The OECD’s annual meeting of the Council at Ministerial level took place in Paris on 13-14 May 2004. Participants discussed a range of issues relating to the economy and trade. Their discussions focussed on the economic implications of population ageing and prospects for international trade negotiations. In a joint session with health ministers, who held a parallel ministerial meeting, they also discussed the challenges of ensuring the financial sustainability of health systems. The Ministerial meetings were chaired by Mexico. The meetings built on discussions at OECD Forum 2004 which took place on 12-13 May.

The discussions at both meetings will assist governments as they grapple with their domestic economic and social agendas as well as with issues in the world economy. Economic recovery is now broadening. Impressive recoveries are under way in the US, Japan and a number of other countries, but economic growth in some of the largest euro area economies remains hesitant.

Theme 1: Strengthening growth in an era of demographic change

Most OECD countries are, or soon will be, strongly affected by population ageing. If current retirement patterns continue, ageing will weaken growth as the labour forces increases more slowly and, in most countries, eventually decline. Furthermore, financial transfers from those in work to the retired population will increase. In countries with public sector pay-as-you-go pension schemes, this could put pressure to increase taxes. If this were to occur, a spiral could develop whereby higher taxes would tend to reduce employment levels, hours worked and, hence, growth. This spiral could be exacerbated by rising expenditures on public health and long-term care and the taxes needed to support them.

Ministers will discuss how best to respond to such a prospect. Addressing the challenges posed by demographic change requires strong political leadership to undertake bold reforms in a wide range of areas. There is a need to design and implement labour market and social policies that preserve the long-run sustainability of public finances and, in particular, ensure the financial viability of pension schemes. The objective is to enable citizens to benefit fully from longer and healthier lives, by encouraging and enabling people to work until later in their lives. People staying in work contribute to social protection programmes, and their activity will help to promote economic growth. Finding the right policy responses to the challenges will enable populations to benefit fully from the major achievement of people living long and healthier lives.

Joint session with Health and Finance/Economy Ministers: Ensuring the financial sustainability of health systems

OECD countries spend considerable amounts on health care:  the average across OECD countries is now almost 9% of GDP, and above 11% in several of the large economies. After a pause in the late 1990s, the proportion of GDP devoted to health is now rising again in many countries.  Advances in the capability of medicine to treat and prevent adverse health conditions are a major factor driving health cost growth.  Population ageing is also expected to play an important role in driving future growth in health spending.  In view of the significant and often predominant role of the public purse in financing health care, the financial sustainability of health systems looms large on the political agenda. OECD countries have experimented with a wide range of measures to offset cost pressures in the health sector, but none offers a panacea.

Theme 2: The outlook for international trade negotiations

International trade and investment is a major source of prosperity for all nations. At their meeting, ministers from both OECD countries and a number of developing counties will endeavour to inject momentum into the Doha Development Agenda (DDA). The development dimension is central to the DDA, and the collective engagement of all WTO members is required if progress is to be achieved in 2004. Representatives from a number of non-OECD economies -- Argentina, Bangladesh, Botswana, Brazil, Chile, China, Guyana, Hong Kong China, India, Indonesia, Kenya, Russia, Singapore and South Africa -- have been invited to participate in the session on trade on the morning of May 14.

One of the key topics of discussion will be agriculture. Progress on agriculture could help to generate parallel progress on other core issues of the Doha Development Agenda. Underpinning efforts to move forward in current trade negotiations is the realisation that robust market opening and strong rules within the multilateral trading system are essential conditions for reaping the benefits of globalisation.  

Additional Issues

The governments of the OECD have recently approved a revised version of the OECD’s Principles of Corporate Governance adding new recommendations for good practice in corporate behaviour with a view to rebuilding and maintaining public trust in companies and stock markets. This is widely recognised as a major achievement for the Organisation, and will likely be welcomed by the Ministerial. Ministers will also receive reports on recent OECD reform measures and on the OECD’s work on sustainable development.

Don't miss the reports and relevant information posted under Background Reading.