May 17, 2013

The Organization for Economic Co-operation and Development (OECD) and Development of Like-Minded Commitment

I. Introduction

The Organization for Economic Co-operation and Development (OECD) has been described as a think-tank, a monitoring agency, a rich man’s club, and an unacademic university.[1]  Although the OECD has each of these characteristics, the most common thread binding OECD member countries together is their like-minded commitment to “a market economy and a pluralistic democracy.”[2]  This paper will explore the development of that like-minded commitment and then analyze how the OECD’s structure and programs facilitate stability in the global economy.
Part II of this paper will describe the OECD’s historical origin and development.  Part III will detail the OECD’s organizational structure.  Part IV will analyze some of the OECD’s major programs and discuss how those programs affect international law.  Part V will conclude with some thoughts on the OECD’s future.

II. Background and History

To understand the OECD it is helpful to have an overview of how it developed as an international organization.  This section will trace the OECD’s development from its beginning as an initiative within the Marshall Plan following World War II.

A. The Marshall Plan and Conference for

European Economic Co-operation

  The OECD began from a challenge proposed by U.S.
Secretary of State George Marshall during a speech at Harvard University on June 5, 1947.[3]  In the speech, Marshall offered American economic aid for the reconstruction of Europe foloowing World War II.  However, the aid was contingent upon various European countries initiating a “coherent program” to carry out the reconstruction.[4]

In response to Marshall’s proposal, the major European allies met in Paris on June 27, 1947 to discuss an implementation program.  At the meeting were Georges Bidault (French Foreign Minister), Ernest Bevin (Secretary of Foreign Affairs of the United Kingdom) and Vyacheslav Molotov (Foreign Minister of the USSR).[5]  Unfortunately, Molotov left the meeting for economic and political reasons and Bevin and Bidualt were left to come up with a proposal on their own.  The work of Bevin and Bidault is credited with allowing Britain and France to continue working together.  Subsequently, on July 4, 1947, Britain and France addressed a joint invitation to 22 other European countries asking them to participate in an organization for European economic co-operation.[6]  Of the 22 invitees, 16 accepted the invitation.  Together, with France and Britain, this group would become known as “Les Seize.”[7]  Shortly thereafter on July 12, 1947, the Conference for European Co-operation began in Paris under the presidency of Mr. Bevin.
At the Conference, M. Herve Alphand was appointed to chair the Working Committee in charge of developing a draft plan for the new international organization.[8]  Out of the draft plan, the Committee for European Economic Co-operation was created and given the initial task of accounting resources of the conference’s 16 member countries.[9] 
Later, in September of that same year, the Conference reconvened to consider a general report provided by the Rapporteur-General of the Committee and to discuss American approval of the organization. 

B. The Organization for European
Economic Co-operation (OEEC)

Upon receiving American approval for the report, the

Conference convened yet again on March 15, 1948 and began drafting a constitution for a more permanent organization.[10]  The result of the Conference’s effort was the Convention on European Economic Co-operation which was signed by all participating countries.[11]  The convention provided the legal foundation for building what would become the Organization for European Economic Co-operation (OEEC).
The OEEC officially came into being on April 16, 1948 and was based on the following principles: (1) promoting co-operation between participating countries and the national programs for reconstructing Europe; (2) developing intra-European trade by reducing tariffs; (3) studying the feasibility of free trade areas; (4) studying multi-lateralism of payments; and (5)  achieving better utilization of labor.[12]  Initially, the primary focus of the OEEC was the European Recovery Program and the allocation of Marshall Aid dollars to participating member countries.  However, as European recovery progressed the OEEC began to see its influence erode.

Eventually, the unexpected end of the Marshall Plan and an American policy shift in favor of NATO in 1952 proved to be the OEEC’s greatest challenge.[13]  For example, the OEEC lost some of its responsibilities to the newly created Mutual Security Agency(MSA).  Following the change in responsibilities, the OEEC survived primarily as an organization in charge of studying European economic questions such as those relating to the function of NATO.[14]  However, even those limited responsibilities would not save the OEEC.

C. The Organization for Economic Co-operation
 and Development (OECD)

Europe’s economic recovery combined with the growing movement in favor of a European Free Trade Area eventually proved too much for the OEEC’s continued success.  Hence, in September 1961 the OEEC was superseded by the Organization for Economic Co-operation and Development (OECD) which included the United States and Canada.[15]  Whereas the OEEC was predominately focused on Europe, the new OECD was focused on becoming a worldwide economic body.[16]

Today, the OECD has expanded to 29 member countries whom collectively produce two-thirds of the world’s goods and services.[17]  For example, new members include countries such as Hungary, Japan, Australia, Mexico, the Czech Republic, Poland and Korea.  Currently, the OECD’s main objective is to be a forum for member countries to exchange information and harmonize their economic policies in order to maximize economic growth within each member country.[18]  In addition, the OECD is now increasingly concerned with assisting non-member countries to develop more rapidly.[19]  This concern is highlighted in the third part of Article 1 of the OECD Convention, which includes the directive for “expansion of world trade on a nondiscriminatory basis.”[20]

III. The OECD Structure

The OECD has a three part structure which is composed of the OECD Council, a network of some 200 committees and working groups, and a Secretariat (governing body).[21]  This section will describe each of these functional areas.

A. The OECD Council

The OECD Council is composed of permanent representatives from each member country.[22]  The Council meets once a year to set priorities for the OECD.[23]  The duties of the Council include: (1) determining the work program and budget of the organization; (2) approving decisions (legally binding) and recommendations (political expressions); and (3) monitoring day-to-day activities.  The Council is chaired by the Secretary-General who is assisted by four deputy Secretaries-General.[24]  The current OECD Secretary-General is Donald Johnston.
Within the OECD Council, there is a smaller body called the Executive Committee which may be charged with specific tasks.[25]  For example, the Executive Committee may coordinate certain OECD programs.  However, as a general rule the substance of issues is studied in greater deal at the committee and working group level discussed next.[26]

B. Committees and Working Groups

The second part of the OECD structure is its affiliation with some 200 committees, working groups, and expert groups which meet in advance of the Council meetings to review and refine substantive policy decisions.  Approximately 40,000 government officials are involved in these OECD committees and groups[27] and the government officials are generally from government departments responsible for working in the same area as the OECD committee or group they are assigned.[28]  For example, OECD education committees would have officials from government education ministries.  In general, committees and working groups establish the following: (1) standards for the reporting of information; (2) guidelines for carrying out policy goals in the public and private sectors; (3) recommendations for the Council; and (4) programs for member countries to harmonize their internal and external policies.[29]

C. The OECD Secretariat

The last branch of the OECD is the OECD Secretariat located in Paris.  The Secretariat is divided among functional lines into departments and/or directorates[30] and is staffed by over 1850 individuals who work both directly and indirectly with the committees and working groups.[31]  The Secretariat is responsible for: (1) gathering statistical information; (2) processing and comparing the statistical information; (3) managing policy review; (4) organizing meetings; (5) providing translation services; (6) monitoring member country agreements; and (7) publishing analysis, forecasts, and statistical information.[32]  The work of the Secretariat is funded by member country donations.  The present OECD budget is near US$200 million.[33]

IV. OECD Programs and Activities

The OECD is involved in a variety of programs and activities run in conjunction with other international organizations.  For example, the OECD is actively involved with the International Monetary fund (IMF), the World Bank, the International Labor Organization (ILO), and the International Atomic Energy Association (IAEA).[34]  However, a complete discussion of each of these relationships is beyond the scope of this paper.  Therefore, this section will only provide a brief overview of the OECD program areas and then discuss the OECD role in developing multilateral agreements.
A. OECD Programs

The OECD is involved in a variety of programs pertaining to economic development.  The primary program and/or activity areas include: (1) economics; (2) statistics; (3) environment; (4) development; (5) public management; (6) trade; (7) enterprises, financial and fiscal matters; (8) science, technology, and industry; (9) social policy; (10) agriculture; (11) energy; and (12) territorial growth and development.  The programs are generally designed and managed by semi-autonomous bodies affiliated with the OECD, or by a department or directorate within the OECD Secretariat.

To illustrate what activities the OECD programs partake, it is helpful to explore some of the aforementioned areas in greater detail.  For example, the OECD Environment Directorate keeps a permanent watch on environmental performance and compiles environmental data in a regular publication called the State of the Environment.[35]  The Environment Directorate also assists countries in standardizing chemical testing and hazard assessment measures, in coordinating cross-border information exchanges, and in promoting clean technologies.[36]  A second example is the
OECD Directorate for Science, Technology, and Industry.  This Directorate is responsible for programming activities pertaining to information and communication technologies.[37]  In particular, the Directorate has responsibility for facilitating economic benefits from new information technology, facilitating the elimination of government subsidies for industry, and facilitating research and development. 

The programming work of these and other OECD departments or directorates helps create the basis for numerous bilateral and multilateral agreements.  However, because the OECD includes only developed countries as members, developing countries often oppose some of the broader implications of OECD proposals.  This problem was a crucial factor in the highly anticipated Multilateral Agreement on Investment (MAI) which was recently rejected.[38]

B. The Failed Multilateral Agreement on Investment

The MAI was supposed to create a standardized and
comprehensive set of rules regarding international investment.[39] It was designed to be broad in scope covering all types of investment including real property, bonds, intellectual property, and equities and securities.[40]  The negotiations for the MAI were carried out by a “high-level group” based at the OECD, but operating outside the OECD committee structure.[41]  It was thought that the MAI would facilitate stability in the global economy.[42]  Unfortunately, the MAI negotiations were tormented by numerous problems.

First, the OECD was not considered to be an impartial forum for negotiating a treaty with global economic implications.  Developing countries felt that the OECD negotiations would be influenced by corporate lobbyists because the OECD does not directly serve the economic, social or environmental objectives of nonmember countries.[43]  The stance of the developing countries was clearly in opposition to one directive of the OECD discussed above, which is to expand world trade on a nondiscriminatory basis.[44]  Second, the OECD failed to directly include developing countries in the MAI negotiations.[45]  Third, both developing and developed countries argued that the MAI would have required countries to give up too much control over their economies.[46]  Eventually, these pressures led to the collapse of MAI negotiations even though there was a consensus that multilateral rules for investments were needed.[47]  Therefore, even though the failure of the MAI negotiations was an important event, it is apparent that the setback has not deterred the continued viability of the OECD.

V. The OECD’s Future

The OECD recognizes that its continued success will depend on addressing new challenges for the 21st century.[48]  To assist member countries in meeting new challenges the OECD has implemented programs such as “The OECD Forum for the Future.”  According to the OECD, the “Forum” provides an on-going series of conferences and workshops focusing on long-term economic and social development.[49]  The “Forum” has been hailed as a success by restricting meeting sizes to around 30 people, by gearing each meeting to specific topics, by discouraging prepared statements in order to encourage candid discussions, and by inviting discussion members on a personal rather than formal basis.[50] 
The unique qualities of the OECD “Forum” program demonstrate that the OECD is willing to develop internally to meet the needs of member countries.  That willingness will help ensure the continued viability of the OECD and moreover, prevent the OECD from meeting the same fate as its predecessor, the OEEC.  Therefore, it seems the OECD will continue to play an important role in creating international law and stabilizing the global economy for many years to come.

[1]What is OECD?, (visited Feb. 1, 1999) <>.
[3]OECD’s Origins, (visited Feb. 15, 1999) <>.
[6]Id.; Invitations were sent to Albania, Austria, Belgium, Bulgaria, Czechoslovakia, Denmark, Finland, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Sweden, Switzerland, Turkey, and Yugoslavia.
[15]Id.; see also Henry G. Aubrey, Atlantic Economic Cooperation the Case of the OECD 4 (1967).
[16]See OECD Convention, Dec. 14, 1960, art. 1.  Stating that the OECD shall promote policies designed “to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus contribute to the development of the world economy.”
[17]What is OECD?, supra note 1.
[19]Ralph H. Folsom et al., International Business Transactions 23 (1991); see also About OECD, (visited Feb. 4, 1999) <>.
[20]Henry G. Aubrey, Atlantic Economic Cooperation the Case of the OECD 32 (1967);see also OECD Convention, Dec. 14, 1960, art. 1.  Stating that the OECD shall promote policies designed “to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.”
[21]About OECD, (visited Feb. 4, 1999) <>.
[23]What is OECD?, supra note 1.
[25]Aubrey, supra note 20, at 34.
[27]What is OECD?, supra note 1.
[28]About OECD, supra note 21.
[29]What is OECD?, supra note 1.
[30]Aubrey, supra note 20, at 35.
[31]?What is OECD?, supra note 1.
[32]About OECD, (visited Feb. 4, 1999) <>.  Frequently requested statistics include GDP numbers, quarterly growth rates in GDP at constant prices, leading economic indicators, standardized unemployment rates, prices, purchasing power parities (PPP) for OECD countries, and PPPs based on comparative price levels. Frequently Requested Statistics, (visited Feb. 13, 1999) <>.
[33]What is OECD?, supra note 1.
[34]OECD and the Public, (visited Feb. 5, 1999) <>. The OECD is in the same class of organizations which are primarily focused on member’s mutual trade and investment interests. Ralph H. Folsom et al., International Business Transactions 23 (1991).
[35]OECD at Work, (visited Feb. 1, 1999) <>.
[37]oecd/dsti/objectives, (visited Feb. 15, 1999) <>.
[38]OECD admits global investment treaty dead, Journal of Commerce, Dec. 7, 1998, available in 1998 WL 20946905. Reporting that negotiations on the MAI were over after France withdrew from the negotiations.
[39]William Crane, Corporations Swallowing Nations: The OECD and the Multilateral Agreement on Investment, 9 Colo. J. Int’l Envtl. L. & Pol’y 429, 431 (Summer 1998).
[41]Sol Picciotto, Linkages in International Investment Regulation: The Antinomies of the Draft Multilateral Agreement on Investment, 19 U. Pa. J. Int’l Econ. L. 731, 741 (Fall 1989).
[42]House Committee on International Relations, Subcommittee on International Economic Policy and Trade, 105th Cong. (Mar. 5, 1998) (statement of Edwin D. Williamson, Vice chairman Committee on Multinational Enterprises and International Investment U.S. Council for international Business).
[43]Crane, supra note 39, at 434; see also Developing Countries Oppose Multilateral Investment Pact, Asia Pulse, Nov. 16, 1998, available in 1998 WL 19982382.
[44]See supra Part II, subsection C.
[45]Michael P. Avramovich, The Protection of International investment at the Start of the Twenty-First Century: Will Anachronistic Notions of Business Render Irrelevant the OECD’s Multilateral Agreement on Investment, 13 J. Marshall L. Rev. 1201, 1250-1251, (Summer 1998).
[46]Marc Selinger, Nations drop efforts on global investment deal, The Washington Times, Dec. 5, 1998, available in 1998 WL 3465468.
[47]OECD reaffirms need for international investment rules, Agence France-Presse, Dec. 3, 1998, available in 1998 WL 16652495.
[48]See generally Kim Benjamin, OECD looks to future of e-commerce, Newswire, Oct. 6, 1998, available in 1998 WL 23801249 (discussing OECD initiatives to deal with electronic commerce).
[49]The OECD Forum for the Future, (visited Feb. 15, 1999) <>.  Previous forums have included topics
such as Economic Flexibility and Societal Cohesion in the 21st Century, China in the 21st Century, and Future Global Capital Shortages.  Id.; see also Societal Cohesion and the Globalising Economy What Does The Future Hold? (OECD 1997) (providing a collection of short papers on the future of societal cohesion in the face of dynamic economies thriving on flexibility).
[50]The OECD Forum for the Future, (visited Feb. 15, 1999) <>.