Improving global governance in a changing world – A view from the OECD

 

Remarks by Angel Gurría, OECD Secretary-General, opening of the Seminar “Beyond the crisis: the future of the multilateral system”

4 October, Madrid, Spain

Good morning, ladies and gentlemen.
It is a great pleasure to be with you today and give this opening address at a Symposium which will discuss one of the world’s most pressing challenges: the future of the multilateral system and the need to improve global governance. I would like to thank the Fundación Ramon Areces for hosting this international seminar, co-organised with the OECD Development Centre

Every generation assesses the future of the international system. It happened after the two world wars, during the cold war, following the fall of the Berlin Wall and, of course, at the turn of the Century. But let me tell you that today the need to re-assess the existing architecture of international co-operation is more imperative than ever. This architecture, “the world as we know it”, was severely tested by the financial crisis, and the world will never be the same again.

Three weeks ago, in a Financial Times article, Gideon Rachman argued that 9/15 changed more than 9/11 did. In many ways, he was right. The collapse of Lehman Brothers, itself only the tip of the iceberg of the worst financial crisis in our lifetime, was a wake-up call. But the structural changes that have occurred in the global economy over the past twenty years are also clear signs that we should rethink the architecture of international co-operation.


Shifting Wealth as a wake-up call

The first working session of this symposium will examine the gradual shift in wealth we are witnessing from the developed to the developing world, particularly to emerging economies.

Not only did China become the world’s largest exporter this year, but it has also surpassed Japan, to become the world’s second largest economy. By the first quarter of 2010, developing countries held approximately two thirds of global foreign currency reserves, up from only a third a decade earlier. These are just two illustrations of an on-going structural transformation where the world’s economic centre of gravity is rapidly changing. By 2030, we estimate that non-OECD countries will account for nearly 60% of world GDP.

In many parts of the developing world, this ‘Shifting Wealth’ phenomenon has brought substantial improvements in growth and poverty reduction. The number of people in the world living on less than a dollar-a-day has fallen by more than a quarter – approximately half a billion – since 1990. About 90% of these people were in China.

But the challenges associated to this rapid change in global economics are also significant: how can we ensure global financial stability? How can we deal with climate change? How can we manage natural resources in a sustainable way, protecting everyone’s right to a decent life?


Implications of Shifting Wealth for key areas of multilateral collaboration

The sessions taking place this afternoon and tomorrow will examine the governance implications of two important challenges posed by the ‘Shifting Wealth’ phenomenon.

Though trade and investment are more important than ever, we are witnessing little progress in further multilateral trade liberalisation and the creation of a comprehensive international framework with respect to international investment.

OECD simulations show that if southern countries reduce tariffs on southern trade to the levels applied between northern countries, they could secure a welfare gain of up to USD 59 billion. Yet, lack of progress on agriculture and other sensitive areas for developing countries have prevented the conclusion of the Doha Round. And the spaghetti bowl of bilateral trade agreements is no substitute for a truly comprehensive multilateral approach.

At the same time, we need a coherent set of international rules overseeing investment promotion and protection to unleash its extraordinary potential to promote development and well-being. A gap remains between institutional structures and current economic realities.

Tackling climate change is another important aspect that will be examined by participants in this symposium, and one that also requires better co-ordinated action by all major emitters, including emerging economies.

The world is looking towards industrialised countries to take ambitious action to cut emissions. Yet, OECD analysis suggests that even the most ambitious targets declared by industrialised countries in the Copenhagen Accord will only reduce emissions by at most 18% in 2020 compared with 1990 levels, falling short of the 25-40% reduction scientists say is needed to stay within the 2°C limit.

This is an endeavour where our countries need to work hand in hand and where the progress provided by the United Nations Framework Convention on Climate Change needs to go an extra mile in terms of joint action. Our research shows that OECD countries could raise revenues of as much as 2.5% of GDP by 2020 if they used carbon taxes or auctioned permits to achieve a 20% reduction in emissions. Part of these revenues could help finance climate change action in developing countries.

But of course, market-based instruments can only be successful if they are multilaterally co-ordinated and implemented.


International Cooperation and ways to improve global governance: the G20

Earlier on, I referred to the importance of the financial crisis and how the collapse of Lehman Brothers was a defining moment for international co-operation. Sometimes you need to reach the limit of a critical situation to take decisive action, and that is precisely what the world economy started doing two years ago to respond to the worst economic and social crisis since World War II.

The emergence of the G20 as the premier economic forum for economic discussions and action is probably the greatest overhaul in global governance since 1945. The fact that countries like China and India are sitting on an equal footing at the same table as G8 Members, when just a couple of years ago they were only invited to the sidelines of G8 Summits, illustrates that a new architecture for global governance is emerging. The Pittsburgh Summit certified this new reality.

The G-20 facilitated a quick response to the immediate, short-term challenges posed by the financial crisis. But it is also gradually providing a forum to promote a multilateral approach to structural issues, ranging from taxation and combating corruption, to the promotion of trade and investment.

Through the Framework for Sustained and Balanced Growth, the G20 Summits of Pittsburgh and Toronto paved the way to build a stronger, more balanced and sustainable growth process. This is potentially one of the most important contributions of the G20 to the world, and hopefully the forthcoming Seoul Summit will produce an action plan on this front.


What role for the OECD?

How can an Organisation like the OECD contribute to fostering global governance and promote multilateral co-operation in a rapid changing world? Here, I must cite former Chilean President Michelle Bachelet, who once described the OECD not as “the club of rich countries”, as many people wrongly characterise us, but as a “club of best practices”. Member countries come to the OECD to learn from each other, to improve policy-making and to develop international standards and rules to address global challenges.

Since its inception, G20 leaders have called on the OECD for our contributions on a wide range of issues. These include substantive analytical work and policy advice on fossil fuel subsidies, on employment and social policies, on investment and trade, on bribery and corruption, on taxation and on the aforementioned Framework. Thanks to our decades of expertise on development issues we are also actively contributing in the creation of the new G20 Working Group on Development, under the Korean presidency.

This engagement reflects the fact that the OECD is well-equipped to provide a platform for enhanced cooperation on emerging issues. Building on our expertise in basically all aspects of public policy, the OECD remains at the forefront of policy innovation.

Yet, while the scope of the OECD’s work is vast and unique, we also need to be global so as to maximise our contribution and effectiveness and to remain relevant. We recognise that the OECD must become more inclusive and our Policy dialogue with emerging and developing countries should become a genuine two-way street.

Progress is being made. This year, Chile, Estonia, Israel and Slovenia became members of the OECD and accession talks with Russia are advancing. We are designing innovative arrangements to engage with non-member states, particularly through our enhanced engagement programme with Brazil, China, India, Indonesia and South Africa. Some 100 non-member countries participate regularly as equals in the work of our committees, expert meetings and forums. We also work closely with non-governmental stakeholders, like business, trade unions, foundations and non-for-profit organisations.

One aspect where our contribution to improve multilateralism can be particularly relevant is in terms of improving the co-ordination between international organisations. The crisis has exposed the limits of the “one organisation per issue area” approach to global governance that prevailed over the last decade. Even though all international organisations should coordinate and avoid duplication or overlaps, it is very useful to take a look at the same problems from different angles. This is good news for an Organisation like OECD, which is known for its ability to undertake genuine cross-disciplinary work.

Yet, we must avoid duplication. We do not need a new institution and a new bureaucracy. International organisations should come together in a full-fledged network that would identify synergies and scope for improved coordination. For that reason, I proposed the creation of an “Observatory” (or “Network”) for Policy Coherence, bringing together the international organisations involved in the G20 (IMF, World Bank, OECD, FSB, ILO and WTO), thus making sure that leaders will get the best possible advice on a selected number of policy issues. 


Conclusion

Ladies and gentlemen,
As we face pressing new global challenges, it is imperative that we, as part of the international community, pursue a frank and open dialogue. The multilateral system of the future needs to be more inclusive. It should also reach out more effectively to non state actors: notably civil society and the private sector.

The G20 has a crucial role to play, and how this evolving body tackles the international issues I have touched on here, may in many ways set the tone for future multilateral cooperation. The OECD stands ready to put its expertise and knowledge at the service of better global governance.

Events such as this Symposium are important inputs to the process, bringing together a broad range of stakeholders to discuss issues at the heart of international cooperation. I wish you a very successful two days of discussion, and look forward to your conclusions and recommendations.

 

 

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Visit of the OECD Secretary-General to Spain (Madrid, 4-5 October 2010)

 

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