VZCZCXYZ0006
RR RUEHWEB

DE RUEHTL #0567/01 2411326
ZNR UUUUU ZZH
R 291326Z AUG 07
FM AMEMBASSY TALLINN
TO RUEHC/SECSTATE WASHDC 0130
INFO RUEHSS/OECD POSTS COLLECTIVE

UNCLAS TALLINN 000567 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/NB KATHARINE GARRY, EUR/ERA BRIAN GUSS, AND 
EEB/EPPD JONATHAN MUDGE 
 
REF: STATE 118192 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV SENV KDEMK OECD EN
 
SUBJECT: ESTONIA'S FULLFILMENT OF OECD ACCESSION CRITERIA 
 
 
¶1. (SBU) Summary: In post's judgment, Estonia fulfills the 
accession criteria for membership in the OECD.  Estonia is 
an active, prosperous and developed member of many 
international organizations, including NATO, the European 
Union and the WTO.  It demonstrates a broad respect for the 
values of current OECD member countries in the areas of 
democracy, human rights, religious freedom, a commitment to 
market economics, media freedom and a vibrant non- 
governmental sector.  Major international surveys of 
economic freedom, anti-corruption, and political 
development consistently rank Estonia in their upper tier 
of countries.  In recent years, Estonia has moved from aid 
recipient to donor nation; many neighboring countries look 
at Estonia as a model for successful economic and 
democratic transition.  End Summary. 
 
Pre-Accession Criteria: 
----------------------- 
 
¶2. (U) Estonia has been a Member State of the European 
Union since May 2004.  Within the EU, Estonia has promoted 
advancements in the areas of competitiveness, improved IT 
security and communications, climate change and energy, 
agricultural and financial reform, justice and home affairs 
and external relations.  Estonia is a strong advocate of 
the European Neighborhood Policy and provides technical 
assistance and training to Ukraine, Moldova and Georgia as 
well as Afghanistan and several countries in the Balkans 
and Caucasus.  In 2006, Estonia donated $15.29 million 
(0.84 of GDP) for development assistance.  The GOE's goal 
is to increase its assistance budget to 0.10% of GDP by 
¶2010.  Estonia also regularly contributes to and 
participates in international and multinational assistance 
projects such as the World Food Program, UNICEF, UNDP, 
UNHCR, Doha Development Agenda Global Trust Fund, and the 
EU's Development Assistance Program. 
 
¶3. (U) Estonia is a constructive member of the 
International Labor Organization (ILO), has ratified 33 ILO 
Conventions and used ILO standards to develop the legal 
framework for labor-related legislation in Estonia. 
Estonia has been a member of the World Trade Organization 
(WTO) since November 1999.  In August 1993, Estonia 
ratified the Stockholm convention establishing the World 
Intellectual Property Organization (WIPO), and in June 
2007, it ratified the WIPO Geneva convention on copyrights. 
Estonia has established a strong domestic legal framework 
for IP protection, and has not been on the USTR Special 301 
Watchlist since 1998.  The USG and GOE actively cooperate 
on IPR training and awareness programs in Estonia. 
 
Like-Mindedness: 
---------------- 
 
¶4. (U) Estonia has a vibrant and pluralistic democracy.  In 
the sixteen years since its re-independence from Soviet 
occupation, Estonia has earned high marks for creating 
strong democratic institutions and one of the world's most 
open economies.  Business development has boomed, 
encouraged by Estonia's stable political climate, 
consistent economic policies and fiscal discipline. 
Freedom House has given Estonia its highest ratings for its 
commitment to liberal democracy, civil liberties, and open 
economic markets.  The OSCE declared Estonia's 2002 
Parliamentary elections in accordance with international 
standards and has not deemed it necessary to observe any 
subsequent elections.  Estonia's media environment is 
equally open:  Reporters Without Borders Worldwide ranked 
Estonia sixth on their international Press Freedom Index in 
2006 -- far ahead of the United States. 
 
¶5. (U) Estonia's economic fundamentals are strong. 
According to the IMF, Estonia's "prudent macroeconomic 
policies and regional integration have resulted in the 
fastest convergence among new EU members and an impressive 
rise in living standards."  Successive governments have 
demonstrated a commitment to promoting economic growth and 
foreign investment.  Since 2001, the GOE has had budget 
surpluses of at least 1% (and as high as 6%) of GDP - thus 
earning a strong international reputation for fiscal 
responsibility.  Since 2000, real GDP growth has averaged 
seven percent or higher.  Of note, in the short- to medium- 
term, inflation, a tight labor market and a large capital 
account deficit are causing some concern.  Also, Estonia 
has the fastest growing HIV infection rate in Europe. 
While absolute numbers are small and the GOE has steadily 
 
increased resources dedicated to prevention, treatment and 
harm reduction, it is too early to predict the long term 
social and economic impact of the disease on Estonia. 
 
¶6. (U) Estonia is a leader in promoting transparency and 
efficiency in governance.  In 2000, Estonia implemented a 
highly effective paperless system of e-government.  Since 
then, the GOE has conducted only paperless weekly cabinet 
meetings.  Ministers review draft bills, make comments and 
suggestions and vote online.  Decisions are instantly made 
available for public review on the internet.  Additionally, 
in 2007, Estonia was the first country in the world to 
allow for e-voting in a national election. 
 
¶7. (U) Estonia also promotes human rights at home and 
abroad.  The State Department's Human Rights Report has 
consistently given Estonia high marks on protecting human 
rights and religious freedom.  Estonia does have a 
significant ethnic Russian minority and a large stateless 
population (currently about 115,000 people).  The GOE is in 
the process of developing the second phase of its 
integration program and has actively promoted 
naturalization as a means of reducing the number of 
stateless people in Estonia.  Since 1992, the number of 
stateless people declined from 32% of the population to 
8.5%.  More than 145,000 people naturalized during this 
period.  (Note:  While most naturalizations took place 
between 1992 and 2000, on average 5000 people have 
naturalized each year since 1998).   For the first time 
since re-independence, the number of naturalized citizens 
exceeds the number of stateless persons. 
 
¶8. (U) Open Markets: Since joining the EU in 2004, the 
Estonian government has sought to maintain liberal policies 
in order to attract export-generating investments.  All 
foreign investors are treated on an equal footing with 
local investors.  In 2007, the International Institute for 
Management Development ranked Estonia 22nd of 55 economies 
on its "World Competitiveness Scoreboard" (higher than 
Japan as well as 13 other EU member states, and the highest 
rating among the former Soviet Bloc countries). 
 
¶9. (U) Sustainable Development:  Estonian environmental 
practices are fully in accordance with EU standards. 
(Note:  Estonia's accession agreement gave Estonia until 
2015 to meet EU standards on carbon dioxide emissions.  End 
note.)  The GOE recognizes that maintaining an ecological 
balance is a central precondition for sustainability.  In 
September 2005, the Estonian Parliament approved the first- 
ever Estonian National Strategy on Sustainable 
Development:  Sustainable Estonia 21.  This strategy laid 
out the GOE's plan for integrating successful global 
competition with a sustainable development model.  The 
strategy seeks to take into consideration interaction 
between environmental and development factors such as the 
viability of Estonian cultural space, the growth of 
welfare, coherent society and ecological balance. 
 
¶10. (U) Control of Corruption: Estonia has in place the 
necessary laws, regulations, and penalties to combat 
corruption.  While incidences of corruption do occur, it is 
not considered a significant problem in Estonia and is not 
cited as an obstacle to foreign direct investment.  In June 
2004, Estonia became a full participant in the OECD Working 
Group on Bribery in International Business Transactions. 
In 2006, Estonia rose to 24th place among 163 countries in 
Transparency International's Corruption Perceptions Index 
(CPI). 
 
¶11. (U) Encouraging Economic Freedom: Estonia actively 
promotes economic freedom domestically and in developing 
and transitioning countries.  Estonia has provided 
technical assistance in fields ranging from WTO accession 
negotiations and reforming the national health care system 
to the implementation of information technology in state 
administration.  In 2006, the Cato Institute awarded former 
Prime Minister Mart Laar its Milton Friedman Prize for 
Advancing Liberty.  Laar has been an active advisor to the 
government of Georgia on market and tax reforms and 
democratic institution building.  The GOE has been lauded 
by President Bush for its flat income tax structure and 
zero tax on reinvested corporate profits.  In the Heritage 
Foundation and Wall Street Journal's 2007 Index of Economic 
Freedom, Estonia ranked 12th in the world.  A key area 
where Estonia needs to improve economic freedom, however, 
is labor market flexibility.  Currently, rigid employment 
 
contract laws and bureaucratic barriers to the importation 
of non-EU labor are exacerbating an already tight labor 
market, which has contributed to rising wage inflation in 
the economy. 
 
PHILLIPS