Canada OECD Info- January 2009

In this Issue

 Message from Ambassador Lapointe: Highlights of 2008, Looking Forward to 2009
 OECD Strategic Response to the Economic and Financial Crisis
 OECD Euro Area Survey
 New Transfer Payment Policy

New Year’s Message from Ambassador Paul-Henri Lapointe

   

2008 was a busy and fruitful year for Canada at the OECD. Our Delegation welcomed over 730 Canadian delegates attending over 850 OECD meetings.

The OECD produced some important studies on Canada in 2008. The Economic Survey of Canada was released in June. The report highlighted Canada’s strong macro framework but pointed to challenges in ensuring the sustainability of our energy sector. Also released was the study on youth employment in Canada Jobs for Youth. The report reaffirmed Canada’s strong performance in comparison to other OECD member countries. Canada’s youth labour market remains dynamic with the youth employment rate (i.e. % of population)at 59% in 2006 compared to the OECD average of 43%. These two reports were launched by OECD Secretary-General, Angel Gurría during an official visit to Canada last June. During his time in Ottawa and Montreal, Mr. Gurría exchanged with several Cabinet Ministers, parliamentarians and discussed OECD priorities with Deputy Ministers. Mr. Gurría was also a key note speaker at the Montreal Conference where he addressed policy-makers, business leaders and civil society on education and water.

After the 2007 Development review of Canada, Canada recommitted itself to the OECD’s Aid Effectiveness Agenda by playing a leading role in the Accra High Level Forum and the development of the Accra Agenda for Action. Canada (CIDA) continues to support the OECD Middle East and North Africa (MENA) Initiative relating to both Investment and Governance.

2008 was a year of significant reform at the OECD. At the Spring OECD Ministerial meeting, Members concluded year long negotiations on financial reform. The results allow for a more equitable repartition of the costs of membership. Members agreed to a base fee to be phased in over ten years, on top of which the scale of contributions would be applied. Canada played an instrumental role in achieving this outcome which will put the OECD on a sound and stable financial foundation in the years to come.

Thanks to the financial reform, the OECD’s Part I budget will be increased to reflect the rate of inflation in France, injecting a cumulative total of 12.1 million Euros over the next two years. Through close collaboration with other delegations, Canada was able to ensure that the work programme reflects Canadian priorities. Indeed, the budget for the next biennium includes substantial funding for work on enhanced engagement with Brazil, China, India, Indonesia, and South Africa. Additional funds will also be directed to work on innovation, health care, the economics of climate change and the OECD’s strategic response to the financial crisis.

2008 was also marked by our desire to bring more Canadian talent to the OECD. In December 2008, we launched the Canada – OECD Assignment Programme with Secretary-General Gurría. This programme aims to give promising Canadian public servants the opportunity to enrich their careers through international experience contributing to cutting edge OECD policy research. The first two participants started their two year assignments last week and we will soon be launching the second recruitment round with the Canadian Public Service Agency.

Canada continues to be well represented in the OECD in 2009. Mr. Bill White, former Head of the Economic Department of the BIS and previously Deputy-Governor of the Bank of Canada, was nominated Chair of the prestigious Economic Development and Review Committee. Canadian national, Ken Ash was appointed Director of Trade and Agriculture after serving as Deputy Director since 1999 and playing a key role in the merger of the Trade and Agriculture Directorates in 2006. In 2008, Canada chaired 21 Committees and working groups and 90 Canadians were employed by the OECD.

Another significant achievement towards more effective Canadian participation in the OECD, is the reform of the Government of Canada Transfer Payment Policy. This reform makes it easier for the Government of Canada to contribute financially to OECD projects of particular interest through voluntary contributions. The Canadian Delegation to the OECD had long been preoccupied by the difficulty Canadian departments had encountered when trying to fund OECD work and salutes this development.

2009 looks to be equally as challenging a year with several important projects ahead.

The OECD will continue its work on the economic and financial crisis. While national governments are focussed on immediate stability concerns, the nature of the OECD’s work allows it to look beyond at pro-growth policy in the long-term. The OECD has developed a work plan covering two types of issues: causes and contributing factors to the crisis (regulatory framework, corporate governance, tax incentives) and issues arising from governments’ response to the economic crisis (which could contribute to or damage the prospects for long-term growth). The Secretariat has identified a number of deliverables in the form of surveillance, recommendation and actions/instruments to implement the OECD’s response in the short term (next three months) and medium term. OECD Committees will be responsible for implementing and monitoring the content of the OECD’s strategic response to the crisis.

The Annual Ministerial meeting in June will be chaired by Korean Prime Minister Seung Soo Han. At this occasion Members will be presented with the interim report on the OECD’s Innovation Strategy – the OECD’s advice to policy-makers to foster innovation for growth. In 2009 the OECD will host a High-Level Policy Forum on Migration and an Employment Ministerial in the fall. The International Energy Agency will also hold its bi-annual Ministerial October 14-15.

The OECD will again be present at the Montreal Conference. Secretary-General Gurría will be a key note speaker and will launch the session sponsored by Industry Canada on Innovation and Stability.

2009 will be an important year for building the OECD’s relationships with the enhanced engagement countries. The 2009-2010 PWB maps out ambitious programmes of cooperation in areas such as investment, economic surveillance and tax. Enhanced engagement countries will be increasingly present in OECD Committee meetings serving to build a broader forum of policy dialogue on global issues.

The Canadian Delegation will continue its efforts on OECD reform – making sure the OECD’s governance is transparent and capable of responding rapidly to members needs. As such, we will be actively involved in the review of the OECD’s priority setting procedures and evaluation mechanisms.

On behalf of the entire team at the Permanent Delegation of Canada to the OECD, I wish you a very happy, productive and successful 2009. As always, we look forward to welcoming all delegates and we appreciate your contribution to the OECD work. We hope to see you the next time you are in Paris.

OECD Tackling the Crisis with its Strategic Response

For several months the OECD has been developing a strategic response to the current financial and economic crisis focussing on regulation, competition, corporate governance and restoring growth in the long term. Developed by the Secretary-General, the various OECDDirectorates and the Council, the document was approved by Council members in December. The OECD’s strategic response puts the accent on the value added of the OECD, i.e. its committees composed of experts working to coordinate policies and Secretariat analysis of structural issues to identify solutions to medium and long term.

The response of the OECD examines two areas:

1. Finance, Competition and Governance - This theme focuses on some of the causes of the current crisis and will analyze and strengthen the regulatory framework of the economy. Work will be undertaken too look at incentive structures in the financial system, corporate governance, taxation, competition policy, consumer protection and consumer education.
2. Restoring conditions for long term growth sustainable - This theme focuses on keeping markets open for trade and investment, macroeconomic, fiscal and labour market policies, green growth, innovation and development.

The OECD will also strive to ensure that current measures to boost the economy have no adverse effects in the long term. The risk is that these interventions weigh too heavily on public finances and undermine the dynamism and resilience of the market economy.

The OECD will publish its Economic Outlook in March. The study will look at how six the crisis is affecting OECD countries, large emerging market economies and accession countries six months after the collapse of stock markets.

OECD Committees will monitor the implementation of the Strategic Response. The financial and economic crisis will undoubtedly be the main theme of the OECD Ministerial Meeting of the OECD in June.

OECD Euro Area Survey

  

The OECD Economic Survey of the Euro Area was released on January 14. One of the central issues addressed in the Survey is the state of financial sector regulation and supervision in the Euro Area. According to the OECD, the current system based on national-based oversight is inadequate in the current environment and should be replaced by a single EU-wide supervisor or a central agency that works closely with national bodies. The integration of European markets has significantly increased cross-border contagion risks as financial institutions typicallyoperate in multiple jurisdictions. The multi-national rescue of Fortis and Dexia last September underscored the integrated nature of the financial system in Europe. The recommendation for a new single supervisor for the Euro Areais especially relevant for Canada, where the government has announced its intention to establish a national Securities Commission to strengthen the foundations of Canada's capital markets.

The Survey also painted a bleak picture for the economic outlook and new data since the completion of the report has revealed the situation to be even worse. The OECD recommends an accelerated easing of monetary policy by the European Central Bank. Inflation fears have vanished and, to some extent, have been replaced with some concern that prices may fall. Moreover, the relatively slow pace of monetary easing has resulted in effective appreciation of the euro, which is undermining exports in an already challenging trade environment. The report acknowledges that monetary policy can only have a limited effect given the severity of the downturn. As a result, fiscal stimulus is also recommended, although this will surely result in a violation of the Stability and Growth Pact. As a result, the OECD recommends stimulus that is temporary as well astargeted on areas where the fiscal multiplier will be largest and where measures have greatest impact on long-term growth potential. Given the rapid economic slowdown, measures must be, above all, timely.

Voluntary Contributions Made Easy !

A new Treasury-Board approved Policy on Transfer Payments and its accompanying Directive on Transfer Payments came into effect on October 1, 2008. This is good news for Departments interested in making voluntary contributions to the OECD. The new Policy and the new Directive better take into account the fact that transfer payments to foreign recipients may not be subject to Canadian law and that foreign recipients may already have well-established accountability structures: this is certainly the case of the OECD.

Previous transfer payment guidelines gave Departmental managers relatively little flexibility in drafting funding agreements with the OECD. Negotiations over clauses important in the Canadian context but out of place in a grant or a contribution agreement with the OECD sometimes turned out to be difficult and protracted. The new Directive provides a streamlined, simplified, and more appropriate list of elements that need to be addressed in any funding agreement (voluntary contribution agreement) with the OECD. While our experience with the new Policy and Directive is still limited, informal feedback from the OECD and IEA Secretariats indicates that future negotiations should prove to be less problematic for everyone.

• The new Policy on Transfer Payments is available at: http://publiservice.tbs-sct.gc.ca/pol/doc-eng.aspx?id=13525&section=text
• The new Directive on Transfer Payments is available at: http://publiservice.tbs-sct.gc.ca/pol/doc-eng.aspx?id=14208&section=text

It is recommended that Departmental managers consult with their internal corporate finance services to enquire how this new Policy on Transfer Payments and its associated Directive on Transfer Payments will impact existing contribution programs as well as recent efforts by some Departments to establish new programs.

The Canadian Delegation to the OECD would be interested in receiving any feedback that Departmental managers might have in applying the new guidelines to the OECD. The Delegation also stands ready to assist and facilitate discussions with the OECD and IEA Secretariats as appropriate.