The Organization for Economic Cooperation and Development

The Organization for Economic Cooperation
and Development
James K. Jackson
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
The Organization for Economic Cooperation and Development (OECD) is an1
intergovernmental economic organization in which the 30 member countries discuss,
develop and analyze economic and social policy. While all of the member countries are
considered to be economically advanced and collectively produce two-thirds of the
world’s goods and services, membership is limited only by a country’s commitment to
a market economy and a pluralistic democracy. The member countries rely on the
OECD Secretariat in Paris to collect data, monitor trends, analyze and forecast economic
developments, research social changes and patterns in trade, environment, agriculture,
technology, taxation and other areas to inform their discussions and to assist them in
pursuing their efforts to develop common policies and practices. The U.S. has sparred
periodically with other OECD member countries over various issues, including U.S.
antidumping laws. Christopher F. Egan was appointed by President Bush to serve as the
U.S. Ambassador to the OECD and confirmed by the Senate on October 26, 2007. Key
issues for Congress include OECD work on coordinating national approaches to
curtailing bribery and the illicit use of tax havens. Congress appropriated about $117
million to the OECD in FY2008. This report will be updated as events warrant.
The United States, along with a number of European countries, formed the
predecessor organization to the OECD, the Organization for European Economic
Cooperation (OEEC) in order to administer aid under the Marshall Plan for the
reconstruction of Europe after WW II. In 1961, the OECD was formed to take over from
the OEEC with a mandate to build strong economies in its member countries, improve

1 The member countries include Australia, Austria, Belgium, Canada, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,
Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak
Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States.

efficiency, hone market systems, expand free trade, and contribute to development in
industrialized as well as developing countries. Presently, the 30 member countries of the
OECD are focusing an increased amount of their attention on developing and newly
emerging economies that adopt free market systems. As a result of this broader
perspective, the OECD is shifting its emphasis from focusing exclusively on the members
of the OECD to assessing the manner in which various policy issues affect a broad range
of countries, including the impact globalization is having on world trade, wages, and
industrial development.
The OECD is organized around three main bodies: the Council, the Committees, and
the Secretariat. Committees are comprised of representatives of all the member countries.
The overriding committee is the Council, which has decision-making power. It is
composed of one representative for each member country, generally at the level of
Ambassador, gives guidance to the OECD, and directs its work. Since the work agenda
is set by unanimous consent by the Council, a veto by a Council member removes an item
from the agenda. The Council meets at the ministerial level once a year, when foreign,
finance and other ministers from member countries raise issues and set the priorities for
OECD work for the coming year. About 200 committees, comprised of some 40,000
senior government officials from the member countries meet to review and contribute to
work that is conducted by the Secretariat. In many cases, these committees serve as
conduits for providing information on work that is being conducted by officials among
the OECD member countries on economic issues. Furthermore, the Council determines
the OECD’s budget, which presently amounts to $470 million. The United States, which
appropriated about $117 million in FY2008, is the largest contributor to the OECD’s
The Secretariat is comprised of a staff of about 2,000, mostly economists, scientists,
lawyers, and other professionals, who work to support the efforts of the Committees to
deliver the work program approved by the Council. As a result, the Secretariat is
organized along substantive areas to mirror the work of the Committees, although the
structure is flexible enough to handle cross-disciplinary studies. Some of the major areas
include employment and labor; environment and economics; trade and investment;
biotechnology, agriculture and science; public management; and globalization and
development. Parts of the Secretariat collect data, monitor trends, analyze and forecast
economic developments, while other parts research social changes or evolving patterns
in trade, environment, agriculture, technology, taxation, and more.
In the 1990s, the OECD, under the direction of its member countries, spearheaded
an international agreement to outlaw crimes of bribery and it continues to coordinate
efforts that are aimed at reducing the occurrence of money laundering and corruption.
Also, the OECD is a pivotal player in promoting corporate codes of conduct that attempt
to develop a set of standards for multinational firms that can be applied across national
borders. In addition, the OECD provides a vast amount of statistical information and data
on the member countries that are made comparable to facilitate comparison and analysis.
These data include national accounts, economic indicators, labor force and employment,
migration, education, energy, taxation, tourism, and environment.

OECD Issues
The OECD is a strong proponent of the view that increasing world economic growth
and welfare is best supported by a free and open flow of goods, services, and capital. As
a result, it views its own role in this process as that of a leading proponent of the benefits
of globalization and as a force for developing institutions and regulatory structures that
can make these benefits available to the OECD members and to developing countries.
The core work of the OECD Committees and Working Groups is organized around five
main areas in order to provide the members with studies, technical knowledge and
expertise, and to help develop guidelines and codes. These areas include:
Trade and Investment Liberalization. Work in this area includes promoting the
benefits of open markets and analyzing trade as it relates to competition policy, the
environment, labor standards, and foreign investment. Work is also being conducted
on the areas of export credit policies, electronic commerce, corporate governance and
codes of conduct, international taxation principles and the linkages between trade,
investment and economic development.
Policy Reform and Development. This work focuses on the newly emerging
economies of Russia and South Eastern Europe where the OECD is attempting to
promote peace, stability, and economic and social progress by achieving economic
integration. The OECD is attempting to establish standards for fair and non-
discriminatory treatment for domestic and foreign investors, with the full protection
of property rights.
Managing New and Evolving Technologies. This area focuses on developing the
necessary ground-work for the approval, adoption, and dissemination of new
technologies to non-members. Such technologies include biotechnology and related
food safety issues.
Public Governance. National governments face increased challenges coordinating
trade and economic issues. The OECD is working with national governments to find
ways to include a broader representation of groups and viewpoints to satisfy public
expectations for input into policy issues.
Social Protection. Globalization has created fears that segments of national
economies will be permanently displaced. The OECD is working with national
governments to address the needs of individuals and the member countries to utilize
the human resources in each member country.
Issues for Congress
Among some consumer groups, there is growing concern over the economic impact
of globalization. These concerns, in turn, are spurring some groups to single out the
OECD for criticism as a result of the OECD’s leading role as a proponent of free trade,
open markets, and globalization. One criticism, in particular, that is expressed by some
groups, is the view that the OECD represents a danger to national sovereignty because
they claim it is one among a number of international bodies that exceeds the authority of
national governments, yet is accountable to no one. Others view the OECD as an
economic cartel dominated by the United States and serving mainly the economic and

political interests of the United States.2 These groups also argue that the OECD is
pursuing free trade and open markets at the expense of the poorest and least developed
countries; that the pursuit of free market economics worsens further the disparity of
income between the richest and the poorest countries; and that the OECD is promoting
the expansion of multinational corporations at the expense of national governments and
national economic interests.
The OECD is independent from any other international organization, but it is the
creation of its member countries and, therefore, reflects their interests and views. As
such, it contends that it has no hidden or independent agenda of its own, but that its
agenda is set by its members. It also argues that free trade and open markets have proven
to be the best route to economic development and to higher national incomes. There is
little doubt, however, that the United States plays a leading, but not a commanding, role
within the OECD. This means that, at times, the United States carries a larger than
average portion of the burden for determining the agenda of the OECD and in helping to
direct the course of policy developments. This also means that the United States is the
most obvious target for criticism from groups that object to the policies or the
performance of the OECD.
The United States plays an active role in the full array of OECD activities. In
support of the needs of developed countries in the WTO negotiations, the OECD has
pursued analytical research into: the impact regional trade agreements are having on the
multilateral trading system; the agricultural policies of OECD countries; the issue of labor
mobility; the impact of barriers to trade in services; and the trade policy implications of
changes in the structure of national economies. U.S. delegates actively participated in
efforts to strengthen competition and antitrust policies within OECD countries, and to
extend and strengthen the OECD’s anti-bribery convention. In addition, U.S. delegates
have supported efforts within the OECD to review national regulatory reform efforts,
because they argued that targeted regulatory reform, especially transparency, can benefit
domestic and foreign stakeholders alike by improving the quality of regulation and
enhancing market openness.
In 2002, U.S. delegates pressed for greater support for the OECD’s Arrangement on
Guidelines for Officially Supported Export Credits, which restricts the use of tied aid
financing in promoting exports. They gained support in 2002 for a U.S. proposal to
merge and update two agreements that banned tied aid in Central and Eastern Europe and
key countries of the former Soviet Union, respectively, and formally incorporated the new
agreement into the Arrangement. The United States also proposed applying the rules
governing the use of tied aid to untied aid and a formal review of the use of “market
windows,” or quasi-government financial institutions that support national exports, but
are not subject to multilateral rules. U.S. negotiators oppose the efforts by some OECD
members to shift the issue of export credit controls to the World Trade Organization
(WTO), because U.S. negotiators believe that a consensus favoring controls on export
financing would be unlikely since the WTO forum would include those very developing
countries that benefit the most from export credit subsidies.

2 See The OECD’s Crocodile Tears at []

U.S. delegates have also placed a high priority on international investment issues in
the OECD. As part of the OECD’s Declaration on International Investment and
Multinational Enterprises, each OECD member has designated national contact points
(NCPs), or the government agencies designated by each country to monitor
implementation of the Guidelines within their territory. The U.S. national contact point
is the Director of the Office of Investment Affairs, the Department of State. At the annual
meeting of NCPs in 2002, the participants agreed to study a number of issues including
the scope and application of the Guidelines. The United States also pressed for and
contributed to a working paper on the general treatment and expropriation obligations in
international investment agreements in order to clarify the content of those obligations for
arbitrators, investors, and the international community. U. S. efforts also focused on the
OECD’s High Level Process on Steel to address overcapacity in the global steel market
and any market-distorting practices that contribute to excessive and inefficient steel
capacity. In December 2002, participants agreed to develop the elements of an agreement
for reducing or eliminating trade-distorting subsidies in steel and to explore developing
a voluntary commitment to refrain from introducing new subsidy programs that may
maintain or enhance steel capacity. The United States also supported efforts to establish
a joint trade capacity building database to assist trade negotiators from developing
Another area of concern for U.S. delegates has been the issue of tax havens. During
the last half of the 1990's, the OECD member countries initiated efforts to curtail the use
of tax havens for illicit tax purposes as part of their efforts to curb “harmful tax
competition.”3 The OECD member countries defined harmful tax competition as attempts
to attract foreign investment in financial and other mobile services by providing
preferential tax treatment to such investment through a regime that excludes local
residents from benefitting from the regime or that limits access to the local market,
thereby protecting the local market from foreign competition, coupled with a lack of
transparency and a lack of effective exchange of information for tax purposes. OECD
member countries initiated these efforts because they were concerned that certain kinds
of tax competition for internationally mobile capital were anticompetitive. This project
has evolved over time. The main focus now has shifted to improving the transparency of
tax and regulatory regimes and to establishing effective exchange of information for tax
purposes. U.S. delegates led the efforts to refocus the project on advancing the
longstanding policy of promoting the exchange of information for tax purposes.
The issues of bribery and tax havens have been major concerns among the OECD’s
members and have prompted certain changes in U.S. laws. International flows of capital
and goods and services around the world, a phenomenon referred to as globalization, have
grown dramatically over the last decade and are producing significant challenges for the
OECD member countries, including the United States. International flows of capital are
the prime mover behind exchange rates and global flows of goods and services, and
represent the heightened growth of foreign investment and cross-border business
transactions. One outcome of this global expansion of business transactions, however,
has been the increased use by multinational corporations and nations of voluntary, legally
enforceable, and industry-specific codes of conduct. One such code promoted by the

3 Harmful Tax Competition: An Emerging Global Issue. Organization for Economic Cooperation
and Development, Paris, 1998. []

OECD is the Convention on Bribery, which focuses on a narrow set of issues related to
the bribing of public officials. Since the Convention entered into force on February 15,
1999, 23 countries, including the United States,4 have passed national legislation
implementing the Convention. The U.S. delegates also pushed to have the OECD update
its landmark 1998 study on Counterfeiting and Piracy to determine the extent and current
impact of these activities and to improve law enforcement efforts among OECD countries.
Since the terrorist attacks of September 11, the Financial Action Task Force on
Money Laundering (FATF), the body within the OECD that has pursued improvements
in the anti-money laundering mechanisms in tax havens and among its own member
countries, has redirected its efforts to focus on terrorist financing. On October 31, 2001,
the FATF issued a new set of guidelines and a set of Special Recommendations on
terrorist financing.5 In the accompanying statement, the FATF indicated that it had
broadened its mission beyond the issue of money laundering to focus on combating
terrorist financing and that it was encouraging all countries to abide by the new set of
guidelines. The Special Recommendations agreed to by the FATF are:
!Take immediate steps to ratify and implement the 1999 United Nations
International Convention for the Suppression of the Financing of
Terrorism and Security Council Resolution 1373 dealing with the
prevention and suppression of the financing of terrorist acts;
!Criminalize the financing of terrorism, terrorist acts and terrorist
!Freeze and confiscate funds or other assets of terrorists, adopt measures
which allow authorities to seize and confiscate property;
!Report funds they believed are linked or related to, or are to be used for
terrorism, terrorist acts or by terrorist organizations;
!Provide the widest possible range of assistance to other countries’ law
enforcement and regulatory authorities in connection with criminal, civil
enforcement, and administrative investigations;
!Impose anti-money laundering requirements on alternative remittance
!Strengthen customer identification requirements on financial institutions
for domestic and international wire transfers of funds;
!Ensure that entities such as non-profit organizations cannot be misused
to finance terrorism.

4 P.L. 105-366, November 10, 1998.
5 FATF Cracks Down on Terrorist Financing. Washington, FATF, October 31, 2001, p. 1.