*{BUSINESS STATEMENT TO THE 1998 OECD COUNCIL MEETING AT MINISTERIAL LEVEL
27 - 28 APRIL 1998

Introduction:}

1. The international business community is pleased to present this statement to the 1998
OECD Council Meeting at Ministerial Level. The recommendations presented below represent the
consensus views of the 34 national industry and employer organisations which are members of the
Business and Industry Advisory Committee (BIAC) to the OECD.

2. We believe that the messages emerging from the 1998 Ministerial Meeting will be of
considerable importance to the international economy. Fear and uncertainty about our
governments’ capacity to meet the challenges of change continue to undermine public support for
liberal trade and investment systems. The OECD and its Member countries bear a special
responsibility to restore confidence in an open multilateral system. Participants in this year’s
Ministerial must use the occasion to promote greater public awareness of the substantial new
wealth and unprecedented opportunities for improved economic performance, employment
creation and consumer welfare which globalisation is generating around the world. Equally
important, Ministers must state very clearly their mutual determination to implement the necessary
policy measures and reforms to ensure that all countries enjoy the maximum benefits of
technological development and economic interdependence.

3. Without a strong statement of support for liberalisation from the world’s most advanced
economies, we believe there is a serious risk that opponents of more liberal trade and development
will begin to have even more influence on the policy agenda, leading to serious tensions among
long-standing trading partners, with unpredictable consequences for the world economy.

4. We consider that the following issues should feature prominently in Ministers’ conclusions:

Strengthening the multilateral system requires a coordinated approach to the development of
policies to support further liberalisation…

5. *partie=titre Multilateral Agreement on Investment (MAI): *partie=nil A strong commitment to conclude the MAI
would signal OECD Governments’ continuing support for an open multilateral trade and
investment system. The international business community wants and needs a Multilateral
Agreement on Investment which reflects the high standards expected of OECD countries, and
which is signed by as many Non-OECD countries as possible. We will actively support an
agreement which we consider truly adds value to the climate for international investment. We urge
individual governments not to waste this opportunity by seeking broad and/or ambiguous general
exceptions for politically-sensitive, country-specific issues which would be more appropriately
covered by transparent, national reservations. As the negotiations approach conclusion, we urge
governments to increase their efforts to publicise the anticipated benefits of the MAI to promote
broader public support for the final agreement.

6. *partie=titre Further Trade Liberalisation: *partie=nil OECD Governments should also use the occasion of the 50th
anniversary of the General Agreement on Tariffs and Trade to reinforce their support for further
liberalisation by implementing, accelerating and completing the agenda established by the Uruguay
Round. The WTO made good progress at Singapore in modifying its post-Uruguay agenda to
address issues facing business today. BIAC applauds the agreements reached in 1997 on Basic
Telecommunications and Financial Services, which were business priorities. We urge OECD
members to take every opportunity at the Geneva Ministerial to make progress on the WTO
agenda. We would particularly support the launching of new negotiations to promote further tariff
reductions. It is also important that the scope of WTO policy coverage be expanded to reflect the
integrated nature of the private enterprise approach to commercial transactions in the global
marketplace. We would also support continued efforts to reduce customs-related barriers to trade
through further reform and simplification of trade and customs procedures.

7. *partie=titre Corrupt Practices: *partie=nil BIAC salutes the achievement of the OECD Convention criminalising
bribery of foreign public officials. We expect OECD member governments to meet their
commitments to establish such practices as a criminal offence under national laws by the end of
this year. Corrupt practices result in substantial economic and social costs both for companies and
for countries in which illicit payments and extortion are frequently encountered. Further work by
governments is needed to address the serious problems of extortion and bribery on a global basis
with the aim of achieving comparable national rules and regulations for all countries, not just
OECD members.

8. *partie=titre Development Assistance: *partie=nil BIAC welcomes the OECD’s efforts to untie official aid
programmes, particularly with regard to the least-developed countries. Conditioning development
assistance on the purchase of specific goods and services represents a significant anachronism in a
world characterised by increasing liberalisation and more dynamic international competition. We
note that the next G8 summit will consider abolition of such programmes and we urge OECD
Ministers to endorse similar reforms to the development assistance programmes of all DAC
members. *{1}

*{1 The CNPF reserves its position on this paragraph.}

9. *partie=titre Electronic Commerce: *partie=nil BIAC supports OECD’s efforts to engage in forthright and
constructive discussions regarding electronic commerce. We believe that the development of
electronic commerce should be led primarily by the private sector in response to market forces.
Where carefully minimalist government action and/or a commitment to a conscious policy of noninterference
is required, we believe that policy making should take place within a global
framework comprising at least all of the OECD countries, developed at the multilateral level in
consultation with the private sector. To that end, we urge government and business in all countries
to co-operate and consider policy principles consistent with BIAC Policy Principles for Global
Electronic Commerce.

10. *partie=titre International Taxation: *partie=nil Companies are increasingly hampered by international double or
multiple taxation. National tax policies can decisively affect company operations now that intracompany
transactions account for nearly half of all trade in some countries. For this reason BIAC
continues its strong support for the OECD Transfer Pricing Guidelines and the recognition of the
arms-length principle as the internationally accepted standard. We also strongly support the
OECD’s efforts to promote acceptance and implementation of the OECD Transfer Pricing
Guidelines and Model Double Income Taxation Convention among Non-OECD countries. We
note that the OECD has completed a study on harmful tax competition which is to be submitted for
the consideration of Ministers. We were disappointed not to have been consulted on this report
during its preparation, and we are thus concerned that the text may not take full account of various
other important factors that distort competition such as state aids in different forms. We hope that
the report makes a clear distinction between so-called harmful tax competition and efforts by
countries to improve their tax legislation through legitimate reform.

…combined with meaningful responses to societal concerns:

11. *partie=titre Sustainable Development: *partie=nil In its Statement to the 1998 Meeting of the Environment Policy
Committee at Ministerial Level, BIAC set out recommendations on how industry and government
can work co-operatively to implement sustainable development in this era of globalisation.
Business is an important actor in the pursuit of sustainable development and can make its
contribution most effectively in the framework of economic growth, a competitive market and a
conducive regulatory structure. BIAC believes that innovation and technological improvements by
the private sector are a key element in achieving sustainable development. Environmental policy
should therefore stimulate innovation and be based on a constructive dialogue between business
and government, on the best available scientific knowledge and analysis, and on a realistic
appreciation of the costs and benefits involved. It is essential that policies and measures be
designed to promote voluntary actions, which can reduce costs, increase flexibility and speed
implementation. Economic growth is a fundamental element of environmental improvement and
the means by which the considerable potential of advancing technology and better environmental
practice is realised. The challenge of climate change, which will play an important role in the
implementation of sustainable development, requires prudent, timely and global action over the
long term. The targets set in Kyoto are challenging, but a number of issues still require further
clarification. BIAC supports the OECD in taking further steps to integrate sustainable development
into its work programme, balancing economic, social and environmental aspects.

12. *partie=titre The Social Dimension of Globalisation: *partie=nil In a 1997 submission to OECD Ambassadors,
BIAC outlined appropriate measures to address the social impact of globalisation. We continue to
urge Member governments not to react defensively to globalisation in deference to politically
influential interest groups, but rather to articulate comprehensive policy frameworks and
implement the necessary reforms to prepare their economies for the tremendous benefits that the
further liberalisation can offer. As elaborated in our paper, such a framework should involve:

• *partie=titre Implementing the Jobs Strategy Recommendations: *partie=nil Labour market policies and their
associated costs in some OECD countries effectively penalise private sector job creation,
especially by small- and medium-sized enterprises. Unfortunately, although OECD
Governments have continued to endorse the Jobs Study recommendations, implementation at
the national level remains piecemeal at best. This must be changed. The fight against
unemployment cannot be won by creating “artificial jobs”, but by implementing measures
which promote sustainable, productive employment. People will only have confidence in
globalisation if they see that it results in more and better job opportunities for them, not
stagnation and insecurity.

• *partie=titre Sound Macroeconomic Policies: *partie=nil It is essential that OECD Governments maintain sound
macroeconomic policies, including the continuing efforts to make sustainable reductions in
government spending. The tremendous scale and mobility of international capital flows is now
a dominant feature of the world economy. Although this vast pool of global capital offers
substantial opportunities for economic growth and development in nearly every country, there
is also a significant risk of financial market volatility if governments are not perceived to be
maintaining appropriate macroeconomic policies. Such volatility creates another source of
considerable uncertainty and can undermine confidence in a government’s ability to manage
change effectively. More broadly, economic cycle volatility can also have an adverse effect on
companies.

• *partie=titre Education and Training: *partie=nil Rapid changes in technology require a well-educated and adaptable
work force. Those individuals who do not have access to and take advantage of effective,
continuing education and re-training programmes will be marginalised in national labour
markets, and as a result, will feel seriously threatened by global competition. Although BIAC
recognises that individuals, together with employers, bear the primary responsibility for
ensuring that labour force skills are updated as necessary, governments can and must help by
taking steps to adapt their educational institutions to equip youth with the knowledge, skills
and attitudes required to become lifelong learners.

• *partie=titre Regulatory Reform: *partie=nil Building on the OECD’s work in this area, governments must undertake
a complete and objective review of existing regulations taking into account international “best
practices”, and reform those that impede entrepreneurial initiative and economic dynamism
including, in particular, the capacity for launching and succeeding in new business ventures.
Introducing such a practice would be a major step towards ensuring that the benefits of
globalisation accrue to the population at-large by promoting more durable employment
opportunities for workers and a wider choice of quality goods and services for consumers at the
best possible prices. In this regard, we fully support the plans to monitor and conduct country
reviews of implementation of the Regulatory Reform report recommendations. However, we
would urge that such reviews do not impose unreasonable administrative requirements on
companies, thus threatening business competitiveness.

• *partie=titre Social Safety Nets: *partie=nil Although globalisation and technological advancements are providing
many new job opportunities in our economies, some individuals may require targeted
assistance to facilitate their re-integration to the labour market. Effective programmes, which
reward individual incentive and responsibility with temporary financial support for enhanced
adaptability and mobility, will foster a much greater sense of economic security and promote
confidence in a government’s ability to help people cope with change.

• *partie=titre Good Governance: *partie=nil Vague and inconsistent approaches to policy development and
implementation undermine peoples’ confidence in their political leaders’ ability to understand
and respond to their needs. Most important, in our view, is the need to clearly articulate policy
objectives to the general public and then to ensure transparent mechanisms for evaluating
performance, control and accountability in implementation. Although the precise methods may
vary according to specific national circumstances, we believe that Member governments should
draw upon the recommendations of the OECD Public Management Service to play a more
active role in promoting constituents’ support for policy goals and the means of achieving
them. In this regard, we believe governments must promote the social benefits of globalisation
in a realistic and objective way, avoiding partisan polemics which undermine public
understanding and support for trade and investment liberalisation.

13. *partie=titre Ageing Populations: *partie=nil In this context, we fully support the work of the OECD on the
economic implications of ageing populations. In our view, one source of uncertainty about the
impact of globalisation on economic security involves the demographic trend towards ageing
populations and the continuing questions about governments’ ability to finance the same level of
care and support enjoyed by previous generations. Although continuing efforts to make sustainable
reductions in public sector deficits will help ensure that future generations are not overly burdened
by the cost of supporting tomorrow’s elderly, there is also a significant need for pension reform so
that there is a more appropriate balance between public assistance, individual savings and company
pension plans. BIAC would be pleased to work with the OECD to develop strategies and
appropriate legal frameworks for stimulating private initiatives in this area.

*{Conclusion:}

14. It is obvious that globalisation is irreversible and that it offers tremendous benefits to the
world economy and overall living standards. BIAC welcomes efforts by the OECD to promote
such benefits and calls upon OECD Governments to use the 1998 Ministerial Meeting to reaffirm
their commitment to an open international trade and investment system, and to promote greater
public understanding of and support for policies which will maximise our economies’ capacity for
adapting to technological change and the competitive pressures of globalisation.