OECD and Asia II

.Panorama

.Resources

.Search

.Newsletter

OECD and Asia II

Wednesday, 30 March 2011 05:01

OECD and Asia: Introduction

When the Organisation for Economic Co-operation and Development (OECD) was created half a century ago in 1961, its members including Japan (which in fact became a member in 1964) accounted for almost 60% of global GDP(1). They were mostly either advanced economies, or economies rapidly recovering from the war and economic depression that had characterized the first half of the 20th century.

Much of the rest of the world could be classified as either communist countries, or developing countries whose economic policies shared similarities with the communist world in terms of inward-looking development strategies, with a strong involvement of the state at the expense of market mechanisms. While some of these economies enjoyed periods of strong growth, overall their economic performance was relatively poor. As Western Europe enjoyed a long and successful period of economic catch-up, the OECD group remained on top of the world economy for many years.

Major international developments occurred from the late 1980s. The Cold War came to an end, and many former communist countries democratized and became increasingly successful market economies. In Latin America, hyperinflation, debt crisis and military dictatorships were replaced by economic stabilization, open market policies and democracy in many countries. But the OECD countries' global economic predominance was only really challenged by the rise of East Asia through its export-oriented growth strategies.

The OECD responded to all these developments by inviting countries to join the Organisation and participate in outreach activities. But what is striking in this opening of the OECD membership is the lack of visible presence of Asia. The OECD's membership has grown by 10 countries (to 34) over the past 17 years, but only one of these new members (Korea) comes from Asia.

Against this background, this paper will explore three main questions: why is Asia so little present in the OECD membership; does this matter; and what if anything should be done to address this problem or situation.

There are several possible reasons why Asia is so little present in the OECD membership despite its stunning economic development, and why certain countries like Mexico and Chile in Latin America, six countries from Central Europe, and Israel have become members. Some Asian countries do not fully abide by the OECD values of democracy and market economy. There has never been a great lobbying campaign on their behalf by existing member countries, the majority of which are European. By contrast, the former communist countries of central Europe had western European neighbors (and also the United States) pushing their case, and Mexico had the US insisting it become a member. To be sure, Korea’s membership was supported by several countries like Japan and Australia, but there was no active lobbying campaign on behalf of Asia on the same scale as for the other aforementioned countries. Perhaps Asian countries, which are generally attached to their developing country status, were deterred by the North Atlantic character of the OECD. The OECD Secretariat itself, geographically and culturally far from Asia, and dominated by European nationals, may also have been less effective in selling the Organisation.

Does it matter ? On the basis of how the Organisation perceives and presents itself, the answer must be "yes, it does matter"! The OECD leadership sometimes refers to the Organisation as “hub of globalization”(2). This is patently not the case when the big dynamic economies of Asia -- China, India and Indonesia -- which are today's main motors of globalization, are not members of the Organisation, and there is no immediate prospect of them becoming members.

Overall, OECD has only two member countries from Asia, being Japan and Korea. By contrast, the World Trade Organisation’s list of the world leading merchandise exporters(3) includes 10 Asian economies in its top 34 exporters, namely, China, Japan, Korea, Hong Kong, Singapore, Taiwan, Malaysia, Thailand, India and Indonesia. While some of Asia's big dynamic economies like China, India and Indonesia still have relatively low levels of GDP per capita, this is not true for economies like Hong Kong, Macao, Singapore and Taiwan, which have levels of economic development around that of the most advanced OECD member countries.

The OECD’s leadership is also only too vividly aware of the tension arising from the fact that a number of G20 members are not members of the OECD. This can limit the OECD’s capacity to participate in and contribute to the activities of this Group, whose leaders have “designated the G-20 to be the premier forum for our international economic cooperation”(4). In particular, some non-OECD G20 members like China have reportedly resisted the inclusion of OECD and some of its important work in the G20 process because they were not OECD members.

This paper will argue that the OECD is an organization caught between economics and politics. Its functional activities are inherently economic, while decisions regarding membership are mainly political. This greatly hampers its capacity to fulfill its basic functions of addressing “the economic, social and environmental challenges of globalization, as well as exploit its opportunities”(5).

This paper argues that for the OECD to be more effective and legitimate player in global governance, it needs to make a major and immediate effort to recruit major Asian countries as members, even if it means adopting a more flexible approach to membership criteria and adapting the organization. While Asia’s leading economies would have much to gain from joining the OECD and accepting and committing to the Organisation’s policy standards, the OECD has to recognize that the global financial crisis has brought the “Western brand” (which the OECD represents) into serious disrepute. This underlines the argument for greater flexibility with respect to membership criteria.

As major beneficiaries of globalization, Asia’s leading economies arguably have a responsibility to adopt more of the OECD’s values-based culture in terms of good governance and transparency. Just as importantly Asia can contribute to this organizational culture which has always evolved and needs to evolve further. This would ultimately be beneficial to them and the global economy, and they would thereby become more responsible stakeholders in the global system. This positive assessment of the benefits of OECD membership is based on my work experience of over 20 years at the OECD.

In making this argument, this paper addresses the following issues: Asia and the evolving logic of OECD membership; Non-member partnerships with Asia; Why Asia matters to the OECD; Adapting the OECD to Asian-led globalization; Asia in the OECD; and some Concluding Comments.

Notes:

1. Maddison, Angus. Historical Statistics for the World Economy:1 to 2003 AD. Accessed on 6 August 2010.

http://www.ggdc.net/maddison/Historical_Statistics/horizontal-file_03-2007.xls

2. Gurria, A. (2007), ‘Making the World Economy Work Better’, OECD Observer No. 262, July 2007.

http://www.oecdobserver.org/news/fullstory.php/aid/2294/Making_the_world_economy_work_better.html

3. WTO, International Trade Statistics 2009.

www.wto.org

4. G20 Leaders’ Statement, the Pittsburgh Summit, September 24-25, 2009.

http://www.g20.utoronto.ca/2009/2009communique0925.html

5. OECD, “The OECD’s Global Relations Programme 2009-10”

www.oecd.org

Complete Series of Articles