1. The Council of the Organisation for Economic Co-operation and Development met at Ministerial level on 21st and 22nd June, in Paris under the Chairmanship of Mr. Panayis Papaligouras, Minister of Co-ordination and Planning of the Republic of Greece. Ministers took a number of decisions in the field of international investment and multinational enterprises and trade. They discussed world interdependence, development co-operation and the dialogue with developing countries. They exchanged views on the current economic expansion situation and agreed on the main elements of a strategy for sustained economic expansion, to be carried out through their respective policies.

I. INTERDEPENDENCE AND CO-OPERATION AMONG OECD MEMBER COUNTRIES

2. OECD Member Governments, basing themselves on a market- oriented open economic system within which social progress, enhanced development co-operation and freedom of the individual can be ensured, are agreed that growing economic interdependence among nations is a source of strength and efficiency contributing to the maintenance of a peaceful and stable world, and leading to improvement in the conditions of life of all people. In this situation Member Governments bear a great responsibility to promote non-inflationary economic growth, employment and social progress not only among their countries but for the world at large.

3. Member Governments agreed that the high degree of interdependence among their countries, their recognition, in a spirit of solidarity, of each other's problems and their dedication to the same basic principles demand close consultation and co-operation among themselves in formulating and implementing their economic policies. Where appropriate, this co-operation may extend to the adoption of rules or guidelines for their behaviour as had been the case in specific areas such as trade, environment, energy and international investment and multinational enterprises.

Energy

4. Ministers noted the progress which has already been achieved in the Organisation in the field of energy co- operation. They received a report from the Chairman of the Governing Board of the International Energy Agency on the Agency's accomplishments over the past year.

5. Important policies have already been adopted to promote rational use of energy resources. In addition, Ministers recognised, in view of the long lead times involved, that there was a need for early effective action to meet the long-term requirement of reducing dependence on depletable energy resources and thus meet the long-term needs of all nations for energy supplies; and that in the short-term, means will have to be found to provide for rational use and adequate supply of available energy sources, primarily oil. They therefore affirmed their resolve to pursue policies designed to meet these objectives, as well as to carry on a useful dialogue with oil-producing and other developing countries, seeking to establish a co-operative approach to these problems.

International Investment and Multinational Enterprises

6. Ministers are agreed that co-operation among Member countries can improve the foreign investment climate, encourage the positive contribution which multinational enter- prises can make to economic and social progress, and minimise and resolve difficulties which may arise from their various operations. They therefore agreed to intensify their co-operation and consultation on international investment and multinational enterprises. On behalf of their Governments, they adopted a Declaration related to guidelines for multinational enterprises, national treatment, international investment incentives and disincentives and consultations and review of these matters. The Council took their Decisions establishing the necessary procedures for inter-governmental consultations in these areas. Continuing endeavours within the OECD may lead to further international arrangements and agreements in this field.

Trade

7. Member Governments decided to renew, for a further year, their Declaration on Trade of 1974 aimed at avoiding restrictions on trade and other current account transactions which could lead to chain reactions and endanger the process of economic recovery. Bearing in mind that the Declaration was designed as a temporary measure to meet the exceptional economic problems of the time, and having in mind the prospect of continued improvement in the economic situation and hence the expected return to normal conditions. Ministers instructed the Organisation to review the situation and to examine any appropriate proposals well in advance of the expiry of the Declaration in 1977. Ministers furthermore agreed to reinforce the Organisation's activities in the field of export credits.

8. Noting the important contribution international trade has made to world economic growth, Ministers recognised the need not only to resist protectionist pressures in all areas but to continue efforts towards further liberalising trade and strengthening international trade system. In this regard they expressed their strong support for a successful outcome of the Multilateral Trade Negotiations.

II. WORLD INTERDEPENDENCE, DEVELOPMENT CO-OPERATION AND THE DIALOGUE

9. OECD Member Governments believe that intensified economic interchange will bring substantial gains in economic progress and prosperity to all nations including the developing countries. They recognise that growing interdependence means that countries are increasingly affected by the actions and events in other countries. They are therefore determined to contribute through appropriate policies and institutions to greater world economic security in such areas as balance-of-payments, commodities, energy and food.

10. Ministers noted that the strong recovery now under way in many industrialised countries will improve the economic and balance-of-payments situation of developing countries. At the same time Ministers stressed that progress towards more balanced and equitable economic relations between developed and developing countries is an essential element of an improved world economy. They recognised that policy measures are called for to ensure enhanced opportunities for developing countries in trade, investment and technology, noting that such measures are designed to support developing countries own efforts. Ministers also emphasized that increased concessional development assistance is required in particular for those most in need. Member governments agreed to intensify their efforts, within the OECD, to strengthen policies to these ends.

11. Ministers reaffirmed that co-operation among industrialised countries within the OECD in pursuit of improved relations with the developing countries is essential to achieve a coherent approach to the evolving economic relations between the industrialised and developing countries and to lead to agreements on practical measures. They noted that the recently concluded meeting of the United Nations Conference on Trade and Develop- ment, following the constructive outcome of the Seventh Special Session of the United Nations Genera1 Assembly in September 1975, had achieved progress on a number of issues which are being pursued. Ministers also noted that at the Conference on International Economic Co-operation the dialogue has now been well launched and the ground prepared for the achievement of concrete results in the second half of the year. They underlined the value they attach to the successful outcome of the Conference.

12. Ministers reaffirmed the determination of their governments, expressed in the Declaration on Relations with Developing Countries adopted by the Council in 1975, to pursue the dialogue with the developing countries in all appropriate fora in order to arrive quickly at concrete results which would make possible intensified co-operation with them and better meet their development needs. Ministers agreed that their governments are prepared to respond positively to the challenges of the continuing dialogue and evolving relationship between the industrialised and developing countries and stressed the necessity of close collaboration and strengthened co-ordination among industrialised nations in pursuing this objective.

III. STRATEGY FOR SUSTAINED ECONOMIC EXPANSION

13. Recognising that the continuation of present levels of unemployment and inflation would be unacceptable, Ministers agreed on the main elements of a strategy for sustained economic expansion, to be carried out through their respective policies. The basic premise on which this strategy rests is that the steady economic growth needed to restore full employment and satisfy rising economic and social aspirations will not prove sustainable unless all Member countries make further progress towards eradicating inflation. Due weight must also be given to features of the present situation which seem to point to the need for caution in the pursuit of expansionary policies. First, because of the fairly close synchronisation of the recovery in many countries, there is a risk that the strength of the expansionary forces at work may be underestimated. Second, because of the virulence of recent inflationary experience, there is a danger that inflationary expectations could revive quite strongly if the pace of the recovery is too fast. Third, because of inadequate investment in past years in some countries and in certain basic industries, there is a risk of supply bottlenecks at a comparatively early stage of the recovery.

14. Bearing these considerations in mind, Ministers agreed on a strategy whereby governments will direct their policies to attaining price stability and full employment through the achievement of an economic expansion which is moderate but sustained. This implies that the restoration of full employment and normal levels of capacity utilisation in the OECD area will be progressive and take a number of years. Ministers are convinced that by adopting a strategy along these lines OECD countries will be making an essential contribution to the economic stability and well-being of the world at large.

15. The growth rates implied by this strategy will differ between countries. Because of the depth of the recent recession, a period of somewhat above-average growth will be possible and necessary to restore full employment, although care will be needed to avoid rekindling inflationary forces and to slow down demand in line with longer-term growth potential as the present slack is taken up. Allowing for this recovery element, Ministers consider that if the right policies are followed and inflation rates are further reduced, there is scope for the growth rate for the GNP of the OECD as a whole to average 5 per cent or somewhat more over the five years l976-80, with world trade expanding by 8 per cent or somewhat more.

16. National economic policies in support of this general strategy of a moderate but sustained expansion should be guided by the following principles:

a) Governments should make firm use of fiscal and monetary policy to achieve the general stability in their economies that non- inflationary growth requires. This means that action taken to dampen short-term fluctuations in demand must be formulated in the light of the need for greater steadiness and predictability of policies over the medium run.

b) In many countries, continuing efforts to develop a better social consensus as to the aims of the economic policy will be needed, which may involve various forms of prices and incomes policy. Such policies can complement, but cannot replace, sound demand management policies which are essential in any event.

c) Action should be taken appropriate to the circumstances to deal with unsatisfactory aspects of the employment situation in accordance with the 1976 Recommendation of the Council of the OECD on a General Employment and Manpower Policy as elaborated by the Manpower and Social Affairs Committee meeting at Ministerial level on 4th-5th March, 1976. This action may include selective policies to cope with sectors and areas which have particularly acute employment problems.

d) In most countries, policies should be directed more towards promoting investment rather than consumption. In many cases, this will require an appropriate recovery of profits from the depressed levels of recent years. It may also require action to stimulate investment, to encourage savings over the medium run and to restrain the rise of public expenditure.

17. Ministers agree that national policies in pursuit of this strategy should be based on a clear recognition of countries international responsibilities. They noted that some larger Member countries and quite a number of smaller Member countries are running unsustainably large current account deficits. So long as the OECD area continues to run a large current deficit with the OPEC countries, Member countries in a strong external position should, while pursuing their anti-inflationary policies, not resist market forces tending to push their current account into deficit. The priority task in countries in a weak external position must be effective policies to bring down the rate of inflation. Because of the interaction between domestic policies, inflation rates and exchange rates, the continuation of much stronger inflation in some countries than in others could have adverse effects on growth and international monetary stability. Ministers recognised the importance of inter-governmental consultation and co- operation to support national stabilization policies. Note was taken of the progress made towards ratifying the Agreement establishing the OECD Financial Support Fund, and there was agreement on the need to complete the process rapidly.

18. Ministers discussed the employment problems of European Member countries where emigration has been an important factor in the past. They agreed that more emphasis should be given to the creation of indigenous employment opportunities, and that this could be facilitated by the creation of conditions conducive to increased capital flows to, and imports from, these countries. Major changes in migration flows between some European Member countries call for intensified co-operation between host countries and countries of origin, so that the burden of adjustment can be equitably shared.

19. Ministers examined the current economic situation and concluded that the recovery now evident in almost all Member countries is on a course consistent with achieving sustainable expansion. They welcomed the fact that in many countries unemployment has stopped rising or begun to decline and that the outlook for labour costs offers hope of a further reduction in inflation. But care will be needed to ensure that the recovery is kept under control and to avoid the undue fiscal ease and excessive rates of monetary expansion which characterised the similar phase of the last upswing; to this end, close international consultation and collaboration will be essential.

20. Ministers instructed the Organisation to examine regularly the extent to which the policies being followed are consistent with the agreed medium-term strategy. They stressed, in particular, the importance of analysis and consultations within the Organisation directed towards the early detection of changes in the pace of expansion in the OECD area, the avoidance of undue fiscal ease or excessive rates of monetary expansion and the identification of potential bottlenecks. They also requested the Secretary- General to ensure that careful attention is given to the problem of the recent divergence in the economic performance of Member countries by the appropriate bodies of the Organisation.

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Source: Activities of the OECD. Copyright OECD 1976. Reproduced by permission of the Organisation for Economic Co-operation and Development.