Ambassador Daniel Yohannes delivered the following remarks to the American Club of Paris on April 7, 2015.
What an honor to be here today in this beautiful venue, with all of you, to talk about the OECD and its importance to the United States.
Before coming here, I did a little homework on the history of the American Club of Paris. And what I realized is that the American Club and the OECD are not so different. The American Club of Paris was established during a critical period for U.S.-Europe relations. It was a time when the United States was assuming a greater role in maintaining peace and stability in Europe. For over a century, this club has helped strengthen the U.S.-Europe relationship by connecting people around shared ideas.
The OECD emerged in a different but equally critical context. Europe, devastated by war, was struggling with hunger and instability…and looking to the United States for help. Like the American Club, the OECD strengthens relations between the United States and Europe, and brings people together to share ideas. So, ladies and gentlemen, it seems natural to be addressing the American Club of Paris about the OECD.
Let me begin with a brief history lesson on why the OECD was created and how it has evolved. Then, I will dive deeper and touch on how the organization works, and how it benefits the United States. I will end with some thoughts on my priorities to advance our interests.
History of the OECD
The story of the OECD begins with a general and his vision. General George C. Marshall served in two world wars. When the second war concluded, he understood that creating lasting peace and stability in Europe would take more than rebuilding towns and factories. It would also require shared economic values.
In a speech at Harvard University in 1947, General Marshall laid out his vision for an ambitious economic recovery program. In his words, it had one purpose: “the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.”
In one year’s time, this vision became the Marshall Plan. The OECD’s forerunner, the Organization for European Economic Cooperation, was created to coordinate and supervise implementation of the Marshall Plan.
By 1960, the Marshall Plan had been completed and Western Europe was prospering. Still, many believed that the mechanism for economic cooperation that had been created through the OEEC was still valuable. It could be adapted to help maintain peace and prosperity in an era of political upheaval and Cold War tensions. With this idea in mind, 20 countries, including the United States, came together in 1961 and founded the Organization for Economic Cooperation and Development.
When President John F. Kennedy ratified the convention establishing the OECD, he said that it reflects “the intention of the United States to enter upon a new era of cooperative enterprise with our Atlantic partners.” Indeed, the OECD would consolidate the Atlantic community. It would be to economic cooperation what NATO was to military cooperation.
Throughout the Cold War, the OECD served as a standard setter in policy areas ranging from trade to education and labor policy. Through this work, it ushered in the greatest era of economic growth the world has ever seen. When the Cold War ended, the OECD played a major role in integrating former communist countries into the community of market democracies. Today, membership in the OECD includes countries in Latin America and Asia, making it more of a global institution. And the OECD continues to evolve as it engages emerging economic powers, such as Brazil, China, South Africa, Indonesia and India.
Just last month, the journal Foreign Affairs published an essay on how the OECD is adapting to tectonic shifts in the structure of the global economy. What the organization has done is give special “key partner” status to five important emerging economies. This status allows them to participate in a range of OECD activities without becoming full members. The Foreign Affairs essay called the Key Partner approach “the most promising strategy adopted to date by any international organization.” The piece argued that the OECD could play an important part in encouraging emerging powers to adopt reforms that are in line with our own priorities and recommendations.
In the 54 years since its creation, it is clear to see how the OECD has evolved from a European club to a global network.
How the OECD Works
So, what does the OECD do? How does it work? A lot of people in the United States ask me these questions. Despite its importance, the OECD is not well-known or understood outside of academic and policymaking circles. But, the questions are not easy to answer because the OECD is a complex organization working on so many issues. To make it simple, I think of the OECD as a policy engine that works in three distinct ways. These ways are grounded in data, learning and sharing, as well as standards.
First, the OECD collects and analyzes data to help us understand the major issues we face today- issues like whether our education systems are effective, how our economies are doing, or how to reduce carbon emissions while boosting economic growth. The importance of this data cannot be underestimated. It is often what compels governments and other stakeholders to take action. To make policy changes, we need reliable information, and this is what the OECD provides through what it calls “evidence-based analysis.”
The second way the OECD works as a policy engine is that it allows countries to learn from one another. The reality is that no one country has all the answers. The OECD serves as a network for governments, companies, trade unions and others to come together, discuss issues, and identify best practices.
Finally, the OECD creates and enforces standards on key issues such as combatting corruption and climate change. This is critical because these kinds of problems cannot be addressed solely at the national level.
Take corruption, for example. President Obama calls corruption a threat to our national security because of its corrosive effects on economic growth, public governance, and respect for human rights. According to the World Economic Forum, corruption costs the global economy 2.6 trillion dollars each year, with over 1 trillion dollars paid in bribes. It is a serious problem.
The United States has been working since the 1970s to combat corruption through tools such as the U.S. Foreign Corrupt Practices Act. This act forbids American companies from bribing foreign public officials. But the challenge is that anti-corruption is a “race to the bottom” issue. Unless other countries adopt similar legislation, not only will bribery continue, but U.S. companies will be at a competitive disadvantage when they do business abroad.
This is where the OECD steps in. It helps level the playing field for everyone. It shows countries the costs of bribery and encourages them to adopt anti-corruption measures. Forty-one countries have ratified the OECD’s Anti-Bribery Convention- what Transparency International calls the “gold standard.”
To monitor and enforce compliance, the Convention established the Working Group on Bribery. Believe me, the Working Group doesn’t pull any punches when reviewing whether countries are living up to their commitments.
Benefits to the United States
So what does all this mean for the United States? Like I said, the OECD is not well-known or understood in the United States. And yet this organization has a major impact on everything from our energy to our trade policy.
The OECD is, in many ways, an extension of U.S. foreign policy. Thanks to its reputation as a trusted source of information and expertise, it is a powerful instrument to promote our values worldwide.
I talked about the “key partners,” but the OECD is also cooperating with countries all over the world. And wherever it goes, it promotes free markets, good governance, democracy, and transparency. For instance, in Colombia, which is working to become an OECD member, the organization is pushing for a number of labor, trade and environmental reforms that are in line with U.S. bilateral recommendations. So, you see, the OECD is a powerful foreign policy tool for the United States.
But the OECD also brings tangible benefits to American businesses, taxpayers, and students. Let me give you just a few examples.
The OECD sets international standards for chemical safety requirements. This alone helps save American businesses more than $150 million each year. How? Because, thanks to the OECD, U.S. companies don’t have to spend money adapting to a new set of chemical safety standards each time they enter a market.
The OECD’s Export Credit Agreement has also been a boon to American business. This agreement helps eliminate trade subsidies and distortions among OECD Members. It helps U.S. companies increase exports and saves the United States an estimated $800 million annually.
The OECD also helps curb tax fraud and protect the integrity of our tax systems by developing the global standard for “automatic exchange of financial account information.” Over 100 countries have signed on to this standard. The “automatic exchange” standard makes it easier for the United States to obtain information on financial accounts held abroad by U.S. citizens. It helps us detect tax evasion and potentially generate millions, if not billions, of dollars in additional revenue.
You may have heard of the PISA, the Program for International Student Assessment, which compares the math, science and reading skills of 15-year-olds in 65 countries. PISA shows us where we should improve our educational system so that our children can thrive in an increasingly competitive global economy. As the Washington Post recently noted, the PISA survey has fueled the debate in the United States on the need for greater equity in our education system.
The OECD also identifies policies that help spur economic growth and create jobs in the United States. This includes at the local level, in cities such as Chicago.
In all these ways and more, the OECD is a very strategic platform for the United States. My job as Ambassador is to make sure we use it effectively.
With that goal in mind, let me tell you what we have planned this year. My team and I are focusing our efforts in four areas: investment, development, climate change and inequality. All of these are central to President Obama’s vision of prosperity that is sustainable, environmentally friendly, and shared across all levels of society.
The reality is that we are at a crossroads right now. We know that in order to create shared prosperity in the United States, we have to make some fundamental changes both at home and abroad.
We must address climate change by harnessing clean, alternative and renewable energy.
We must increase investment and trade because 95% of the world’s consumers (in terms of population) are outside of the United States.
We must foster growth in developing countries because their success will create economic opportunities and jobs for us too.
And we must address what President Obama has called “the defining challenge of our time” — the growing inequality we see not just in the United States, but also across the world.
The truth is that, to do these things, we need the OECD, maybe more than ever before.
My team and I will work with the OECD in the months ahead to encourage investment in low carbon infrastructure, and to make energy greener and more accessible. We’ll be looking at how best to support the sustainable development goals being negotiated at the United Nations. Such goals will serve as the world’s development roadmap for the decades ahead. And we’ll be examining ways to promote “inclusive growth,” to ensure that everyone shares in the benefits of economic growth.
Secretary of State John Kerry recently pointed out, “the true measure of our success is not whether our economies continue to grow, it’s how they grow.
The world needs a new era of global prosperity and stability, where growth doesn’t come at the expense of social cohesion or environmental protection.
And for that, the world needs the OECD.