June 2006

Interview with OECD Secretary General Angel Gurría

On June 1, Angel Gurría of Mexico took the reins as secretary general of the 30-nation Organization for Economic Cooperation and Development (OECD).  The Paris-based OECD assesses economic policies and compares economic performance in the United States, the European Union, Japan and many other advanced industrial economies, and it provides policy guidance to non-member economies such as China and Russia.  U.S. business has direct input to the organization through the Business and Industry Advisory Committee (BIAC) to the OECD, part of USCIB’s global network.  Mr. Gurría, who served as Mexico’s foreign affairs minister and finance minister in the 1990s, spoke with USCIB’s Jonathan Huneke just prior to taking office.

Angel Gurría

USCIB:  What are your priorities for the OECD, both immediate and longer term?

GURRíA:  We should address the issue of global imbalances, which is worrying everybody.  Here I think it is a matter of substance as well as coordination – the imbalances between savings and expenditure, the problems with the current-account deficits and the related issue of the exchange rate policy of some of the larger trading countries.  Particularly, here the question of China crops up as very relevant, because to get the balance back, you obviously need both sides to be working.  Not just the trade and fiscal deficits on the U.S.side, and similarly not just the exchange rate on the Chinese side.  Both have to be seen in parallel.

Today, there are a few other threats to the world economy out there.  How does one deal with the economic consequences of high prices of energy, of oil in particular?  There is also a risk of rising protectionism.  The Doha Round obviously does not seem to be going very well, and the problem with trade is that normally if you do not make progress, you regress.  Another threat is the deterioration in the climate for international investment.  We do not seem to be making enough progress on this front.  And within the OECD – the house of “best practices,” if you will – we obviously have to practice what we preach.  Our members have to be the shining examples.

USCIB:  Could you elaborate?  The upsurge in economic nationalism is very worrisome for our members.

GURRÍA:  That’s one of my systemic concerns.  We have a number of fairly recent examples, in France, Italy, Spain, Belgium, Luxembourg, and then, of course, in the United States itself.  That is just among OECD countries.  Now, if we look at non-OECD countries as well, we have cases in Russia, Venezuela, and most recently what happened in Bolivia with energy.  Obviously, these are very big issues, very relevant to the good functioning of the world economy and the confidence of foreign investors.  These kinds of developments threaten the more efficient allocation of resources.   Investors will think twice, some may leave countries where they have invested because of fear of changes in attitudes with respect to the investment climate by the local government.  That is not good.  In the OECD, clearly, as I said, we have to be the ones who lead by example.

USCIB:  What is the significance of a Mexican taking over as secretary general of the OECD, both for the organization and for Mexico?

GURRÍA:  I think it shows that the OECD is a truly global organization.  It also shows the transparency of the process through which the Secretary-General was chosen.  It really was an election where countries were free to choose the candidate they thought  was the best suited to lead the Organisation, given the profile they had defined before the process started.  Of course, at the OECD it is one country, one vote, whereas at the World Bank or the IMF it depends on shareholding.  But I think this process is one that others can learn from.  From the point of view of Mexico, we have been there for 12 or 13 years.  I personally chaired the annual ministerial meetings in 1999.  It is important because we are going to be looking at outreach, at the possibility of bringing in developing country members.  As someone from a developing country, I  think I am well suited to do that job.

USCIB:  Does the OECD’s recent addition of countries from Central and Eastern Europe affect the way the organization operates?  Does it change any of the priorities?

GURRÍA:  I think it already has.  The need to enlarge the membership, of course, was felt very strongly by the Europeans.  So far, four of the ten new EU countries are now OECD members, and the others keep abreast of the OECD work.  But, also, there are a number of countries that are very large – Brazil, Russia, India, China and South Africa – that are not formal members, but cannot be ignored.  If you really aspire to be a global organization, you have to consider them in everything you do.  So, we have been working with them on this outreach effort.  Whether they will become full members going forward is both a question of their own interest and preparedness, and also the collective political will of today’s members.  Here there are technical issues, economic issues, issues of best practices, but there are also financial and governance issues.

Decisions in an institution like the OECD, governed by consensus, are made differently whether there are 15, 30 or 45 members.  There comes a moment when you can no longer rely on consensus or unanimity for practical purposes.  It leads to paralysis rather than democracy.  Actually, the members have just finished working on a new governance system, which would give more weight to qualified majority votes on a broader number of issues than is the case today, so that we can have a smoother decision-making process.  After that, the next step is to look hard at the financing issues, budgetary costs of an enlarged membership.  Then, the third will be to consult on countries which have already expressed an interest and, finally at a later stage, on countries which should be approached to see if they are interested in a closer involvement with the OECD.

USCIB:  Why should business, American business in particular, pay attention to the OECD?

GURRÍA:  Well, the OECD played a very important role in the time of competing ideologies, when it was the market approach versus the centralized approach.   Now, of course, it’s a question of best practices.  How do you actually spread the best practices for the purpose of having a world economy that works better?  We are the mouthpiece of the market economies.  We are the institution that identifies, analyzes, quantifies and assesses, and then proposes best practices to countries.

If we go out to non-members, and get some of these very large economies to adopt some of the same policies, then, of course, we will magnify our own impact.  This is why the OECD deserves support.  In terms of cost-benefit, the OECD is one of the institutions that provides greater returns to its shareholders, because it is not only putting out documents or informed analyses, it is basically connecting with the countries of the world in terms of how to share these best practices.

USCIB:  How do you see the relationship with BIAC and the business community in general?

GURRÍA:  One of the things that make us unique is the relationship with BIAC.  It makes us not only stronger, but wiser and more sensitive to the issues of the private sector, to enable companies to do what they do best, which is to produce, innovate, create wealth and jobs, and improve the welfare of societies in the world.  And BIAC is our “sounding board,” : not only do we receive input from the private sector but we also receive feedback on our own proposals or ideas.  This is particularly the case with USCIB, which has not only been very supportive but is also a critical source of input in terms of the quality of the policies and the direction of our efforts.

USCIB:  One of your predecessor’s priorities was exploring ways to engage other elements in civil society, NGOs in particular.  How do you see that relationship developing?

GURRÍA:  “Civil society” is a very broad and sweeping expression.  I always hesitate to use it, because I don’t want to use words whose meaning I do not grasp fully.  BIAC is specific – it represents the businesses of the world, the global firms, one of the main engines of the global economy.  They’re the ones who pass around knowledge, capital, technology, etc., and having them as interlocutors fulfills a particular role which cannot be substituted by anybody else.  Just like having TUAC [Trade Union Advisory Committee] as interlocutors gives us the voice of the unions around the world, and of the people who are dealing with workers.  Today there are more groupings than business, or unions, or governments.  They are represented by some of these other organizations whose voices, obviously in many cases, have become very important, and where one has always to keep a close and vigilant eye. And we also have to keep an open ear and an open mind towards them.   But I don’t think they’re exclusive.

USCIB:  What are your thoughts on some of the key issues for our members with respect to the OECD – corporate social responsibility, bribery and corruption, corporate governance, counterfeiting and piracy?

GURRÍA:  On these issues, the OECD, in a way, already wrote the book.  On corporate governance, we were the ones who first started to work on it, and with the political detonator like Enron it became very newsworthy, and of course it triggered Sarbanes-Oxley and the equivalent in other countries.  But long before that, the OECD was concentrating on good corporate governance.

As you know, we got very close to having a treaty on international investment and corporate responsibility, which unfortunately didn’t come to fruition.  But a lot of the work still is there, and a lot of it continues to inspire regulators as well as the companies themselves.  And a lot of institutions are practicing self-restraint as part of their own way of life, and that came from the OECD, and we’ll continue to make progress there.  And by the way, here BIAC was an absolutely indispensable interlocutor, because if you’re not working with BIAC every day on these issues you could go out on a limb and be irrelevant.  BIAC is the one that keeps us close to the ground.

USCIB:  What will your profile be in the U.S? And how do you see the relationship with Congress?

GURRÍA:  Well the U.S. is our major shareholder.  They pay for about a quarter of our budget.  They are a very, very important player.  They are active in every committee.  If anything, I think, what we need is to work more in the other direction: bring the OECD to the U.S, because the U.S. is very present at the OECD.  How does one drive home the idea that the OECD has been so positive and so useful, with a number of initiatives that provided specific measurable benefits to the U.S.?  The first one being, of course, the fact that the OECD, as I said before, is the institution that is promoting the idea of open markets, of free economies, in fact a promoter of market economic democracy and freedom as translated into practice every day.  This is what the OECD is preaching to all countries, so that they can see for themselves what has worked.  If we didn’t exist, they’d have to create an institution like the OECD.

USCIB:  Thank you very much for your time, Mr. Gurría, We wish you much success in Paris.

GURRÍA:  Thank you.

More on the Business and Industry Advisory Committee to the OECD

OECD website