1. The Council of the OECD met on 2 and 3 June 1993 at Ministerial level. The meeting was chaired by Mr. John Dawkins, Treasurer of Australia. The Vice-Chairmen were Mr. Gunter Rexrodt, Federal Minister of Economy of Germany and Mr. Pertti Salolainen, Minister for Foreign Trade and Deputy Prime Minister of Finland. Prior to the meeting, the Chairman led consultations with the Business and Industry Advisory Committee (BIAC) and the Trade Union Advisory Committee (TUAC) to the OECD; both organisations submitted statements for the consideration of Ministers.

Ministers addressed the need to restore strong, sustained growth with improved employment prospects; they agreed on collective action to meet the major challenges facing their countries. They are deeply concerned that growth in the OECD area is insufficient and that unemployment continues to rise in most countries. To cope with these problems they are resolved to take additional action to improve both macroeconomic and structural policies and to extend international co-operation, in particular by strengthening the open multilateral trading system.

Ministers are committed to a concerted strategy for growth and employment. It consists of the following planks, described in detail in this Communique:

• monetary and fiscal policies will exploit the opportunities that may exist -- without jeopardising the objectives of price stability and medium term budget consolidation;


• structural reform policies, including labour market policies, will aim for vigorous, competitive and efficient development of OECD economies, exploiting opportunities offered by technological progress and open international competition;


• intensive efforts will be made to continue to liberalise trade, to abide by and further strengthen multilateral disciplines and, as the first priority, to achieve a substantial, comprehensive and balanced outcome of the Uruguay Round by the end of the year -- which would be a very powerful contributor to bolstering confidence, growth and employment both in OECD Members and elsewhere.

In pursuit of this strategy, effective support will be given for the progressive integration of all countries into the world economy; this will include the concerted international effort to support the economies in transition, in particular Russia, and developing countries.

Ministers underline the particular relevance of the OECD and of the --basic values its Members hold in common: respect for human rights, pluralist democracy and the market economy. They appreciate its working methods and its multi-disciplinary character, as exemplified by the study underway on employment/unemployment. They call on the Organisation to continue to build on. its strengths and on the collective wealth of its Member countries' national and regional, economic, social and cultural experiences to further develop common approaches in order better to meet the challenges of a fast changing world and to foster worldwide sustainable development.

PROMOTING SUSTAINABLE GROWTH AND EMPLOYMENT: THE MAJOR CHALLENGE FOR THE l990's

REDUCING UNEMPLOYMENT: A CENTRAL GOAL

2. Ministers are deeply concerned that the number of unemployed people in the OECD area may reach nearly 36 million by the end of this year and is unlikely to decline significantly before well into 1994. This represents enormous human and economic costs. Ministers commit their governments to reinforce and broaden their concerted strategy to improve employment prospects.

3. In this respect, Ministers noted the interim report presented by the Secretary-General on employment and unemployment and its preliminary conclusions. They call on the Secretary-General to press ahead, in consultation with all appropriate OECD bodies and other groups as necessary, to complete the final report in 1994, with specific policy recommendations.

4. Improving employment prospects requires higher sustained growth accompanied by structural reforms. All the actions identified hereafter aim for these goals. They span a wide range of mutually reinforcing policies. They intend to exploit an enhanced interaction between macroeconomic and structural policies and, through trade and competition, to build on the growing integration of the world economy. A high degree of social consensus would foster these actions. Ministers support and encourage actions now being taken throughout the OECD to increase real economic activity and employment, in the context of national initiatives and, importantly, of enhanced international co-operation at all levels, especially in the OECD but also elsewhere. In this context, they welcome the EC/EFTA joint initiative, the G7 co-operation, and other efforts which complement the OECD strategy. They call for further concerted action.

MACROECONOMIC POLICY

5. Ever growing interdependence between economies results in a continual assessment by markets, particularly financial and currency markets, of the adequacy, and hence credibility, of national policies. These must not only fit the requirements of each country s specific circumstances, but also be compatible internationally and made more effective through close international co-operation. Overall, they must provide economic agents with a predictable, sound and stable environment, favourable to growth and employment.

6. In a context of weak economic performance and generally low inflation, monetary policy can and must exploit possibilities for lowering short-term interest rates, without jeopardising the fundamental aims of price stability and low long term interest rates. In this respect, Ministers welcome interest rate reductions which have already occurred and hope further cuts in interest rates can be made as and where conditions permit. Price stability must also be sought and maintained through structural improvements; this in turn would increase the room for manoeuvre for monetary policies.

7. To improve the balance between monetary and fiscal policies, it is equally important that governments at all levels contribute with policies aiming at sound public finances. A well-functioning public sector is important for a prospering market economy. High structural public budget deficits, however, pre-empt national savings; can adversely affect current accounts; and contribute to higher interest rates, thereby lowering productive investment and contributing to the economic slowdown. This highlights the importance of achieving fiscal consolidation, in each country's particular circumstances, over the medium term.

8. Ministers commit their governments:

• to reduce with determination government budget structural deficits over the medium term;


• without jeopardising the objective of medium term fiscal consolidation, to exploit opportunities that may exist for fiscal policy. The automatic stabilisers have been and will be allowed to play an appropriate role without risking an increase in structural deficits. These temporary deficits will be reversed once the economy begins to recover;


• to increase the efficiency of the public sector, including where appropriate through privatisation and through enhanced coherence of policies;


• to improve the "quality" of budgets on both the revenue and expenditure sides, in particular in promoting investments which strengthen the long-term physical and human potential of their economies to realise sustainable growth.

STRUCTURAL POLICY PRIORITIES: STRENGTHENING THE MULTILATERAL SYSTEM

9. To help ensure that recovery is sustainable, and in particular to provide sustained growth of employment over the longer term, the momentum of structural reform will be continued, and stepped up where necessary. Ministers therefore agree that coherent, complementary actions on structural reform will be undertaken in the areas set out below both nationally and in a multilateral framework and also ask the OECD to continue and deepen its work on structural issues, in particular through multilateral surveillance and peer review.

Trade policy

10. Liberalisation of trade and strengthened multilateral disciplines have underpinned the development of OECD economies since the end of World War II. Protectionism has a worldwide impact: it reduces living standards, engenders dangerous economic tensions and impedes development by locking parts of the economy and of the labour force into low productivity, low value-added and poorly remunerated activities. A fundamental element in restoring confidence is therefore the OECD governments strong commitment to strengthen the open multilateral trading system so as to let it play its central role in promoting further non-inflationary growth and sustainable development around the world, fostering international trade within an agreed framework of multilateral rules covering access to markets and fair competition.

11. The momentum shown in the Quadrilateral meetings of Trade Ministers and the collective determination expressed by OECD Ministers demonstrated that it is realistic not only to hope but to expect that the Uruguay Round will conclude by the end of the year.

12. Ministers accordingly agree:

• to do their utmost, individually and collectively, to ensure the rapid achievement of a substantial, comprehensive and balanced outcome of the Round, using the Draft Final Act of December 1991 as a basis for final agreement including a substantial market access result on goods and services;


• to abide by and further strengthen multilateral disciplines and to make no recourse to initiatives and arrangements which are inconsistent with the principles of free trade and undermine the multilateral system;


• to make full use of the GATT system and of the more informal mechanisms and broad expertise available in the OECD, so as to contribute to a reduction of international trade tensions and to the efficient operation of the multilateral trading system.

13. The multilateral framework needs to keep pace with and anticipate new developments affecting trade. Ministers ask the OECD to:

• pursue new issues arising at the interface of trade policy and other national policies (concentrating initially on competition, investment and, in the case of environment, on analytical work with a view to developing appropriate substantive guidelines as well as providing input to negotiating rules in the relevant multilateral fora). This work should help to gain an early and deeper understanding of the issues which are likely to be at the heart of the multilateral trading agenda after the Uruguay Round and of policy options;


• monitor and analyse important moves to regional integration, as a contribution to ensuring that they are complementary to and supportive of the multilateral trading system, by contributing to open markets and strengthened international competition.

Ministers endorse the procedural guidelines on integrating trade and environment policies contained in the joint report submitted by the Trade and Environment Policy Committees.

Agriculture

14. Efforts are being made to implement agricultural reform along the lines agreed by Ministers in 1987 and subsequent years. Progress has been limited and uneven: much remains to be done. The OECD Secretariat has estimated that transfers from taxpayers and consumers to the agricultural sector totalled $ US 354 billion in 1992, an increase of 7% over the previous year; but this figure expressed in ECU terms shows a more moderate increase (+2%) and these percentage increases covered widely different situations in individual countries. Many current domestic agricultural and trade policies remain costly and do not meet efficiently their stated objectives. They often distort domestic and world markets, which tends to lead to significant international frictions. Bearing in mind the difficulties which the necessary adjustment may entail, governments are determined to pursue their efforts to promote the agreed agricultural reform, within a comprehensive policy framework that addresses structural adjustment in the entire agro-food sector, as well as rural development and environmental questions, and that is consistent with the multifunctional character of agriculture. Ministers stress the role that the OECD must continue to play in support of this approach, both through improved qualitative and quantitative analysis and monitoring, and through constructive policy dialogue.

Industrial support measures

15. Ministers are deeply concerned about support measures and industrial subsidies that distort markets, represent heavy charges on public finances, risk locking economies into sub-optimal patterns of activities and risk provoking trade frictions. Ministers urge the OECD to press ahead with the projects already under way to increase transparency and comparability in the field of industrial subsidies and support measures and to present results that measure the importance of publicly financed support to industry in Member states. These projects will help to improve discipline. Ministers also stress the importance of concluding as quickly as possible the already long negotiations on agreements with respect to shipbuilding, steel and the financing of large civil aircraft in conformity with the objectives of the aircraft sector understanding. They call for a report at their 1994 meeting on the implementation of the recent agreements on further disciplines in the field of officially supported export credits and tied aid credits and on progress in developing guiding principles for setting guarantee premia as well as on other aspects covered by the Helsinki package.

Foreign direct investment and international transactions

16. Providing regimes for FDI which are open, clear, non-discriminatory, secure and stable is essential for business confidence and job creation. Ministers wish that the feasibility study on a Wider Investment Instrument be pursued at a sustained pace, and if possible completed by their 1994 meeting. They also stress the need to speed up liberalisation in the area of international services transactions and to consider the issues relating to taxation on them. Ministers welcome work in the Organisation on a draft Recommendation intended to prevent illicit payments in international transactions. They also reaffirm the principles agreed within the OECD for allocating and taxing the profits of multinational enterprises. In this context, they endorse the importance of the internationally agreed arm s length standard. Ministers also reaffirm the continued importance of co-operative global action to combat money laundering. They welcome the substantial progress made by members of the Financial Action Task Force (FAFF) in implementing effective countermeasures in their countries and look forward to the greater application of these measures.

Labour market and social policies; human resource development

17. In these domains, resolute action based on a comprehensive strategy for sustainable non-inflationary growth and employment is necessary. The Secretary-General s interim report on employment and unemployment points to it. Ministers commit their governments to press ahead with necessary reform and urge the OECD to help this effort by vigorously pursuing analysis, monitoring and discussion in all these domains, including active labour market policies, so as to take full advantage of the diversity of individual countries experience. They stress particularly the need to:

• ensure coherent social and labour market policies and practices; effectively combined to meet the needs of rapidly evolving circumstances to which our economies must adapt without increasing unemployment. Labour market mobility, flexibility and efficiency are all important in this respect. They should be the focus of all relevant facets of public policy and operate where appropriate at the enterprise level;


• promote and increase the effectiveness of active labour market and social policies aimed at the efficient entry and re entry of workers into the labour market; enable the private sector to play its full role in job creation; facilitate the full participation of women in labour markets; particular attention should be given to the long-term unemployed and disadvantaged groups;


• continually improve, including within enterprises, education, training and retraining at all levels, involving both the employed and unemployed:


• to equip citizens with the skills, attitudes and values necessary for the full realisation of their human and professional potential;


• and such that education and training systems respond properly to the evolution of the employment needs of the economy;


• continue reform efforts aimed at ensuring a closer relationship between wages and productivity, at improving incentives to seek remain in employment, at enhancing employment prospects for low-skilled workers and at helping them to acquire the skills needed for higher paying jobs;


• increase labour productivity and define the role of public policy in doing so; and


• create skill-based jobs by facilitating the diffusion of new technology and innovative work practices, including flexibility in working arrangements, and through a general environment for innovation that fosters enterprise creation, including that of small and medium-sized high technology firms.

Migration

18. Migration remains a major issue on the international agenda. Ministers ask the OECD, bearing in mind the recent Madrid conference and the work underway in other international organisations, to continue to analyse migration trends and policies, including the interlinkages with labour markets and with issues such as development co-operation, international trade, private investment and urban problems, which have a potential impact on migration. They also stress the need to address, in the appropriate fora, the range of serious problems created by illegal immigration.

Environmental policy

19. Genuinely sustainable development over the long term requires worldwide co-operation. OECD Member countries intend, even in this period of economic downturn, to continue to play a leading role in the field of sustainable development, including in their commitment to follow up to the outcome of the United Nations Conference on Environment and Development (UNCED). They commit their governments to take effective action aimed at:

• achieving, at the national, regional and international levels, more effective integration and compatibility of environmental and all other relevant policies. In this regard they welcome the overall progress made by the OECD in this field, including the programme of environmental performance reviews. Ministers ask the OECD to pursue its follow-up to UNCED, and in this regard, to consider the feasibility of analysing the relation between consumption and production patterns and sustainable development;


• more effective use of the variety of available economic instruments, in combination with regulatory and voluntary measures, taking account of national circumstances, to address global, regional and national environmental problems -- with the goals of cost-effective, viable results, including reduction of greenhouse gas emissions, through national and international agreed actions;


• promoting environmental protection through various forms of international co-operation, including relevant international legal instruments; and


• promoting national and international efforts in the development and diffusion of technologies aimed at protecting and restoring the environment.

OECD IN AN INTERDEPENDENT WORLD

20. The emerging worldwide consensus on human rights, pluralistic democracy and the advantages of the market economy, and the successful integration of a growing number of countries into an increasingly globalised and interdependent world economy, call for an outward looking OECD.

21. Ministers take note of the interest in the Organisation expressed by non-Member countries, an increasing number of which have indicated the wish to become members. They feel that it is now time to invite the Organisation, taking into account resource constraints, to examine rapidly the situation and the consequences for the development of the Organisation in order to continue the process of opening the Organisation and to commence negotiations for membership with those countries which are able to assume all the responsibilities linked with it.

DEVELOPING COUNTRIES

22. Far-reaching and encouraging changes are under way in many developing countries. Increasing prominence is being given to the requirement for good governance, respect for human rights and democracy, in order to create the conditions for sustainable economic development, social progress and reduction of poverty. Attention is being paid to participatory development and institutional capacity building, and a greater role given to the private sector and to market-oriented policies. The need to eliminate unproductive expenditures like excessive military spending, and to co-operate in fighting corruption, is also increasingly recognised. These are welcome changes to OECD countries and to their citizens whose support for aid is essential. Nonetheless, developing country experiences still differ widely: integration into the international economy is progressing successfully in a number of countries; others, including many in Africa, continue to experience serious difficulties. Global issues such as mass poverty, population growth, environmental destruction, migration, refugees, drug abuse and AIDS, also continue to pose major challenges.

23. In response to these circumstances, Ministers recognise the need for a comprehensive and differentiated approach, based on partnership and shared responsibility, in the support and encouragement which they give to the self-help efforts of developing countries in their diversity. They also recognise their countries' special responsibilities for a sound global economy and commit their governments:

• to undertake further efforts to promote integration of developing countries into international markets;


• to consider fully, when devising and implementing their own policies, the contribution which they can make to economic growth, environmental protection and social progress in developing countries; and to improve coherence between their development co-operation policies and other relevant policies, notably in the areas of trade, investment, environment and migration;


• to make all efforts to enhance development assistance, both quantitatively and qualitatively, with particular attention to the poorest countries, and, while responding to new requirements, also to make all efforts to meet ongoing needs for concessional development assistance.

DYNAMIC NON-MEMBER ECONOMIES

24. The informal dialogue with the Dynamic Asian Economies (Hong Kong, Korea, Malaysia, Singapore, Taiwan and Thailand), which play an active role in the world economy, has proved substantial and useful. It has been extended this year to include Argentina, Brazil, Chile and Mexico. Ministers ask that this dialogue with Dynamic non-Member Economies be deepened.

25. In the context of the general approach outlined in paragraph 21, Ministers note that Mexico and Korea have been further involved in OECD activities over the past year. In light of Mexico s statement of intent for membership, comprehensive policy reforms and constructive participation in the OECD, Ministers invite the Organisation to examine with Mexico the terms and conditions of its membership with a view toward early entry of Mexico into the OECD. Ministers also welcome the positive evolution of Korea s involvement in OECD activities, which enhances mutual understanding and also paves the way for early membership.

26. Looking to the future, Ministers recognise that other non-Member economies, such as China, are becoming increasingly important players in the world economy and their further integration into the multilateral trading system should be fostered. The OECD should consider broadening its knowledge and understanding of these economies.

ECONOMIES IN TRANSITION

27. Reform has made uneven progress in the Economies in Transition (the CEECs, the NIS and Mongolia), whose situations are becoming increasingly diversified. The success of reform in these countries and their integration into the global economy are vital. Ministers reaffirm the willingness of their governments to work with these countries to support their efforts through a variety of bilateral and multilateral means.

28. In the context of the general approach outlined in paragraph 21, Ministers appreciate the manner in which the OECD has been helping the reform process, principally by providing, in a variety of ways, technical assistance for policy formulation and reform of governance. The Partners in Transition (PIT) programmes have promoted closer links between the countries concerned and the OECD, and have contributed to the objectives set out in the Memoranda of Understanding signed on 4 June 1991, helping them to succeed in transitions toward market economies and to enable each to meet the conditions for membership in the OECD as soon as feasible. Substantial progress in this direction has already been made. Some other Economies in Transition might also benefit from similar programmes. For the others, the OECD has diversified its activities in order to meet better their evolving needs and specific priorities. Ministers call on the OECD to:

• continue to focus the development of its programmes on policy areas such as establishing the legal and administrative framework and promoting structural reform and, to that end, to devise and implement its programmes in close partnership with those countries;


• help the CEECs and NIS to address their severe environmental problems including those deriving from defective industrial and nuclear installations, taking note of the outcome of the recent Ministerial Conference in Lucerne;


• pursue further its co-operation with other international organisations, bearing in mind their shared commitment to enhance co-ordination;


• contribute actively to the concerted international support effort to NIS, including promoting a competitive enterprise sector, such as small and medium-sized enterprises, military conversion, trade and investment, taking note of the outcome of the second West-East Conference of Ministers of Economy, Industry and Trade in Tokyo; in particular, to strengthen its co-operation and develop appropriate links with Russia;


• continue to develop its Register on technical and financial assistance, for which governments commit to provide the necessary information; and


• exploit its expertise to develop further its role as a locus for policy discussion among its Member countries and with the reforming countries, as exemplified by the recent high level meeting with four of them.

29. To foster the integration of the economies in transition into the world economy and into the framework of the rules and disciplines of the multilateral trading system, Ministers stress the need to intensify efforts to provide these economies with better access to OECD Member countries markets. They also recognise the need for these economies to develop mutually beneficial trade and payments relations among themselves. They underline the importance of supporting the creation of transparent, stable-and non-discriminatory conditions for trade, foreign direct investment and private sector development .

LONG-TERM PERSPECTIVE

30. This last decade of the century is proving to be one of momentous change. Interaction between economic globalisation, rapid scientific and technological progress, worldwide diffusion of information, shared concerns for the environment, and general progress towards democracy offers new challenges and opportunities for mankind. At the same time these changes lead to continuing and rapid adjustment of minds, consumer attitudes, skills, productive structures and government action. Ministers therefore welcome the OECD's ongoing support in evaluating the long-term problems bound to confront Member countries, and in devising appropriate policy responses to achieve a growing general well-being and respect for the individual.

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Source: The Annual Report of the OECD. Copyright OECD 1993. Reproduced by permission of the Organisation for Economic Co- operation and Development.