economic surveys,

adherence to OECD instruments,

integration into OECD statistical reporting and information systems, and

policy-specific peer reviews.

The actual mix and the sequencing of the elements is determined by mutual interest.

While Enhanced Engagement programs are distinct from accession to the OECD,

they have the potential in the longer term to lead to membership of the

Organization, should the participating countries decide to explore that possibility.

The OECD also works closely with over seventy other non-member economies in

areas from exchange of tax information to educational assessments. OECD free-

market principles and internationally recognized benchmarking and peer review

support good economic governance in these countries helping to increase

prosperity, investment and trade in goods and services - all of which benefit the

United States.

BIBLIOGRAPHY:

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Cline, William R., (1 984), Exports of Manufactures from Developing Countries:

Performance and Prospects

http://www.google.co.in

OECD, (1 979), The lmpact of the Newly-industrializing Countries on Production

and Trade in Manufactures

Valdes, A. Zietz, J.,( 1 9801, Agricultural Protection in OECD countries: Its Cost to

Less Developed Countries,

http://HlDK-UUQ

World Bank, (1 9831, World Development Report (Washington, D.C.).

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OECD's portal for books, reports, statistics, working papers and journals

International Futures Programme

OECD Forum

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