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DE RUEHFR #0312/01 0261447
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O 261447Z JAN 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4461
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UNCLAS PARIS 000312 
 
SIPDIS 
 
FROM USOECD PARIS 
 
SENSITIVE - NOT FOR INTERNET DISTRIBUTION 
SIPDIS 
STATE FOR E, EB, EUR/ERA AND IO/S, NSC FOR MCCORMICK 
 
E.O. 12958:N/A 
TAGS: ECON EFIN ETRD OECD AORC
SUBJECT:  OECD: MISSION VIEWS ON ENLARGEMENT 
 
REF:  (A) PARIS 160 (B) 06 PARIS 7864 (C) 06 PARIS 7734 (D) 06 PARIS 
7438 (E) 06 PARIS 7053 (F) 06 PARIS 6944 (G) 06 PARIS 6848 
 
¶1.  (SBU) Summary:  USOECD reiterates the importance of having the 
OECD's impending enlargement include a major emerging economy to 
ensure the Organization's viability and its effectiveness as a tool 
to promote a U.S.-friendly global economic system.  As a virtual 
invitee since 1997, Russia presents a special case in this regard. 
Though not supportive of the desired diversity and global reach we 
should try to engineer, admission of at least one of the "EU 8" will 
probably be the price of enlargement that EU members exact from 
non-EU members.  Mission has made progress in winning a new 
assessment framework that would freeze our contribution in real 
terms, even as financing requirements - linked to enlargement and 
enhanced engagement - increase.  This progress is, however, 
contingent on a successful outcome to the enlargement exercise. 
Meanwhile, members are converging on a framework for enhanced 
engagement that supports partnership with major economies, maintains 
our work in the MENA and African regions, and serves as a "farm 
system" for prospective members among emerging economies.  End 
summary. 
 
¶2.  (SBU) USOECD understands that the interagency will meet January 
29 to discuss OECD enlargement.  Mission believes that a 
well-considered enlargement and enhanced engagement process is 
crucial to the continuing relevance of the OECD and to its ability 
to play a significant role in shaping rules for economic cooperation 
and development on a global level.  This cable provides USOECD's 
views on some of the key outstanding questions that the interagency 
will address: 
 
* which, if any, of the BRICS (Brazil, Russia, India, China, South 
Africa) should be considered for inclusion in a first round of 
enlargement? 
* what conditions for membership/accession might we wish to impose 
so that those tapped will not accede until they share our values and 
make a significant contribution to the work of the OECD? 
* how should the aspirations for membership by the eight EU members 
that are not now in the OECD be addressed? 
* how can we ensure the diversity of representation that 
non-European members such as Australia, Canada, Japan, Korea, Mexico 
and  New Zealand demand reflects the dynamic character of today's 
global economy? 
* how can the OECD best employ its model of enhanced engagement to 
expand its influence with strategically important non-member 
countries and to help prepare some key countries for membership? 
 
¶3.  (SBU) While the OECD has been focused on enlargement for the 
past several years, Council discussion of this critical issue only 
moved into full gear in September.  Over the course of a number of 
sessions, the Council has made assessments of individual potential 
candidates in light of the so-called "Noburu criteria" - 
like-mindedness, significant player, mutual benefit, and global 
considerations (i.e., geographic diversity) -- and discussed the 
Secretary General (SYG)'s "Way Ahead" paper (see reftels).  In 
 
SIPDIS 
addition, the Council has asked the Special Group on Financing 
Enlargement and Enhanced Engagement to review and make 
recommendations on the financial arrangements that enlargement will 
require of OECD members (both current and potential).  At the same 
time, the External Relations Committee (ERC) has developed a model 
for enhancing the OECD's engagement with countries of strategic 
interest to the OECD that are not members of the Organization. 
Taken together, how the OECD deals with enlargement, financing 
arrangements and enhanced engagement will go a long way toward 
determining the OECD's future relevance and usefulness to U.S. 
global economic interests. 
 
Which of the BRICS - Brazil, Russia? 
------------------------------------ 
 
¶4.  (SBU) USOECD has argued that the BRICS need to be part of any 
enlargement and enhanced engagement scenario.  If the OECD is to 
serve as a "hub for globalization," to extend the reach of its 
(clear pro-U.S.) policymaking model, these major emerging economies 
belong in its work.  An enlargement that does not include 
recognition of their growing influence will be widely viewed as 
inconsequential and evidence of the Organization's insularity and 
decline.  Of the BRICS, several members (including France, Turkey, 
and the Nordics) and the SYG are pushing for Russia to join in a 
first tranche; Mexico and other non-European members look favorably 
at Brazil as a non-European "diversity" candidate.   While Mission 
appreciates that both countries raise a host of concerns, we firmly 
believe that including at least one on the list of invitees offers 
the only possibility of securing the Organization's role in the 
emerging global economic order and gives the U.S. a well-tested tool 
to help engineer it. 
 
¶5.  (SBU) Mission supports sending a strong signal to Brazil that 
the OECD wants to engage and would be open to Brazil's membership. 
Bringing this important regional and growing global player closer to 
OECD standards is worth the investment.  Brazil's role in Latin 
America as well as the international trading system makes it a prime 
candidate for eventual OECD membership.  Both Korea and Mexico did 
more than change the organizations to which they belonged when they 
joined the OECD:  Korea signed on to ILO rules, while Mexico gave up 
its G-77 membership.  As we hear from their representatives on a 
regular basis, these were part of changes overall in the way that 
they looked at and participated in the international economic 
system.  It is important to see Brazil's potential in this light: 
inviting Brazil to begin accession talks is just the start of a 
process that will take years to complete - and only if Brazil meets 
the OECD aquis. 
 
¶6.  (SBU) Russia's status is unique, being the only country with 
which the Organization has formalized a "shared objective" of 
membership.  Its absence from the group identified for membership 
would thus send Moscow a clear and negative signal.  We leave to 
others to assess the effect this will have on Russia's reformers and 
reform efforts.  It would, however, be a clear break with the status 
quo; USOECD believes it preferable to clarify it.  Without conceding 
anything, the eventual May Ministerial statement could reasonably 
reaffirm the 1997 exchange of letters, yet make clear that 
negotiations on accession will not begin until Russia has 
demonstrated greater fulfillment of certain measures (e.g., Noburu 
criteria -- notably that of like-mindedness - or undertakings on the 
energy front, etc).  Ministers might then task the Organization with 
elaborating concrete measures that could pave the way toward 
launching accession negotiations (these, again, could take an 
extended period and follow Russia's fulfillment of these 
conditions). 
 
The other BRICS - China, India and South Africa 
--------------------------------------------- -- 
 
¶7.  (SBU) OECD members recognize that the other BRICS - China, India 
and South Africa - have demonstrated their significance, although 
they may not yet be ready  to embark on the accession path.  We 
would recommend that these countries be considered as prime 
candidates for enhanced engagement as defined by the ERC and 
approved by Council and consider their accession at the earliest 
opportunity. 
 
The EU Aspirants and Diversity 
------------------------------ 
 
¶8.  (SBU) Mission believes that the EU will insist on some signal 
that the eight EU member states not currently in the OECD will 
eventually join.  EU country Ambassadors appear ready to move away 
from the position that all eight are ready now and should receive 
invitations.  The sense here is that inclusion in an enlargement 
package of at least one EU member will be essential to EU member 
state agreement.  Non-EU members, including Canada, Japan and 
Australia, are likely to object at first, but in the end would 
probably agree, as long as other regions were well represented. 
USOECD would recommend supporting such an outcome as long as there 
was no implied automaticity for eventual membership by all of the 
eight and that the Noburu criteria be fulfilled in all cases. 
 
¶9.  (SBU) While recognizing that neither of the Asian BRICS is ready 
for or has shown a strong interest in beginning an accession 
process, Australia, Japan, Korea and New Zealand continue to argue 
that all of the BRICS should be priority countries for eventual 
membership.  To meet some of their diversity concerns, we should 
look closely at key regional players (e.g., Thailand, Indonesia, 
Malaysia and Egypt) as prime candidates for enhanced engagement, 
possibly through regional programs along the lines of MENA.  This 
would signal to these countries as well as the non-EU OECD Members 
that the Organization is serious about addressing today's global 
economic challenges. 
 
Enhanced Engagement 
------------------- 
 
¶10.  (SBU) The ERC has developed a well defined model for enhanced 
engagement (EE) that the OECD should be able to employ once 
decisions have been taken by Members to move forward the enlargement 
and engagement process.   The EE model currently has two main 
components - EE for individual countries, which we consider to be 
the most important component - and a regional component.  As now 
defined, the individual country model would provide for an agreement 
negotiated with each selected partner country with the following 
elements: (1) a periodic peer-reviewed economic survey (every 18-24 
months) like those currently done on member countries; (2) a series 
of sectoral peer reviews with a focus on encouraging adherence to 
OECD instruments (investment, anti-corruption, corporate governance, 
competition, environment, capital movements, taxation, etc.); (3) a 
series of policy dialogues to promote capacity building in areas 
where the partner country is not yet ready to accept OECD 
disciplines; (4) participation in OECD bodies - usually as 
observers; (5) access to OECD documentation through the 
Organization's online system (restricted to selected policy areas); 
(6) participation in OECD global forums and regional programs; and 
(7) opportunities for officials of partner countries to serve in 
training or expert capacity in the OECD for limited periods. 
 
¶11.  (SBU) The agreement negotiated with partner countries and 
approved by the Council would be for a 3-5 year period.  It would be 
renewable if there had been sufficient progress by the partner 
country, but could likewise be allowed to lapse if there had not 
been suitable progress toward convergence with OECD principles and 
practices.  Partner countries would accept responsibility for their 
progress under the agreement and would shoulder a significant 
portion of the costs.  A number of delegations support our view that 
EE for individual countries is a resource intensive effort and 
should be limited to countries of "strategic interest" to the OECD. 
This could include BRICS that are not yet ready for accession talks, 
as well as other countries deemed to be of "strategic interest." 
The goal would be primarily to enhance the OECD's policy influence 
among non-member countries and to encourage adherence to OECD 
principles and practices.  It would, however, also be an excellent 
vehicle for helping countries prepare for future membership. 
 
¶12.  (SBU) Proposals for the regional approach to EE are not yet as 
well developed or as broadly accepted as those for individual 
programs.  Based on current thinking (still to be developed in more 
detail), regional EE programs would include many of the same 
elements as elaborated above, but would be geared to the needs and 
circumstances of selected geographic regions, including continuation 
or expansion of existing programs for the Middle East and North 
Africa, Africa and Southeast Asia - with the establishment of new 
programs for regions such as Latin America where no regional program 
currently exists.  Such regional programs would, by virtue of their 
nature, be better suited to spreading OECD influence regionally, but 
would be less effective in helping individual countries make rapid 
progress in convergence toward OECD disciplines. 
 
Financing Questions 
------------------- 
 
¶13.  (SBU) While Council has been considering which countries to 
invite to begin the accession process and while the ERC has been 
developing enhanced engagement, the Special Group on Financing has 
developed options for financing both.  We have urged, apparently 
successfully, that financing enlargement and enhanced engagement 
should not be separated from the issue of long-term financial 
sustainability of the OECD.  For years the largest contributors have 
carried the financial burden.  USOECD, and a number of other "large" 
countries believe that it may be time to shift some of that burden - 
in particular as both enlargement and engagement will make 
additional financial demands.  The major contributors have argued 
that contributions must reflect the reality that OECD membership 
involves benefits, obligations and costs and that all Members should 
strive to cover recurring costs of participation (although special 
consideration would be provided to the smallest members who would 
otherwise see ten-fold increases to cover their recurring costs).  A 
key element would include holding large countries' (including the 
U.S.) contributions at their current level, resulting in a declining 
share for them.  This debate is tied intimately to enlargement and 
would not be occurring without it. 
 
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