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DE RUEHFR #7864/01 3541503
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O 201503Z DEC 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3888
INFO RUEHSS/OECD POSTS COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1379
RUEHBR/AMEMBASSY BRASILIA PRIORITY 1739
RUEHSA/AMEMBASSY PRETORIA PRIORITY 1233
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 0421
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 0583

UNCLAS PARIS 007864 
 
SIPDIS 
 
SENSITIVE -- FROM USOECD 
SIPDIS 
STATE FOR EUR/ERA, EB, IO/S AND E, NSC FOR MCCORMICK 
 
E.O. 12958: N/A 
TAGS: ECON OECD EFIN ETRD EAID
SUBJECT: OECD: COUNCIL DISCUSSES BUDGET, MAY MINISTERIAL AS WELL AS 
ENLARGEMENT AND ENHANCED ENGAGEMENT, WHERE SYG GURRIA PROPOSES A WAY 
AHEAD 
 
REF:  (A) PARIS 7799 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
¶1. (SBU) SUMMARY:  The OECD Council met all day on December 14 for 
its last regularly scheduled session in 2006.  PermReps considered 
the program of work and budget (PWB) for 2007-2008 (see reftel), 
enlargement and enhanced engagement as well as planning for the May 
2007 Meeting of the Council at Ministerial Level (MCM).  The Council 
also heard a report from Ambassador Morella, Chair of the Committee 
on Public Affairs and Communication (CPAC) and approved the latest 
OECD publishing policy. 
 
¶2. (SBU) The discussion of enlargement and enhanced engagement 
centered on an informal paper (text e-mailed to EUR/ERA) laying out 
the Secretary General (SYG)'s personal thoughts on next steps. 
Reactions to the paper, which calls for including all BRICS in the 
category of potential accession, basically split along EU and non-EU 
lines.  The former objected to having EU candidates considered "in 
the context of a balanced enlargement process" and to the suggestion 
that the representation of the EU in the OECD Council should merit 
further discussion.  As we move into the holidays, capitals will be 
asked to closely examine the key issues for enlargement and enhanced 
engagement in order to prepare for Council's next two scheduled 
discussions, January 11 and the first week of February.  END 
SUMMARY. 
 
Enlargement 
----------- 
 
¶3. (SBU) SYG Gurria circulated an informal paper with his personal 
thoughts on the way ahead for OECD enlargement and enhanced 
engagement (copy of the text has been forwarded to EUR/ERA). 
PermReps expressed general approval for the SYG's taking the 
initiative but criticized some specific elements.  The SYG's paper 
focuses heavily on the BRICS (Brazil, Russia, India, China and South 
Africa) and the need to engage with these emerging economies if the 
OECD is to remain relevant in today's international economy.  In 
this respect, the SYG suggests a near term accession package which 
would include at least several of the BRICS, starting with Russia 
and Brazil.  Noting there may some "problems" with China and India, 
he still considers them as potential members in the not too distant 
future.  He also wants to expand relations with South Africa with 
the possibility of beginning accession negotiations in the near 
term.  His paper is strong on Chile for near team accession, while 
it posits that Israel "could" be included in this category. 
 
¶4. (SBU) PermRep responses to the SYG's emphasis on the BRICS 
reflected a real divide between EU and non-EU Members.  The Belgian 
Ambassador called for caution, noting that including China, Russia 
and India would change the nature of the Organization, while the 
Mexican Deputy praised the "real" regional balance contained in the 
paper.  Australia, while agreeing that bringing in the BRICS would 
change the OECD's culture, noted that there were positive elements 
to change.  She also questioned the designation of Southeast Asian 
candidacies as only medium term.  The Turkish rep supported Russian 
and Brazilian accession, while Austria noted that Russia (and 
Israel) had moved some distance away from OECD standards in the past 
five years.  Korea, New Zealand and Mexico each spoke in favor of 
focusing first on the BRICS, and even France (bucking the general EU 
trend) expressed support for Russia, South Africa, Chile and Israel 
and consideration of medium term membership for China and India. 
 
¶5. (SBU) A number of EU ambassadors criticized the paper for its 
treatment of the EU member candidates and the suggestion that the 
relationship between the OECD and the EU might deserve examination 
as part of the enlargement process.  Several EU members took issue 
with the SYG's suggestion that EU member countries might be examined 
as a group, while being individually considered for accession in the 
context of a balanced enlargement process, which could involve a 
sequencing of accessions.  The Greek Ambassador, one of the more 
outspoken critics, questioned mentioning any EU member state by name 
(the SYG had cited Slovenia as the EU state which might begin the 
accession process).  Most EU reps who spoke, including the European 
Commission, demanded that the sentence: "A related issue that would 
merit discussion is the representation of the EU in the Council of 
the OECD" be stricken.  For them this was a sensitive issue which 
the EU would first have to consider internally. 
 
¶6. (SBU) Ambassador Morella agreed with the SYG that enlargement and 
enhanced engagement were key to enhancing the OECD's relevance.  She 
said this objective, as laid out in the paper, includes helping 
countries consolidate the transition to a market economy.  She urged 
 
 
the EU members to work out the role they see for the EU in the OECD 
to help the Council move forward.  The Australian and Swiss 
ambassadors supported Ambassador Morella, with the Australian 
stressing that the EU should come up with a solution.  She noted 
that while the EU questioned the candidacy of the countries of 
Southeast Asia, none of the EU 6 plus 2 met the Noburu criterion of 
significant player. 
 
¶7. (SBU) SYG Gurria reiterated that the paper was the result of his 
own thinking based on the Council's previous discussions.  He noted 
that "we are in the beginning of the next stage of the process."  In 
response to an Italian comment that the Council was working on two 
levels - one, the vision of the OECD for the next 15 to 25 years and 
two, the accession process for individual countries - the SYG agreed 
that the process was like a negotiating a contract, with a certain 
down payment (basic accord with the Noburu criteria) and a payment 
schedule (where the new members would have to reach designated 
milestones).  He hoped that in May at the MCM, Ministers could give 
a signal to those countries that would be ready to begin accession 
negotiations; "then the real process of bringing them on board will 
begin." 
 
¶8. (SBU) These remarks led several ambassadors to raise more 
philosophical questions.  Canadian Ambassador Bourgon called on the 
Council to avoid insisting on prohibitions; e.g., the EU should not 
be asked to give up on the 6 plus 2; however, one should ask if the 
OECD is the place for global economic engines (i.e., the U.S., the 
EU, China, India and Russia) to come together.  Here, each and every 
member should bring something to the table.  In answering her own 
question - should being European be reason for membership? - she 
said, "I do not think so."  The Ambassador of New Zealand reminded 
colleagues that her country was also small and like-minded, but 
there should be no automaticity to EU countries becoming members. 
She too appealed to the EU to help find solutions to pragmatic 
questions of timing, absorptive capacity, etc., and not just demand 
that the 6 plus 2 be accorded accession. 
 
¶9. (SBU) The SYG concluded the discussion by stressing that 
decisions on membership in the end will be political in nature. 
Here, it will be important to hear from capitals, while at the same 
time capitals will want advice from the Council.  He picked up on 
the idea of the Polish Ambassador that Council schedule a 
(reinforced) session in February with representatives from capitals 
to review outstanding issues.  The Dutch Ambassador also called for 
finding a place (informal discussions) where PermReps can express 
their views honestly, a space where they can say "naughty 
constructive things." 
 
Enhanced Engagement 
------------------- 
 
¶10. (SBU) SYG Gurria noted that his paper also addresses the 
question of enhanced engagement, where he has suggested underpinning 
an expanded relationship with non-members within the context of 
regional programs.  He then asked Canadian Ambassador Bourgon, 
outgoing Chair of the External Relations Committee (ERC), to report 
on the Committee's work on enhanced engagement.  Ambassador Bourgon 
directed Council's attention to the "food for thought" ERC paper, 
"Enhanced Engagement" (ERC(2006)15).  The paper, she said, lays out 
possible elements of a "typical" program of enhanced engagement. 
She continued that since that the ERC has completed its conceptual 
work, the Council needs to provide further guidance.  The issue now 
is to determine which countries are to be offered enhanced 
engagement, since each partnership will be unique. 
 
¶11. (SBU) Ambassador Bourgon and members of the Secretariat also 
reported on a separate paper prepared by the Secretariat on regional 
approaches (C(2006)168) - basically a stocktaking of what the OECD 
was already doing in this area.  Of note was the fact that almost 50 
percent of the funding for global relations work in the OECD is tied 
to regional approaches.  This finding should be of major import for 
future outreach (including enhanced engagement). 
 
Financing Enlargement and Enhanced Engagement 
--------------------------------------------- 
 
¶12. (SBU) The SYG's paper also addresses financing enlargement (but 
not enhanced engagement).  The SYG offered that enlargement may 
require revising the current scale of contributions, and this 
adjustment should be decided prior to moving into accession 
negotiations, and then called on Ambassador Smidt of Denmark, Chair 
of the Special Group on Financing Enlargement and Enhanced 
Engagement.  Ambassador Smidt reported that the Group was moving in 
 
 
the direction of recommending the concept of a base fee to be paid 
by all members with the size and conditions for using that fee still 
to be determined.  He also noted that new members will need to pay 
for accession negotiations and the start up of membership, but 
charges will be tailored for each individual candidate.  Regarding 
enhanced engagement, Ambassador Smidt said that costs will depend on 
what type of engagement individual candidates choose and that it 
will be difficult to determine how to fund this engagement until the 
ERC and the Council are able to define exactly what is meant by 
enhanced engagement.  The Special Group was to meet on December 18 
to continue its deliberations and take up the question again 
following the New Year. 
 
Planning for the May Ministerial 
-------------------------------- 
 
¶13. (SBU) DCM Reid, who chaired the last meeting of the Executive 
Committee (ExCom), reported on the ExCom's discussion of 
preparations for the 2007 Council Meeting at Ministerial Level (MCM) 
scheduled for May 14-15.  The major outstanding issue remains the 
theme of the meeting, which the ExCom had proposed should be: 
"Innovation, Growth and Equity:  The Way Ahead."  Spanish Ambassador 
Ballestero (Spain's Minister of Finance Solbes will chair the MCM) 
suggested to Council what he termed a more dynamic title: 
"Innovation for Growth and Striving for Equity:  Advancing the 
OECD's Agenda."  This new proposal caught many by surprise and led 
to an inclusive debate where some argued the social goals of equity 
and others the desire for growth and equity to be compatible. 
Deputy SYG Akasaka, who is coordinating the MCM, said that he would 
review the title informally with interested delegations and return 
to Council for further discussion in January.  At that time the 
Council will also address other elements of the agenda, including 
the trade session and Ministerial discussion of enlargement and 
enhanced engagement.  (COMMENT:  The issue of the theme for the MCM 
revolves around how to include the words innovation, growth and 
equity, with the primary stress on innovation.  We suspect that it 
may not be easy to meet everyone's desires.  END COMMENT.) 
 
¶14. (SBU) Ambassador Bourgon reported that the ERC had reviewed the 
issuing of invitations to non-members.  It was agreed that Brazil, 
China, India, Russia and South Africa (the BRICS) would be invited 
to all sessions except the one on enlargement and enhanced 
engagement.  Regular observers to the Trade Committee would be 
invited to the session on trade.  A decision on inviting other 
international organizations (the Geneva Group) would be deferred 
until the Trade Committee meets in March. 
 
Items Approved Without Debate 
----------------------------- 
 
¶15. (U) All of the items on the agenda that were "likely to be 
approved without debate" were approved by Council with the exception 
of the item regarding the European Council of Ministers of Transport 
which was referred back to the Executive Committee (ExCo) at the 
insistence of France for further discussion.  (NOTE:  This item was 
approved on December 20, in a short Council session that gave final 
approval to the 2007-2008 Program of Work and Budget.) 
 
MORELLA