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UNCLAS SECTION 01 OF 04 PARIS 000140 
 
SENSITIVE 
 
SIPDIS 
 
ALSO FOR USAID 
 
SENT FROM USOECD 
 
12958:  N/A 
TAGS: EAID ECON EFIN ETRD OECD XA XE XF XL XM
SUBJECT: OECD COUNCIL AND ENHANCED ENGAGEMENT PARTNERS DISCUSS 
DEVELOPMENT 
 
REF: A) PARIS 61, B) SECSTATE 5422 
 
PARIS 00000140  001.2 OF 004 
 
 
¶1. (SBU) Summary: The Council of the Organization for Economic 
Cooperation and Development (OECD) met in an enlarged session with 
Enhanced Engagement and Accession Country countries to discuss the 
development dimension of OECD work on climate change, trade, 
taxation, and food security.  The discussion will feed into the 
eventual articulation of "OECD Development Goals" as requested by 
last year's Ministerial Council Meeting.  The session was also 
designed to signal to Enhanced Engagement Partners the interest of 
the OECD Council in hearing their views on OECD involvement in these 
areas.  Council members for the most part used the meeting to 
showcase their own aid efforts, but also voiced support for OECD 
work in food security, integrating climate change into development, 
and mobilization of domestic resources (such as taxation).  USOECD 
Ambassador Kornbluh urged the OECD to choose a limited number of 
issues, work horizontally, and invite countries to participate which 
have demonstrated a commitment to sound economic governance.  The 
two Enhanced Engagement partners which spoke brought different 
viewpoints:  the delegate of Brazil focused on his country's success 
in riding out the global financial crisis; the delegate of India 
highlighted the differences between "lifestyle emissions" of OECD 
countries and "survival emissions" of developing countries and his 
hope that the OECD would engage in more frank discussion of these 
divides.  The Secretariat is working to pull together a conclusion 
from these development meetings for the upcoming Ministerial Council 
Meeting in May.  End summary. 
 
OECD COUNCIL MEETS ON DEVELOPMENT WITH ENHANCED ENGAGEMENT PARTNERS 
 
--------------------------------------------- ------- 
¶2.  (U) on January 21, the OECD Council met in an enlarged session 
dedicated to development issues with Enhanced Engagement Partners 
and Accession countries invited to participate.  Partners Brazil, 
China, Indonesia and India attended (South Africa was absent.) 
Accession countries Estonia, Slovenia, Israel and Russia also 
attended.   Accession and Enhanced Engagement countries were 
represented at the level of Deputy Chief of Mission or below. 
 
¶3.  (U) Before opening up debate, the OECD Secretariat gave a brief 
presentations on "the Impact of the Crisis on Emerging and 
Developing Economies" and outlined areas where OECD work in climate 
change, food security, tax and domestic resource mobilization, and 
trade has implications for developing countries. 
 
EMERGING AND DEVELOPING ECONOMIES WEATHER THE CRISIS 
--------------------------------------------- ------- 
¶4. (U) The OECD presentation on the global economic crisis 
highlighted the extent to which the emerging economies have led the 
world out of the economic crisis.  Many of these countries were 
reaping the benefits of macro policies put in place years ago. 
Nonetheless, the economic crisis had dealt a blow to development 
commitments and enforced the need for cooperation in development 
architecture.  There were setbacks to achieving the Millennium 
Development Goals (MDGs).  Protectionist reactions to the crisis had 
not yet emerged, but this needed to be closely monitored.  Going 
forward, trade and investment were drivers of growth, but green 
growth and innovation provided new opportunities for developing and 
emerging economies.  Trade between developing countries was now 
greater than with OECD countries.  Developing countries needed to 
build and reinforce institutions and find new domestic resources, 
such as taxes. Corruption was a serious problem, particularly in 
connection with oil resources.  OECD Development Center Director 
Javier Santiso concluded that the economic crisis had acted as an 
accelerator of change.  It was also an opportunity for "humility" - 
to see that best practices were not only in developed countries.  He 
encouraged more south-south peer learning. 
BRAZIL EXPLAINS HOW 
------------------- 
¶5. (U) The delegate of Brazil (Minister Counselor Ricardo Guerra, 
head of the OECD Section within the Brazilian Embassy in Paris) 
noted that Brazil had been one of the last economies to be hit by 
economic crisis, and one of the first to recover.  Brazil's economy 
resumed growing at end of 2009, and consumer and business confidence 
was going up.  Brazil adopted a number of financial policies 
including increasing the social safety net and increasing minimum 
 
PARIS 00000140  002.2 OF 004 
 
 
wage.  In addition, Brazil used its financial resources to sell 
foreign currency and buy local currency, kept its interest rates 
low, cut taxes to stimulate economy, and revised its primary surplus 
target.   The fiscal impact has been a small increase in public 
debt.  Net public debt increased to 44% of GDP.  For Brazil the main 
lesson was that it needed counter-cyclical policies and reserves. 
He also credited "heavy handed prudential financial regulations." 
According to Guerra, developing countries needed to rely on their 
own resources to survive the crisis. 
OECD JOINT WORK ON CLIMATE CHANGE, FOOD SECURITY, TAXATION, AID FOR 
TRADE 
-------------------------------------------- 
¶6. (U) Climate Change - Environment acting Deputy Director Helen 
Mountford noted that in the future the main emitters of greenhouse 
gasses will be the emerging economies.  She summarized the 
conclusions of the Copenhagen COP 15 conference and highlighted 
areas where OECD could contribute, including providing policy advice 
on how to build up a global carbon market, proving information on 
efficient and effective policy mixes for emissions reduction and 
adaptation nationally and sub-nationally and tracking progress in 
implementing adaptation and mitigation actions (note:  OECD is 
already tracking bilateral finance flows to support mitigation 
actions through the Development Assistance Committee (DAC), and has 
recently developed a marker for adaptation.  End note). 
¶7. (U) Ms. Mountford noted that OECD was positioned to work on 
finance issues, including how to raise public and private finances 
(including innovative finance) and monitoring and reporting on 
finance flows.  OECD was set to continue work on guidelines and 
guidance on integrating adaptation into development cooperation and 
national development policies, and to work on MRVing targets, 
actions and finance to enhance transparency and progress, and on 
market mechanisms (CDM, sectoral approaches, cap-and-trade, etc). 
And finally, the OECD provided a forum for countries to discuss key 
issues outside formal negotiations and build common understanding. 
OECD worked with developing countries through the DAC-EPOC Task 
Teams, the Africa Partnership Forum, and the Roundtable on 
Sustainable Development. 
MEXICO ON COP16 
----------------- 
¶8.  The Mexican Ambassador reported that expectations were high for 
the upcoming COP16 meeting in Mexico.  Mexico had been disappointed 
at the Copenhagen outcome, and hoped that the COP 15 commitments 
would be made binding at the COP 16 meeting.  Mexico supported the 
concept of differentiated responsibility, but explained that this 
should not be understood to be a "license to do nothing."  Climate 
change was multi-disciplinary area and impacted areas ranging from 
development assistance to trade to Intellectual Property Rights 
(IPR).  The OECD's advantage lay in its ability to muster 
multi-disciplinary approaches to the issue. 
 
 
¶9. (U) Food Security - Development Cooperation Directorate Director 
Richard Carey noted that the recent food crisis had been mitigated, 
but had not disappeared.  India was in fact facing a poor monsoon 
season.  Carey stressed that food security was inextricably linked 
to the credibility and efficiency of the international trading 
system.  He noted that the DAC had been tasked to track food 
security commitments.  DAC was also (with Gates Foundation funding), 
working on African policy improvement. 
¶10. (U) Taxation - The Director of the OECD Center for Tax Policy, 
Mr. Jeffrey Owens explained that tax systems can provide a 
sustainable revenue base, an antidote to aid dependency, a stable 
and predictable pro-growth environment, and play an important role 
in state building and recovery from conflict.  By making government 
more accountable, a good tax system supported democracy.  He noted 
that he was spending one third of his Directorate funds on non-OECD 
members.  They had trained more than 15,000 tax official in China, 
and had worked with South Africa (where government revenues have 
increased by 30% due to better tax collection).  However, donor 
countries spent less than 1 percent of aid funding on taxation 
support.  He encouraged donors to match resources to rhetoric.  He 
also noted that the Center was working with the DAC to determine how 
they together could respond to a follow-up request from a group of 
African countries that want to tap into the best practices and 
lessons learned by OECD-member countries on tax and domestic 
resource mobilization approaches. 
 
PARIS 00000140  003.2 OF 004 
 
 
¶11. (U) Aid for Trade - The Director of the Trade and Agriculture 
Directorate, Ken Ash said trade plays an important part in a wider 
strategy to improve growth, although open markets alone are not 
enough to ensure growth and development.  He emphasized that 
complementary policies are also needed to provide a stable 
macroeconomic environment, effective systems of governance, improved 
human capital and physical infrastructure, etc.  He noted that less 
developed countries face specific constraints, such as weak 
institutional capacity and limited or costly access to credit.  Aid 
for Trade, a joint WTO-OECD initiative, is even more important in 
the current context as developing countries have been hit hard by 
the economic crisis and subsequent trade collapse, and the 
tightening of trade finance.  The OECD can complement the Aid for 
Trade monitoring with evaluating the impact of specific measures, 
identifying binding constraints to trade expansion, maximizing the 
impact of trade on growth, and developing good practice guidelines 
for complementary policies. 
OECD MEMBERS WELCOME WORK ON SUSTAINABLE DEVELOPMENT, FOOD SECURITY 
AND MOBILIZING DOMESTIC RESOURCES 
--------------------------------------------- ------ 
¶12. (U) Interventions from Mexico, France, Greece, Germany, the 
Netherlands and Norway highlighted those countries intentions to 
prioritize the Copenhagen "Fast Start" and praised OECD's work on 
monitoring adaptation and mitigation and integrating climate change 
issues into development.  Delegates also welcomed OECD work on food 
security and mobilizing domestic resources.  The UK delegate called 
the OECD's emerging work on tax and development with the DAC a good 
example of a successful horizontal approach between directorates. 
He stated that members should identify Part I (assessed) resources 
for the next biennium to support such activities.  Korea noted that 
development would be one of its priorities for the upcoming G-20 
meeting in Seoul. 
¶13. (U) Several countries spoke of the important work being done by 
the OECD's Development Center and lamented that a number of major 
OECD countries (e.g., U.S., Japan, Canada, and Australia) were not 
members.  Switzerland, in comments that were echoed by the 
Netherlands and Korea, issued a call for all OECD embers to join for 
reasons of both resources and visibility.  Enhanced Engagement 
country Brazil said that these major OECD countries could play a 
fundamental role in the Development Center, and urged them to 
re-think their position. 
¶14. (U) USOECD Ambassador Kornbluh welcomed the OECD's increased 
focus on development issues.  She pointed out that the U.S. was 
upgrading development to be a central pillar of its foreign policy, 
along with defense and diplomacy.  US development principles include 
shared responsibility between donors and recipients, innovation that 
can transform lives and speed development, gender (investment in 
women and girls' health, education, etc.) and a whole-of-government 
approach.  The OECD can bring together best practices and donor 
coordination in support of development, but must be selective due to 
human and financial resource constraints and concentrate on areas 
where there is congruence between OECD core competence, committee 
expertise, and member priorities.  Future projects should be guided 
by clear demands from developing countries willing to share 
development responsibility and having sound economic policies and 
good governance. 
INDIA ARGUES FOR FRANK DIALOGUE 
--------------------------------- 
¶15. (U) The Indian delegate gave a spirited presentation on why 
India was ambivalent towards the OECD.  Saying he was speaking 
personally and without instructions, he said that the OECD should be 
less timid and engage in more honest dialogue.  For example, on the 
issue of border tax adjustments, India thinks it could be a 
potential disaster, and yet it is talked about as if it is a done 
deal without any discussion of its negative aspects.  Or on climate 
change, should there not be a discussion on the difference between 
lifestyle emissions (low gas mileage cars) and survival emissions? 
Or on IPR, shouldn't there be a frank discussion on the impact of 
IPR protection on the availability of technologies for developing 
countries?  He said that he recognized that the OECD is doing some 
good things, citing as examples taxes and steel.  And he suggested 
that the OECD could in the future focus on such areas as innovation, 
education, infrastructure, and technology.  But he also hoped that 
OECD could capture the spirit of frank dialogue with the developing 
countries. 
 
 
PARIS 00000140  004.2 OF 004 
 
 
Next Steps 
---------- 
 
¶16. (U) The OECD Secretariat is working to synthesize the results of 
the January 15 (ref A) and January 21 meeting and is expected to 
call an additional meeting of the Development Goals Working Group. 
As instructed by the 2009 Ministerial Council Meeting (MCM), a 
report will be prepared for the 2010 MCM on OECD Development Goals. 
Member input will be important to shape this outcome, and determine 
how far members wish to see the OECD advance in this area.  Outcomes 
could range from an instruction from Council for Committees to 
jointly advance work on certain areas (such as climate change, food 
security or tax issues) to specific project proposals to be funded 
from the 2011-2012 Program of Work of Budget (and/or through 
voluntary contributions).  Kornbluh