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Cablegate: Oecd: Council Discusses Budget, May Ministerial As Well As

VZCZCXYZ0000
OO RUEHWEB

DE RUEHFR #7864/01 3541503
ZNR UUUUU ZZH
O 201503Z DEC 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3888
INFO RUEHSS/OECD POSTS COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1379
RUEHBR/AMEMBASSY BRASILIA PRIORITY 1739
RUEHSA/AMEMBASSY PRETORIA PRIORITY 1233
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 0421
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 0583

UNCLAS PARIS 007864

SIPDIS

SENSITIVE -- FROM USOECD
SIPDIS
STATE FOR EUR/ERA, EB, IO/S AND E, NSC FOR MCCORMICK

E.O. 12958: N/A
TAGS: ECON OECD EFIN ETRD EAID
SUBJECT: OECD: COUNCIL DISCUSSES BUDGET, MAY MINISTERIAL AS WELL AS
ENLARGEMENT AND ENHANCED ENGAGEMENT, WHERE SYG GURRIA PROPOSES A WAY
AHEAD

REF: (A) PARIS 7799

SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION

1. (SBU) SUMMARY: The OECD Council met all day on December 14 for
its last regularly scheduled session in 2006. PermReps considered
the program of work and budget (PWB) for 2007-2008 (see reftel),
enlargement and enhanced engagement as well as planning for the May
2007 Meeting of the Council at Ministerial Level (MCM). The Council
also heard a report from Ambassador Morella, Chair of the Committee
on Public Affairs and Communication (CPAC) and approved the latest
OECD publishing policy.

2. (SBU) The discussion of enlargement and enhanced engagement
centered on an informal paper (text e-mailed to EUR/ERA) laying out
the Secretary General (SYG)'s personal thoughts on next steps.
Reactions to the paper, which calls for including all BRICS in the
category of potential accession, basically split along EU and non-EU
lines. The former objected to having EU candidates considered "in
the context of a balanced enlargement process" and to the suggestion
that the representation of the EU in the OECD Council should merit
further discussion. As we move into the holidays, capitals will be
asked to closely examine the key issues for enlargement and enhanced
engagement in order to prepare for Council's next two scheduled
discussions, January 11 and the first week of February. END
SUMMARY.

Enlargement
-----------

3. (SBU) SYG Gurria circulated an informal paper with his personal
thoughts on the way ahead for OECD enlargement and enhanced
engagement (copy of the text has been forwarded to EUR/ERA).
PermReps expressed general approval for the SYG's taking the
initiative but criticized some specific elements. The SYG's paper
focuses heavily on the BRICS (Brazil, Russia, India, China and South
Africa) and the need to engage with these emerging economies if the
OECD is to remain relevant in today's international economy. In
this respect, the SYG suggests a near term accession package which
would include at least several of the BRICS, starting with Russia
and Brazil. Noting there may some "problems" with China and India,
he still considers them as potential members in the not too distant
future. He also wants to expand relations with South Africa with
the possibility of beginning accession negotiations in the near
term. His paper is strong on Chile for near team accession, while
it posits that Israel "could" be included in this category.

4. (SBU) PermRep responses to the SYG's emphasis on the BRICS
reflected a real divide between EU and non-EU Members. The Belgian
Ambassador called for caution, noting that including China, Russia
and India would change the nature of the Organization, while the
Mexican Deputy praised the "real" regional balance contained in the
paper. Australia, while agreeing that bringing in the BRICS would
change the OECD's culture, noted that there were positive elements
to change. She also questioned the designation of Southeast Asian
candidacies as only medium term. The Turkish rep supported Russian
and Brazilian accession, while Austria noted that Russia (and
Israel) had moved some distance away from OECD standards in the past
five years. Korea, New Zealand and Mexico each spoke in favor of
focusing first on the BRICS, and even France (bucking the general EU
trend) expressed support for Russia, South Africa, Chile and Israel
and consideration of medium term membership for China and India.

5. (SBU) A number of EU ambassadors criticized the paper for its
treatment of the EU member candidates and the suggestion that the
relationship between the OECD and the EU might deserve examination
as part of the enlargement process. Several EU members took issue
with the SYG's suggestion that EU member countries might be examined
as a group, while being individually considered for accession in the
context of a balanced enlargement process, which could involve a
sequencing of accessions. The Greek Ambassador, one of the more
outspoken critics, questioned mentioning any EU member state by name
(the SYG had cited Slovenia as the EU state which might begin the
accession process). Most EU reps who spoke, including the European
Commission, demanded that the sentence: "A related issue that would
merit discussion is the representation of the EU in the Council of
the OECD" be stricken. For them this was a sensitive issue which
the EU would first have to consider internally.

6. (SBU) Ambassador Morella agreed with the SYG that enlargement and
enhanced engagement were key to enhancing the OECD's relevance. She
said this objective, as laid out in the paper, includes helping
countries consolidate the transition to a market economy. She urged


the EU members to work out the role they see for the EU in the OECD
to help the Council move forward. The Australian and Swiss
ambassadors supported Ambassador Morella, with the Australian
stressing that the EU should come up with a solution. She noted
that while the EU questioned the candidacy of the countries of
Southeast Asia, none of the EU 6 plus 2 met the Noburu criterion of
significant player.

7. (SBU) SYG Gurria reiterated that the paper was the result of his
own thinking based on the Council's previous discussions. He noted
that "we are in the beginning of the next stage of the process." In
response to an Italian comment that the Council was working on two
levels - one, the vision of the OECD for the next 15 to 25 years and
two, the accession process for individual countries - the SYG agreed
that the process was like a negotiating a contract, with a certain
down payment (basic accord with the Noburu criteria) and a payment
schedule (where the new members would have to reach designated
milestones). He hoped that in May at the MCM, Ministers could give
a signal to those countries that would be ready to begin accession
negotiations; "then the real process of bringing them on board will
begin."

8. (SBU) These remarks led several ambassadors to raise more
philosophical questions. Canadian Ambassador Bourgon called on the
Council to avoid insisting on prohibitions; e.g., the EU should not
be asked to give up on the 6 plus 2; however, one should ask if the
OECD is the place for global economic engines (i.e., the U.S., the
EU, China, India and Russia) to come together. Here, each and every
member should bring something to the table. In answering her own
question - should being European be reason for membership? - she
said, "I do not think so." The Ambassador of New Zealand reminded
colleagues that her country was also small and like-minded, but
there should be no automaticity to EU countries becoming members.
She too appealed to the EU to help find solutions to pragmatic
questions of timing, absorptive capacity, etc., and not just demand
that the 6 plus 2 be accorded accession.

9. (SBU) The SYG concluded the discussion by stressing that
decisions on membership in the end will be political in nature.
Here, it will be important to hear from capitals, while at the same
time capitals will want advice from the Council. He picked up on
the idea of the Polish Ambassador that Council schedule a
(reinforced) session in February with representatives from capitals
to review outstanding issues. The Dutch Ambassador also called for
finding a place (informal discussions) where PermReps can express
their views honestly, a space where they can say "naughty
constructive things."

Enhanced Engagement
-------------------

10. (SBU) SYG Gurria noted that his paper also addresses the
question of enhanced engagement, where he has suggested underpinning
an expanded relationship with non-members within the context of
regional programs. He then asked Canadian Ambassador Bourgon,
outgoing Chair of the External Relations Committee (ERC), to report
on the Committee's work on enhanced engagement. Ambassador Bourgon
directed Council's attention to the "food for thought" ERC paper,
"Enhanced Engagement" (ERC(2006)15). The paper, she said, lays out
possible elements of a "typical" program of enhanced engagement.
She continued that since that the ERC has completed its conceptual
work, the Council needs to provide further guidance. The issue now
is to determine which countries are to be offered enhanced
engagement, since each partnership will be unique.

11. (SBU) Ambassador Bourgon and members of the Secretariat also
reported on a separate paper prepared by the Secretariat on regional
approaches (C(2006)168) - basically a stocktaking of what the OECD
was already doing in this area. Of note was the fact that almost 50
percent of the funding for global relations work in the OECD is tied
to regional approaches. This finding should be of major import for
future outreach (including enhanced engagement).

Financing Enlargement and Enhanced Engagement
---------------------------------------------

12. (SBU) The SYG's paper also addresses financing enlargement (but
not enhanced engagement). The SYG offered that enlargement may
require revising the current scale of contributions, and this
adjustment should be decided prior to moving into accession
negotiations, and then called on Ambassador Smidt of Denmark, Chair
of the Special Group on Financing Enlargement and Enhanced
Engagement. Ambassador Smidt reported that the Group was moving in


the direction of recommending the concept of a base fee to be paid
by all members with the size and conditions for using that fee still
to be determined. He also noted that new members will need to pay
for accession negotiations and the start up of membership, but
charges will be tailored for each individual candidate. Regarding
enhanced engagement, Ambassador Smidt said that costs will depend on
what type of engagement individual candidates choose and that it
will be difficult to determine how to fund this engagement until the
ERC and the Council are able to define exactly what is meant by
enhanced engagement. The Special Group was to meet on December 18
to continue its deliberations and take up the question again
following the New Year.

Planning for the May Ministerial
--------------------------------

13. (SBU) DCM Reid, who chaired the last meeting of the Executive
Committee (ExCom), reported on the ExCom's discussion of
preparations for the 2007 Council Meeting at Ministerial Level (MCM)
scheduled for May 14-15. The major outstanding issue remains the
theme of the meeting, which the ExCom had proposed should be:
"Innovation, Growth and Equity: The Way Ahead." Spanish Ambassador
Ballestero (Spain's Minister of Finance Solbes will chair the MCM)
suggested to Council what he termed a more dynamic title:
"Innovation for Growth and Striving for Equity: Advancing the
OECD's Agenda." This new proposal caught many by surprise and led
to an inclusive debate where some argued the social goals of equity
and others the desire for growth and equity to be compatible.
Deputy SYG Akasaka, who is coordinating the MCM, said that he would
review the title informally with interested delegations and return
to Council for further discussion in January. At that time the
Council will also address other elements of the agenda, including
the trade session and Ministerial discussion of enlargement and
enhanced engagement. (COMMENT: The issue of the theme for the MCM
revolves around how to include the words innovation, growth and
equity, with the primary stress on innovation. We suspect that it
may not be easy to meet everyone's desires. END COMMENT.)

14. (SBU) Ambassador Bourgon reported that the ERC had reviewed the
issuing of invitations to non-members. It was agreed that Brazil,
China, India, Russia and South Africa (the BRICS) would be invited
to all sessions except the one on enlargement and enhanced
engagement. Regular observers to the Trade Committee would be
invited to the session on trade. A decision on inviting other
international organizations (the Geneva Group) would be deferred
until the Trade Committee meets in March.

Items Approved Without Debate
-----------------------------

15. (U) All of the items on the agenda that were "likely to be
approved without debate" were approved by Council with the exception
of the item regarding the European Council of Ministers of Transport
which was referred back to the Executive Committee (ExCo) at the
insistence of France for further discussion. (NOTE: This item was
approved on December 20, in a short Council session that gave final
approval to the 2007-2008 Program of Work and Budget.)

MORELLA

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