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DE RUEHFR #0525/01 0401421
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O 091421Z FEB 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4827
INFO RUEHSS/OECD POSTS COLLECTIVE
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UNCLAS PARIS 000525 
 
SIPDIS 
 
FROM USOECD PARIS 
 
SENSITIVE - NOT FOR INTERNET DISTRIBUTION 
SIPDIS 
 
STATE FOR E, EB - DIBBLE, EUR/ERA AND IO/S, NSC FOR MCCORMICK 
 
E.O. 12958:N/A 
TAGS: ECON EFIN ETRD OECD
SUBJECT:  OECD: MISSION VIEWS ON ENLARGEMENT 
 
SUBJECT:  OECD:  FEBRUARY 5 DISCUSSION OF ENLARGEMENT AND ENHANCED 
ENGAGEMENT - COUNCIL IS DIVIDED 
 
REF:  (A) EUR/ERA LUFTMAN'S E-MAIL (2/5/2007), (B) PARIS 431 
(NOTAL), (C) PARIS 371 (NOTAL), (D) PARIS 312 
 
¶1.  (SBU) SUMMARY:  OECD members are divided on a number of key 
issues regarding enlargement and enhanced engagement.  A February 5 
Council discussion highlighted differing views on how to deal with 
the BRICS, whether Russia should be invited to begin discussions on 
accession negotiations, whether EU membership implies special 
status, the need to ensure greater global balance, and the 
definition of enhanced engagement.  New Zealand declared that it 
could not agree to opening negotiations with Israel, based on human 
rights concerns.  Only Chile appears to command consensus as a 
candidate for near term membership.  OECD members are also grappling 
with how enlargement and enhanced engagement are to be financed, 
trying to balance the principle of capacity to pay with that of 
covering the costs and benefits of membership.  The Secretary 
General's draft concept paper on enlargement will be revised based 
on the February 5 discussion and circulated prior to the February 20 
Council which will be attended by representatives from capitals. 
END SUMMARY. 
 
¶2.  (SBU) The OECD Council engaged in a three hour discussion of 
Secretary General (SYG) Gurria's latest informal draft paper on 
 
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enlargement and enhanced engagement on February 5.  The SYG noted 
that recent developments including visits by Russian Federation 
Deputy FM Denisov (Ref C) and the Chinese vice-minister for trade, 
his own discussions on the margins of Davos with Israeli and other 
representatives, as well as several consultations with EU 
representatives had helped shape this draft.  He stressed that while 
the paper tried to reflect as much as possible most delegations' 
points of view, it was not a mandate for enlargement but rather 
identified possible elements of a mandate.  He noted that the paper 
remained a work in progress - with each draft being a refinement of 
previous discussion and consultation.  The SYG pointed out that two 
key issues need additional work:  (a) defining the concept of 
enhanced engagement and its relationship to accession, and (b) 
financing of enlargement and enhanced engagement. 
 
General Disappointment with SYG's latest Draft 
--------------------------------------------- - 
 
¶3.  (SBU) The Australian Ambassador, who was the first to comment, 
said she was disappointed with the thrust of the paper, which she 
labeled a "political" document.  Major flaws included lack of any 
mention of the Noboru criteria and a focus on Europe.  She was 
especially concerned that neither Thailand nor Indonesia was 
mentioned and that Southeast Asian countries were lumped together 
with Egypt and Morocco.  In particular, she saw no reason to elevate 
Russia among the BRICS and questioned what appeared to be a 
subjective recommendation to open discussions with Chile, Estonia, 
Israel, the Russian Federation and Slovenia with a view to 
membership.  The Korean Ambassador supported his Australian 
colleague regarding absence of the Noboru criteria in the paper, and 
expressed his disappointment with the treatment of Asian countries. 
He also emphasized the importance of sending a message to all/all of 
the BRICS that the OECD wants them in the OECD, if they so desire 
and meet conditions for membership.  The Japanese Ambassador said 
that he had been shocked that Thailand and Indonesia were not 
included in the paper.  He continued that Tokyo had concerns about 
the EU candidates - not sure they met all of the Noboru criteria - 
and did not support offering Estonia and Slovenia near term 
accession discussions.  He agreed that the BRICS were important, but 
called for nuanced support, especially with respect to South 
Africa. 
 
¶4.  (SBU) New Zealand's Ambassador, speaking on instructions, joined 
other non-EU countries in underlining the importance of the Noboru 
criteria, with the bottom line for Wellington being human rights 
considerations.  Human rights, along with free market and democracy, 
demonstrated like-mindedness and shared values, and each candidate 
needed to be considered for accession on its own merits.  With this 
in mind, New Zealand could support opening immediate discussions 
with Chile, pursuing Brazil's and South Africa's interest in OECD 
membership and offering enhanced engagement to China and India as 
well as a regional enhanced engagement program to countries in SE 
Asia.  She said that New Zealand would watch with great interest 
discussions regarding the EU but had taken no position on next 
steps.  Finally, because of human rights considerations, Wellington 
could not accept opening discussions on possible membership with 
either Israel or Russia. 
 
¶5.  (SBU) The German representative, speaking both in his national 
and EU presidency capacities, offered that the SYG's paper "had room 
for improvement."  He stressed that all of the EU-8, not just 
Estonia and Slovenia fulfilled the criteria for OECD membership 
based on the fact that they were members of the EU.  It was 
important that EU members not be lumped in the same category as 
countries from Latin America and Asia.  The German rep also 
suggested a greater emphasis on country specific rather than 
regional enhanced engagement programs, with special interest shown 
to Brazil, China and India.  The Danish Ambassador expressed concern 
that small countries (i.e., the three Baltic countries) not be 
excluded and that new members must fully embrace core values if they 
are expected to follow OECD norms (directed at Russia and 
non-European nations). The EU Commission representative picked up on 
these themes, stating that the EU-8 should be allowed to join the 
OECD at some point, whether in the near, medium or long term.  He 
stated that willingness and a clear interest in joining the OECD had 
to be a condition of membership.  He agreed that the BRICS were key 
players and supported formalizing relations through strong bilateral 
programs and said that Brazil might be considered for accession 
discussions if the Brazilians displayed greater interest in the 
OECD. 
 
¶6.  (SBU) U.S. Charge Reid drew on points contained in ref A, 
stressing our support for immediately opening accession negotiations 
with Chile and Israel; expressing support for  eventual Russian 
Federation membership, but, at this point calling only for enhanced 
engagement with Russia due to current political and economic trends; 
inviting the SYG to consult with China, Brazil, India and South 
Africa regarding expanded cooperation; noting that the U.S. does not 
have a firm view at this time with regard to the candidacies of 
Estonia and Slovenia; and supporting expanded cooperation and OECD 
programs in the Middle East, North Africa, Latin America and Asia. 
 
Outstanding Issues 
------------------ 
 
¶7.  (SBU) With the exception of Iceland, every OECD Member spoke, 
expressing concerns to various degrees along the lines above.  The 
key issues about which differing views were expressed included: 
 
o  BRICS - all Members agree that the BRICS deserve special 
consideration in order to ensure the OECD's continued relevance and 
ability to influence the global economic system.  Views differ, 
however, as to the type of relationship to be established.  All 
Members appear supportive of initiating a two-step process of 
consultations to clarify the interest of the BRICS in developing 
closer ties with the OECD, with this initial dialogue  determining 
next steps, e.g., beginning an accession process.  All Members 
appear ready to institute enhanced engagement programs with each of 
the BRICS, as part of what the UK Ambassador described as the need 
to "embrace" these key emerging economies. 
 
o  Russian accession negotiations - two camps have emerged:  those 
opposed or very cautious (including New Zealand, Australia, the UK, 
Canada, Belgium, Ireland and the U.S.) and those in favor (led by 
France, Turkey and the Nordic states along with Italy, Greece, 
Luxembourg, Poland, Spain and the SYG). 
 
o  Chile and Israel - The only dissent over Chile's membership (and 
it was directed more at the draft than at the substance) came from 
the Australians who questioned why no mention was made of the Noboru 
criteria.  However, New Zealand's direct opposition to Israeli 
accession due to human rights concerns poses a problem which will 
need to be addressed with Wellington.  The New Zealand Ambassador 
told us that this decision had been taken directly by the Prime 
Minister.  Several other delegations have noted in past discussions 
that Israeli membership could pose problems. 
 
o  EU-8 - there is a definite divide between EU and non-EU 
 
 
countries.  The Commission and EU members assert that membership in 
the EU implies that all these countries are by definition 
like-minded and have demonstrated their interest and bona fides in 
joining the OECD.  The EU, therefore, will not accept the mention of 
only Estonia and Slovenia as countries to be considered for 
discussions on near term accession.  On the other hand, the 
Australians and most other non-EU countries argue that the SYG's 
draft is too Europe centric.  (COMMENT:  Given the strong views, we 
will look to see if the SYG refers generically to EU members in his 
next draft or includes the names of each of the EU-8.  If he tries 
the latter, we can expect Turkey to object.  Also, it would not be 
in our interest of pushing for a more global OECD if Ministers were 
to imply that EU membership implied eventual accession to the OECD. 
END COMMENT) 
 
o  Non-EU/non-BRICS - Australia, New Zealand, Japan and Korea, and 
to an extent the UK and Canada, want a stronger signal sent to 
countries in Asia, including Thailand and Indonesia, that the OECD 
is open to engage with them and that the door for eventual 
membership remains open depending on the individual merits of each 
potential candidate.  They believe the SYG's proposals fall short in 
sending the message that the OECD is serious about expandind its 
global role. 
 
o  Enhanced engagement - how to strengthen the OECD's relations with 
the BRICS is a major element of the enlargement/enhanced engagement 
debate.  Former Chair of the External Relations Committee (ERC), 
Canadian Ambassador Bourgon, observed that a key question is whether 
the OECD can define enhanced engagement without addressing 
enlargement.  Should enhanced engagement be the first step on the 
path to eventual accession, or should it be an end in itself?  The 
SYG's paper fails to answer this question and calls for enhanced 
engagement with individual countries of strategic interest and as 
part of existing regional programs.  This led Italy and several 
other countries to observe that the paper was conceptually shallow, 
especially with respect to enhanced engagement. 
 
¶8.  (SBU) The SYG responded that he would carefully examine the 
issues raised, which he thought could be resolved by in-depth 
explanation and clarification, although he cautioned that certain 
problems (i.e., Russia) would remain.  The SYG earlier made the 
point that membership in other bodies (i.e., the EU) does not 
necessarily qualify for OECD membership, and automaticity should not 
be implied.  EU membership is important but does not mean every EU 
country can join the OECD.  He said that as he drafts the next 
version of the paper he will try to avoid acrimony but will fully 
lay out the issues. 
 
¶9.  (SBU) The SYG plans to provide a new draft in advance of the 
February 20 Council discussion of enlargement which will be attended 
by representatives from capitals.  There is also the possibility 
that Council may have another opportunity to review a revised text 
before February 20. 
 
Financing Questions 
------------------- 
 
¶10.  (SBU) Danish Ambassador Smidt, Chair of the Special Group on 
Financing, told the Council that there was emerging consensus on 
funding of start up fees and the "site project."  Regarding start 
up, members of the Special Group agreed that candidate members 
should pay the non-recurring costs of accession, based on a fee 
negotiated between the OECD and the candidate and approved by 
Council.  New members would not be charged for the improved "site" 
due to the fact the project will be completed by the time of 
accession and new members will be asked to help fund the 
Organization's historic pension liability (a liability that greatly 
exceeds the assets new members will assume).  Smidt continued that 
differences remained among current Members on funding recurring 
costs, where the Group was attempting to balance the concepts of 
capacity to pay with benefits countries obtain by being a Member of 
the OECD (cost and value of benefits).  He noted emerging consensus 
that part of the budget should be financed equally by all, with the 
size of a base fee or minimum contribution still to be determined. 
Smidt concluded that he would provide an oral report to the 
reinforced Council meeting set for February 20. 
¶11.  (SBU) SYG Gurria, while noting that the Council would benefit 
from his report, suggested that a written element would help in 
preparing for the February 20 meeting.  This was especially true for 
attendees coming from capitals, who would wish to know in advance 
how much progress has been made.  (COMMENT:  As a result of the 
January 29 meeting of the Special Group, Smidt is aware that his 
proposal - a base fee of 1.25 million Euros - does not command 
consensus, and he is reluctant to put it in writing.  At this stage, 
Mission believes that having a Chair's proposal on the table, 
without having a corresponding proposal (which the G-7 supports) for 
fully covering recurring costs, would prejudice the discussion.  The 
Special Group will meet twice prior to the February 20 Council 
meeting and explore if further agreement on principles can be found. 
 We believe it best that the question of financing be kept open, 
especially given the lack of consensus on which, if any, countries 
should be asked to begin accession negotiations.  END COMMENT.) 
 
REID