Identifier
Created
Classification
Origin
07PARIS525
2007-02-09 14:21:00
UNCLASSIFIED
Embassy Paris
Cable title:  

OECD: MISSION VIEWS ON ENLARGEMENT

Tags:  ECON EFIN ETRD OECD 
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O 091421Z FEB 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4827
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 0310
RUEHEG/AMEMBASSY CAIRO 0936
RUEHBJ/AMEMBASSY BEIJING 1404
RUEHBR/AMEMBASSY BRASILIA 1764
RUEHJA/AMEMBASSY JAKARTA 0603
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UNCLAS PARIS 000525 

SIPDIS

FROM USOECD PARIS

SENSITIVE - NOT FOR INTERNET DISTRIBUTION
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STATE FOR E, EB - DIBBLE, EUR/ERA AND IO/S, NSC FOR MCCORMICK

E.O. 12958:N/A
TAGS: ECON EFIN ETRD OECD
SUBJECT: OECD: MISSION VIEWS ON ENLARGEMENT

SUBJECT: OECD: FEBRUARY 5 DISCUSSION OF ENLARGEMENT AND ENHANCED
ENGAGEMENT - COUNCIL IS DIVIDED

REF: (A) EUR/ERA LUFTMAN'S E-MAIL (2/5/2007),(B) PARIS 431
(NOTAL),(C) PARIS 371 (NOTAL),(D) PARIS 312

UNCLAS PARIS 000525

SIPDIS

FROM USOECD PARIS

SENSITIVE - NOT FOR INTERNET DISTRIBUTION
SIPDIS

STATE FOR E, EB - DIBBLE, EUR/ERA AND IO/S, NSC FOR MCCORMICK

E.O. 12958:N/A
TAGS: ECON EFIN ETRD OECD
SUBJECT: OECD: MISSION VIEWS ON ENLARGEMENT

SUBJECT: OECD: FEBRUARY 5 DISCUSSION OF ENLARGEMENT AND ENHANCED
ENGAGEMENT - COUNCIL IS DIVIDED

REF: (A) EUR/ERA LUFTMAN'S E-MAIL (2/5/2007),(B) PARIS 431
(NOTAL),(C) PARIS 371 (NOTAL),(D) PARIS 312


1. (SBU) SUMMARY: OECD members are divided on a number of key
issues regarding enlargement and enhanced engagement. A February 5
Council discussion highlighted differing views on how to deal with
the BRICS, whether Russia should be invited to begin discussions on
accession negotiations, whether EU membership implies special
status, the need to ensure greater global balance, and the
definition of enhanced engagement. New Zealand declared that it
could not agree to opening negotiations with Israel, based on human
rights concerns. Only Chile appears to command consensus as a
candidate for near term membership. OECD members are also grappling
with how enlargement and enhanced engagement are to be financed,
trying to balance the principle of capacity to pay with that of
covering the costs and benefits of membership. The Secretary
General's draft concept paper on enlargement will be revised based
on the February 5 discussion and circulated prior to the February 20
Council which will be attended by representatives from capitals.
END SUMMARY.


2. (SBU) The OECD Council engaged in a three hour discussion of
Secretary General (SYG) Gurria's latest informal draft paper on

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enlargement and enhanced engagement on February 5. The SYG noted
that recent developments including visits by Russian Federation
Deputy FM Denisov (Ref C) and the Chinese vice-minister for trade,
his own discussions on the margins of Davos with Israeli and other
representatives, as well as several consultations with EU
representatives had helped shape this draft. He stressed that while
the paper tried to reflect as much as possible most delegations'
points of view, it was not a mandate for enlargement but rather
identified possible elements of a mandate. He noted that the paper
remained a work in progress - with each draft being a refinement of
previous discussion and consultation. The SYG pointed out that two

key issues need additional work: (a) defining the concept of
enhanced engagement and its relationship to accession, and (b)
financing of enlargement and enhanced engagement.

General Disappointment with SYG's latest Draft
-------------- -


3. (SBU) The Australian Ambassador, who was the first to comment,
said she was disappointed with the thrust of the paper, which she
labeled a "political" document. Major flaws included lack of any
mention of the Noboru criteria and a focus on Europe. She was
especially concerned that neither Thailand nor Indonesia was
mentioned and that Southeast Asian countries were lumped together
with Egypt and Morocco. In particular, she saw no reason to elevate
Russia among the BRICS and questioned what appeared to be a
subjective recommendation to open discussions with Chile, Estonia,
Israel, the Russian Federation and Slovenia with a view to
membership. The Korean Ambassador supported his Australian
colleague regarding absence of the Noboru criteria in the paper, and
expressed his disappointment with the treatment of Asian countries.
He also emphasized the importance of sending a message to all/all of
the BRICS that the OECD wants them in the OECD, if they so desire
and meet conditions for membership. The Japanese Ambassador said
that he had been shocked that Thailand and Indonesia were not
included in the paper. He continued that Tokyo had concerns about
the EU candidates - not sure they met all of the Noboru criteria -
and did not support offering Estonia and Slovenia near term
accession discussions. He agreed that the BRICS were important, but
called for nuanced support, especially with respect to South
Africa.


4. (SBU) New Zealand's Ambassador, speaking on instructions, joined
other non-EU countries in underlining the importance of the Noboru
criteria, with the bottom line for Wellington being human rights
considerations. Human rights, along with free market and democracy,
demonstrated like-mindedness and shared values, and each candidate
needed to be considered for accession on its own merits. With this
in mind, New Zealand could support opening immediate discussions
with Chile, pursuing Brazil's and South Africa's interest in OECD
membership and offering enhanced engagement to China and India as
well as a regional enhanced engagement program to countries in SE
Asia. She said that New Zealand would watch with great interest
discussions regarding the EU but had taken no position on next
steps. Finally, because of human rights considerations, Wellington
could not accept opening discussions on possible membership with
either Israel or Russia.


5. (SBU) The German representative, speaking both in his national
and EU presidency capacities, offered that the SYG's paper "had room
for improvement." He stressed that all of the EU-8, not just
Estonia and Slovenia fulfilled the criteria for OECD membership
based on the fact that they were members of the EU. It was
important that EU members not be lumped in the same category as
countries from Latin America and Asia. The German rep also
suggested a greater emphasis on country specific rather than
regional enhanced engagement programs, with special interest shown
to Brazil, China and India. The Danish Ambassador expressed concern
that small countries (i.e., the three Baltic countries) not be
excluded and that new members must fully embrace core values if they
are expected to follow OECD norms (directed at Russia and
non-European nations). The EU Commission representative picked up on
these themes, stating that the EU-8 should be allowed to join the
OECD at some point, whether in the near, medium or long term. He
stated that willingness and a clear interest in joining the OECD had
to be a condition of membership. He agreed that the BRICS were key
players and supported formalizing relations through strong bilateral
programs and said that Brazil might be considered for accession
discussions if the Brazilians displayed greater interest in the
OECD.


6. (SBU) U.S. Charge Reid drew on points contained in ref A,
stressing our support for immediately opening accession negotiations
with Chile and Israel; expressing support for eventual Russian
Federation membership, but, at this point calling only for enhanced
engagement with Russia due to current political and economic trends;
inviting the SYG to consult with China, Brazil, India and South
Africa regarding expanded cooperation; noting that the U.S. does not
have a firm view at this time with regard to the candidacies of
Estonia and Slovenia; and supporting expanded cooperation and OECD
programs in the Middle East, North Africa, Latin America and Asia.

Outstanding Issues
--------------


7. (SBU) With the exception of Iceland, every OECD Member spoke,
expressing concerns to various degrees along the lines above. The
key issues about which differing views were expressed included:

o BRICS - all Members agree that the BRICS deserve special
consideration in order to ensure the OECD's continued relevance and
ability to influence the global economic system. Views differ,
however, as to the type of relationship to be established. All
Members appear supportive of initiating a two-step process of
consultations to clarify the interest of the BRICS in developing
closer ties with the OECD, with this initial dialogue determining
next steps, e.g., beginning an accession process. All Members
appear ready to institute enhanced engagement programs with each of
the BRICS, as part of what the UK Ambassador described as the need
to "embrace" these key emerging economies.

o Russian accession negotiations - two camps have emerged: those
opposed or very cautious (including New Zealand, Australia, the UK,
Canada, Belgium, Ireland and the U.S.) and those in favor (led by
France, Turkey and the Nordic states along with Italy, Greece,
Luxembourg, Poland, Spain and the SYG).

o Chile and Israel - The only dissent over Chile's membership (and
it was directed more at the draft than at the substance) came from
the Australians who questioned why no mention was made of the Noboru
criteria. However, New Zealand's direct opposition to Israeli
accession due to human rights concerns poses a problem which will
need to be addressed with Wellington. The New Zealand Ambassador
told us that this decision had been taken directly by the Prime
Minister. Several other delegations have noted in past discussions
that Israeli membership could pose problems.

o EU-8 - there is a definite divide between EU and non-EU


countries. The Commission and EU members assert that membership in
the EU implies that all these countries are by definition
like-minded and have demonstrated their interest and bona fides in
joining the OECD. The EU, therefore, will not accept the mention of
only Estonia and Slovenia as countries to be considered for
discussions on near term accession. On the other hand, the
Australians and most other non-EU countries argue that the SYG's
draft is too Europe centric. (COMMENT: Given the strong views, we
will look to see if the SYG refers generically to EU members in his
next draft or includes the names of each of the EU-8. If he tries
the latter, we can expect Turkey to object. Also, it would not be
in our interest of pushing for a more global OECD if Ministers were
to imply that EU membership implied eventual accession to the OECD.
END COMMENT)

o Non-EU/non-BRICS - Australia, New Zealand, Japan and Korea, and
to an extent the UK and Canada, want a stronger signal sent to
countries in Asia, including Thailand and Indonesia, that the OECD
is open to engage with them and that the door for eventual
membership remains open depending on the individual merits of each
potential candidate. They believe the SYG's proposals fall short in
sending the message that the OECD is serious about expandind its
global role.

o Enhanced engagement - how to strengthen the OECD's relations with
the BRICS is a major element of the enlargement/enhanced engagement
debate. Former Chair of the External Relations Committee (ERC),
Canadian Ambassador Bourgon, observed that a key question is whether
the OECD can define enhanced engagement without addressing
enlargement. Should enhanced engagement be the first step on the
path to eventual accession, or should it be an end in itself? The
SYG's paper fails to answer this question and calls for enhanced
engagement with individual countries of strategic interest and as
part of existing regional programs. This led Italy and several
other countries to observe that the paper was conceptually shallow,
especially with respect to enhanced engagement.


8. (SBU) The SYG responded that he would carefully examine the
issues raised, which he thought could be resolved by in-depth
explanation and clarification, although he cautioned that certain
problems (i.e., Russia) would remain. The SYG earlier made the
point that membership in other bodies (i.e., the EU) does not
necessarily qualify for OECD membership, and automaticity should not
be implied. EU membership is important but does not mean every EU
country can join the OECD. He said that as he drafts the next
version of the paper he will try to avoid acrimony but will fully
lay out the issues.


9. (SBU) The SYG plans to provide a new draft in advance of the
February 20 Council discussion of enlargement which will be attended
by representatives from capitals. There is also the possibility
that Council may have another opportunity to review a revised text
before February 20.

Financing Questions
--------------


10. (SBU) Danish Ambassador Smidt, Chair of the Special Group on
Financing, told the Council that there was emerging consensus on
funding of start up fees and the "site project." Regarding start
up, members of the Special Group agreed that candidate members
should pay the non-recurring costs of accession, based on a fee
negotiated between the OECD and the candidate and approved by
Council. New members would not be charged for the improved "site"
due to the fact the project will be completed by the time of
accession and new members will be asked to help fund the
Organization's historic pension liability (a liability that greatly
exceeds the assets new members will assume). Smidt continued that
differences remained among current Members on funding recurring
costs, where the Group was attempting to balance the concepts of
capacity to pay with benefits countries obtain by being a Member of
the OECD (cost and value of benefits). He noted emerging consensus
that part of the budget should be financed equally by all, with the
size of a base fee or minimum contribution still to be determined.
Smidt concluded that he would provide an oral report to the
reinforced Council meeting set for February 20.

11. (SBU) SYG Gurria, while noting that the Council would benefit
from his report, suggested that a written element would help in
preparing for the February 20 meeting. This was especially true for
attendees coming from capitals, who would wish to know in advance
how much progress has been made. (COMMENT: As a result of the
January 29 meeting of the Special Group, Smidt is aware that his
proposal - a base fee of 1.25 million Euros - does not command
consensus, and he is reluctant to put it in writing. At this stage,
Mission believes that having a Chair's proposal on the table,
without having a corresponding proposal (which the G-7 supports) for
fully covering recurring costs, would prejudice the discussion. The
Special Group will meet twice prior to the February 20 Council
meeting and explore if further agreement on principles can be found.
We believe it best that the question of financing be kept open,
especially given the lack of consensus on which, if any, countries
should be asked to begin accession negotiations. END COMMENT.)

REID