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Parliamentary Assembly Session: 4 to 8 October 2010

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Statement by

Angel GURRIA

Secretary General of the OECD

Mr. President, Members of Parliament, Ladies and Gentlemen:

Coming back to Strasbourg to address the Council of Europe Parliamentary Assembly every year is a great honour and pleasure. The Council of Europe is an important partner for the OECD. As elected representatives of the people in your countries, you are key stakeholders for our work. Therefore I appreciate your constructive and helpful monitoring of our work and our frank and open discussions.

To start I would like to thank you Mr President for the invitation. A particular thanks goes also to the Committee on Economic Affairs and Development, in particular its rapporteur, Mr Juan Moscoso, for the hard work in preparing the report on “The activities of the OECD in 2009-2010”.

The Council of Europe celebrated its 60th anniversary last year and we at the OECD will turn 50 next year. We both have the aim of promoting dialogue and international cooperation to improve policies in different fields in order to ensure better lives for our citizens. That is why our Imperative at the OECD continues to be “Better Policies for Better lives.” We try to meet this Imperative with our unique instruments of cross-country comparisons, peer review, best practices and standards-setting.

Let me start by presenting the major institutional changes at the OECD since your last year’s parliamentary assembly. I would then give you an update on steps being taken to overcome the worst financial, economic and employment crisis of our lifetime. I will address four key challenges: sustaining the recovery and restoring public finances, improving jobs perspectives and skills, exploring new sources of growth and restoring trust and confidence.

The OECD has become more inclusive in 2010

The OECD has changed since we met in 2009. Over the past year, the OECD has become more inclusive through the accession of three new member countries representing different regions of the world. We are pleased that we now have Chile, Israel, and Slovenia on “board”. Furthermore, Estonia is expected to ratify the OECD Convention in the next few weeks and become our 34th member. At the same time, the accession process with the Russian Federation is moving forward. This accession process is leading to a more open and inclusive OECD and it is part of a broader process of widening our global reach.

We also are strengthening our collaboration with emerging and developing economies. We have deepened relations with Brazil, China, India, Indonesia, and South Africa. Recent examples in the last 12 months include the very well received first Economic Survey of South Africa, published in July as well as the OECD Economic Surveys on Brazil and China, our Investment Review of India, the report on “Trends in South African Income Distribution and Poverty”, and the on-going work on investment policies in Indonesia.

International cooperation has become more evident than ever

This is proof that international cooperation is alive and well. In fact, it is more necessary than ever because of the financial crisis: cooperation, coordination and coherence, what I call the three “C”. This is needed to prevent the fourth “C” – another crisis.

The economic outlook points to low growth for quite some time. The perspective to recover the same level of output and employment as before the crisis will take years. Citizen’s perceptions on the future are bleak, and their tolerance to bad news is exhausted. We need to change this outlook and this negative psychology. We can only overcome this if we act together - policy makers in governments, parliaments with the support of International organisations like the OECD.

Let me take you in this context through the current global economic situation and the work of the OECD to help countries to respond to four broad challenges:

Sustaining the recovery and restoring public finances

Our latest interim assessment indicates that the pace of recovery may be slower than previously anticipated. Growth in the G7 countries, for example, is expected to be around 1½% on an annualised basis in the second half of 2010 compared with the previous estimate of around 2½%. Growth in the major emerging economies, by contrast remains robust. At the same time, the fiscal positions of most OECD countries have deteriorated significantly as a result of the crisis and need to be brought to a more sustainable path. If public debt is left to accumulate at its current pace, the cost of borrowing is likely to rise, crowding out private investment. And private business investment is exactly what we need right now. Private demand needs to replace policy stimulus as the source of recovery in order to be self-sustaining.

But if countries consolidate too soon, too fast or by too much, the fragile recovery could stall. Job creation, also a driver of a sustained expansion, would in turn be delayed. Thus getting the balance right is essential!

Consolidation measures should concentrate first on cutting government spending. When additional revenue is needed, emphasis should be placed on the least distortive taxes, such as consumption and property taxes, rather than taxes on labour and business income.

New Jobs and new skills

Looking at the social impact of the crisis, it is clear that unemployment remains too high and can’t be accepted as the “new normal”. In the OECD, unemployment has been at a post war high this year: 8.5% in July. Youth unemployment - above 40 per cent in some European countries – is a particular problem. There is a risk of a lost generation if measures are not taken.

Here again, governments face difficult policy choices. They need to strike the right balance between the imperative of fiscal consolidation, the need to support a job-rich recovery and specific labour market policies. We need targeted programs, active labour market policies for the most vulnerable - in particular for the youth.

Unemployment is the human face of the crisis that we have to address as a matter of urgency, in particular in the long-run and for the coming generation. The OECD is therefore developing a Skills Strategy in order to help governments to identify and assess essential skills for the 21st century economies, address the issue of “lifelong employability and lifelong learning” and improve the match of demand and supply of skills.

New Sources of innovative, green and gender-friendly growth

In these stormy fiscal times, our governments are also looking for solutions on how to expand their economies’ growth potential. Growth-friendly consolidation means that growth enhancing government programmes such as education, innovation and infrastructure should be preserved to the extent possible.

Innovation and “green growth” will be the key drivers of future growth. We have just published our Innovation Strategy with concrete policy recommendations on R&D spending, on the governance of the Innovation framework, on human capital development and the treatment of intellectual assets. Green Growth will remain a priority for the OECD with a new growth model focusing on green production and consumption patterns, green jobs and on overcoming barriers to the green economy. We will also continue our work on trade and investment, in particular the relationship between trade, growth and employment.

One important dimension of new sources of growth is the role of women in the economy. Enabling women to fully contribute to economic development will increase productivity and promote prosperity and stability. Wasting the potential of women is an option we cannot afford especially in the context of an ageing workforce. The OECD already includes gender issues in many areas of its work and we are now looking at ways to reduce the gender gap with a focus on education, employment and entrepreneurship.

Another important area of our work to improve policy making is the issue of measuring well-being. Given the need to promote sustainable and balanced growth, we will benefit from measurement methods that take into account the social and environmental dimensions of economic development. We will continue our work on Measuring the Well-Being and Progress of Societies, beyond GDP. The OECD is well placed to take a leading role in the implementation of this new measurement agenda and link it to policies, including by hosting the follow-up of the Stiglitz-Fitoussi-Sen Commission convened by President Sarkozy.

Restoring trust and confidence

And one should not forget the need to restore trust and confidence. The depth and breadth of the crisis has demonstrated the need to restore trust in both government and business. The OECD has been working on both corporate and public governance for decades, developing sound, reliable and multilaterally-agreed principles and standards. This is an essential engine for the global economy and its financial system.

In this context, we must ensure that the tax burden is fairly shared, and seen to be so. Here, thanks to the combination of the political impetus from the G20, and 12 years of careful and diligent work by the OECD, we have achieved important breakthroughs in combating tax evasion. This includes the exchange of information for tax purposes, where we have made more progress in the past two years than in the previous ten. An important part of this effort is the recently updated and amended Convention on Mutual Administrative Assistance in Tax Matters, developed jointly by the OECD and the Council of Europe. The updated Convention, signed by 15 countries, is now in line with the international standard on exchange of information for tax purposes and open to countries that are neither members of the OECD nor of the Council of Europe.

The OECD is also in the process of updating the OECD Guidelines for Multinational Enterprises to ensure their continued role as a leading international instrument for the promotion of responsible business conduct. For that update, we have invited the active participation of the major emerging economies. And I look forward to your contribution to this very important instrument.

Finally, we believe that fighting corruption needs a comprehensive approach. We are looking at an Organisation-wide effort aimed at a policy-oriented anti-corruption framework, based on the OECD Anti-Bribery Convention and a host of other instruments. In this regard, we welcome the continuous collaboration with the Council of Europe's Group of States against Corruption (GRECO).

Mr. President, Ladies and Gentlemen:

The OECD will use its 50th anniversary celebrations to take stock of its contribution to better policies for better lives in our member and partner countries. The Parliamentary Assembly of the Council of Europe has been a key partner from the very beginning and we look forward to marking this occasion with you, as well as continuing our fruitful cooperation. We count on you to implement many of the courageous and timely reforms that our world so urgently needs.

Thank you very much!