Organization for Economic Cooperation and Development Forms Summary

  • Last updated on November 10, 2022

The Organization for Economic Cooperation and Development, a successor to the Organization for European Economic Cooperation, encouraged and coordinated economic development and globalization in the Western world.

Summary of Event

On September 30, 1961, seventeen of the twenty governments that had signed the convention creating the Organization for Economic Cooperation and Development (OECD) had ratified it. That number was sufficient to bring the OECD formally into being. Formation of the OECD was an organizational recognition of the globalization of the world economy. Organization for Economic Cooperation and Development Economic policy;international cooperation Foreign aid [kw]Organization for Economic Cooperation and Development Forms (Sept. 30, 1961) [kw]Economic Cooperation and Development Forms, Organization for (Sept. 30, 1961) [kw]Development Forms, Organization for Economic Cooperation and (Sept. 30, 1961) Organization for Economic Cooperation and Development Economic policy;international cooperation Foreign aid [g]Europe;Sept. 30, 1961: Organization for Economic Cooperation and Development Forms[07050] [g]France;Sept. 30, 1961: Organization for Economic Cooperation and Development Forms[07050] [c]Diplomacy and international relations;Sept. 30, 1961: Organization for Economic Cooperation and Development Forms[07050] [c]Trade and commerce;Sept. 30, 1961: Organization for Economic Cooperation and Development Forms[07050] [c]Economics;Sept. 30, 1961: Organization for Economic Cooperation and Development Forms[07050] [c]Organizations and institutions;Sept. 30, 1961: Organization for Economic Cooperation and Development Forms[07050] Adenauer, Konrad Eisenhower, Dwight D. [p]Eisenhower, Dwight D.;international relations Gaulle, Charles de [p]Gaulle, Charles de;international relations Gaulle, Charles de [p]Gaulle, Charles de;economic policy Macmillan, Harold

The origins of the OECD go back to the Marshall Plan Marshall Plan , the brainchild of U.S. Secretary of State George C. Marshall that paved the way for U.S. subsidization of European postwar recovery. Marshall set forth his plan in a famous speech given at Harvard University on June 5, 1947. In that plan, Marshall invited Europeans to draw up proposals outlining specific ways in which the United States might help forward European economic recovery from World War II.

The European governments responded to Marshall’s invitation by creating the Organization for European Economic Cooperation Organization for European Economic Cooperation (OEEC). It was to draw up the proposals requested in the Marshall Plan and then to supervise their implementation. A requirement of the Marshall Plan was that the plans of each nation be integrated into an overall European recovery plan.

Delegates from the European countries most affected by the destruction of World War II met in the spring of 1948 to form an organization to supervise the creation and subsequent progress of the European Recovery Plan. The remarkable success of this effort, working with a contribution of thirteen billion dollars of American aid, convinced both the United States government and the governments of Europe that this close economic cooperation was worth continuing.

Accordingly, at a meeting of U.S. president Dwight D. Eisenhower, French president Charles de Gaulle, West German chancellor Konrad Adenauer, and British prime minister Harold Macmillan in December of 1959, it was decided to extend the work of the OEEC by creating a successor organization, designed according to the same model. Two missions were assigned to this new organization: to further the development of underdeveloped countries and to coordinate trade policies of the developed nations so as to ensure continued economic growth and prosperity.

A series of international meetings took place during 1960 and 1961 to plan the new organization. A draft convention was signed in December of 1960 by ministers from twenty countries, including representatives of the European Community and of the United States and Canada. By the following September, sufficient ratifications had been received to enable the new organization to supersede the OEEC and begin its work. The founding countries were Austria, Belgium, Canada, Denmark, France, the Federal Republic of Germany (later Germany), Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Subsequently, Japan, Finland, Australia, Korea, Mexico, and New Zealand joined, and Yugoslavia became an associate member. The Czech Republic, Hungary, Poland, and the Slovak Republic joined after the collapse of communism in Eastern Europe.

A tripartite mission was adopted by the new organization. It was to take whatever actions were necessary to encourage a maximum of sustainable economic growth in the member countries, to contribute to world economic development by aiding development of underdeveloped countries, and to foster world trade through the encouragement of nondiscriminatory trade policies.

The organization is essentially run by a ministerial council, on which sit delegates of ministerial rank from each of the participating countries. Permanent appointees carry on the council’s work on a continuous basis. The council has the authority to adopt a variety of measures: decisions, which are binding on the members but require a unanimous vote; agreements, which can include nonmembers; recommendations either to member states or to international organizations, for their consideration; and resolutions involving proposed activities of the OECD.

Day-to-day actions of the council are handled by an executive committee, composed of ten representatives elected annually by the members of the council. This body generally meets once a week. The primary role of the executive committee is to prepare an agenda for meetings of the council.

The organization has a small permanent staff headed by a secretary-general, whose role is to chair meetings of the council and the executive committee and to supervise the permanent staff, composed largely of specialists in the gathering of economic data. The main office of the OECD is in Paris.

The full scope of the topics in which the OECD is interested is revealed by the various committees assigned to monitor economic developments in various sectors. Committees include those concerned with economic policy, economic development and review, the European Monetary Agreement (payments committee, trade committee, and committee on invisible transactions), development assistance, technical cooperation, scientific and technical personnel, scientific research, industry, energy (with ties to the European Nuclear Energy Agency), agriculture, and fisheries. There is a small permanent staff of economists and other experts for each committee.

The OECD developed a device it called a “confrontation.” Confrontations were meetings devoted generally to various economic policies of individual member nations at which representatives of other nations evaluated and criticized the policies. The object was to bring to bear on the policies of each member the experience of other members.

Although the OECD has no formal authority over the economic policies of its members, it has relied heavily on moral persuasion to induce members to modify their individual economic policies to accommodate the needs of the group as a whole. An area of particular concern for the OECD, in the light of its commitment to promote economic development through the encouragement of liberalized trade, is international financial relations. Although many impediments to trade in goods had been eliminated by the OEEC, there were still, in 1961, numerous barriers to trade in services and financial movements. In order to help free up this area, the OECD created the European Monetary Agreement European Monetary Agreement Trade agreements (EMA). Although not possessed of the funds available to the International Monetary Fund, the EMA is able to provide short-term credit when member countries experience exceptional drains on their foreign exchange reserves.

For the longer run, the OECD developed the Code of Liberalization of Current Invisible Operations Code of Liberalization of Current Invisible Operations . The members of the OECD are committed to introducing the various measures outlined in the code—there are more than fifty of them—at the earliest possible moment. The code is supervised by an OECD committee, the Committee for Invisible Transactions Committee for Invisible Transactions . The same committee supervises a code of liberalization of capital movements. The increasing ability of individuals and businesses to move financial assets freely around the world is a testimonial to the accomplishments of the OECD in this area.

Another focus of the OECD of particular interest to business is the question of double taxation. By 1963, the OECD, building on work done by its predecessor, the OEEC, had developed a draft convention on this subject that led to a number of bilateral agreements, more than fifty by the late 1960’s. More recently, the fiscal committee encouraged tax changes in member countries that would standardize taxation of estates and inheritances.

A special committee was established in the early 1960’s to deal with restrictive business practices. After gathering information from all member countries, the committee published a guide to legislation on restrictive business practices.

Besides a general committee on industry, which concerns itself with developments in timber, hides and skins, machinery, nonferrous metals, pulp and paper, chemical products, iron and steel, and textiles, the OECD has a committee devoted to energy and a committee within that one devoted specifically to oil. The oil committee recommended that all members establish individual oil stockpiles. The possession of such reserves enabled each member to survive the Arab-Israeli war of 1967 and consequent disruptions in oil production and delivery without severe dislocations.

An important initiative of the OECD was the establishment of a development center to evaluate the various forms of aid to underdeveloped countries. The development center has its own research staff, which has investigated problems arising from the attempts of underdeveloped countries to industrialize. It also has taken a close look at regional planning as a method to promote development. The development center set up a “Question and Answer Service” for underdeveloped countries that is able to provide technical advice on specific problems.

Significance

The establishment of the OECD was a recognition by the developed countries that globalization was a fact of life. It recognized that world trade was the engine driving the prosperity enjoyed by its members and that world trade would thrive only if the economic policies of the developed countries were coordinated. The OECD has described itself as an “international economic forum,” that is, an organization sponsoring a continual stream of meetings of experts on various aspects of the economy.

One of the most important accomplishments of the OECD has been the standardization of economic statistics worldwide. Member countries have been pressured to adopt standard statistical measures so that economic developments in various countries can be readily compared. The organization has been developing computerized databases that can be tapped into by every member country. The OECD publishes several series of statistical information, among them a monthly set of main economic indicators, foreign trade statistics, and analytical statistics. It collects and publishes statistics on the oil market quarterly as well as producing a quarterly series on energy prices and taxes. Each year, it publishes an economic survey of each of the member countries.

The OECD has done substantial work with macroeconomic data to enable those responsible for macroeconomic policy in member countries to see how their own policies interrelate with those of other developed countries. For example, the savings rate has been a subject of intensive study, with the OECD recommending to each member nation that it pursue policies designed to foster savings. Among the recommended policies is the reduction of governmental budget deficits, a goal that has increasingly become a target for economic policy in the member countries.

At the founding of the OECD, the environment was not an area of particular concern, but it has become one. The OECD has developed a computer model to estimate the impact of negative environmental forces such as global warming and has designed various cost-benefit analyses that could be used by member countries to design policies to counteract these negative environmental impacts. The OECD recommends policies that use market forces wherever possible, rather than relying on government decree.

The OECD publishes an enormous amount of material on a wide variety of economic subjects. Its numerous committees frequently assemble working groups of experts to investigate particular topics under their purview, and the resulting studies are published by the OECD. Combined with regular bulletins covering statistical material gathered by the OECD, these publications represent an enormous body of knowledge accessible both to the member governments and to individuals anywhere in the world. Organization for Economic Cooperation and Development Economic policy;international cooperation Foreign aid

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Henry, Miriam, et al. The OECD, Globalisation, and Education Policy. Oxford, England: Pergamon Press, 2001. Monograph on the effects of globalization upon the educational policies of OECD member nations and of the role of the organization in shaping those policies. Uses Australia as a case study. Bibliographic references and index.
  • citation-type="booksimple"

    xlink:type="simple">Hufbauer, Gary. “Beyond GATT.” Foreign Policy 77 (Winter, 1989): 64-76. Hufbauer advocates replacing the General Agreement on Tariffs and Trade with an OECD-sponsored Free Trade and Investment Area.
  • citation-type="booksimple"

    xlink:type="simple">Leary, Virginia A., and Daniel Warner, eds. Social Issues, Globalisation, and International Institutions: Labour Rights and the EU, ILO, OECD and WTO. International Studies in Human Rights 84. Boston: M. Nijhoff, 2006. Compilation of essays on international labor issues in terms of the actions and effects of the OECD, as well as of the European Union, International Labor Organization, and World Trade Organization. Bibliographic references and index.
  • citation-type="booksimple"

    xlink:type="simple">Organization for Economic Cooperation and Development. The Annual Report of the OECD. Paris: Author, 1962-    . This is the annual report of the secretary-general. Comparison of annual reports enables the reader to see how the organization remains true to its original mission and how it has changed.
  • citation-type="booksimple"

    xlink:type="simple">_______. OECD at Work. Paris: Author, 1969. This small volume gives a clear exposition of the OECD’s organization and structure. It contains a short chapter on each of the committees and its work.
  • citation-type="booksimple"

    xlink:type="simple">_______. OECD: History, Aims, Structure. Paris: Author, 1971. This pamphlet gives a brief history of the organization and then briefly discusses the work of the committees.
  • citation-type="booksimple"

    xlink:type="simple">Sun, Marjorie. “Administration Divided Over OECD Biotech Plan.” Science 229 (August 30, 1985): 842-843. A plan for common guidelines among all OECD countries in licensing biotechnical creations meets with opposition from the Ronald Reagan administration.

General Agreement on Tariffs and Trade Is Signed

Marshall Plan Provides Aid to Europe

Soviet Bloc States Establish Council for Mutual Economic Assistance

Agency for International Development Is Established

European Economic Community Adopts the Common Agricultural Policy

Birth of the European Monetary Union Project

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