Global Agenda: Joining the club

Joining the OECD is a status symbol - confirmation that the Israeli economy has indeed reached developed status.

groucho marx 88 (photo credit: )
groucho marx 88
(photo credit: )
Groucho Marx famously noted that "I wouldn't join any club that would have me as a member." Israel does not have that luxury, especially in the globalized economy that makes integration the key to participation, and participation the critical factor in surviving and thriving. That alone explains why Israel has, for well over 10 years, been aiming and endeavouring to join the club of rich and developed countries known as the Organization for Economic Cooperation and Development. The OECD - which expanded during the 1990s to include Mexico and South Korea, and then the central European former Communist countries of Hungary, Poland and the Czech and Slovak republics, to reach a membership of 30 states - was introduced in last week's column. This week we focus on the narrower question of "what's in it for us?" Dan Catarivas, former head of the Finance Ministry's International Department and now in charge of Foreign Trade and International Relations at the Manufacturers Association, sees two sides to the question - the flip side being "what's in it for them?" That's because the OECD faces a serious identity crisis: despite its expansion and inclusion of Japan, Korea, Mexico, Australia and New Zealand, it remains a very European organization, in a world where Europe's relative weight is rapidly shrinking. It must, therefore, expand its geographical spread - while remaining true to its core principles of democratic government and free markets. Israel qualifies easily for membership on all counts, perhaps to the chagrin of some existing members. But, for its part, Israel needs to upgrade its involvement in the OECD from that of participant in some committees to full membership. In part, this is a status symbol - confirmation that the Israeli economy has indeed reached developed status. But the performance of the economy in recent years is such that this type of confirmation is hardly necessary. The real attraction, from our point of view, is to be actively involved when the OECD develops the standards that will define best practice around the world in fields such as corporate governance, taxation, money laundering and even education. Obviously, a small country such as Israel can have very limited influence in the formulation of these standards - but even that is better than nothing. But what is more important is to be abreast of the development of these standards in real time, rather than having them imposed from outside and having to scramble to catch up - as has been the case hitherto. Furthermore, the peer review process that is the OECD's hallmark and that, as noted in the previous column, depends for its efficacy on the willing participation of member states, suits the Israeli governmental system very well: it has proven adept at meeting challenges defined and measured by global bodies, and respects external oversight much more than any domestic version. The elimination of inflation, the scourge of the Israeli economy for many years, is an outstanding example of how the Israeli governmental system can achieve an economic policy goal previously considered "mission impossible" once it is convinced that doing so is essential. Joining the OECD is by no means an impossible task, but it has proven complicated and difficult -mostly for reasons not connected with Israel itself, but rather stemming from the organization's internal debate as to how, and how far, to expand its membership. Ohad Bar-Efrat, head of the Bank of Israel's Foreign Relations unit, is in the forefront of the diplomatic battle underway, because central bank Governor Stanley Fischer has taken over the leadership and coordination of the intra-governmental effort - and because of his widespread global network of contacts, among which OECD Secretary General Angel Gurria stands out. One of the sure signs that Israel is taking something very seriously is if the government departments and entities involved manage to cooperate effectively - and both Bar-Efrat and Catarivas concur that has been and continues to be the case with regard to the OECD. Since the list includes the ministries of Finance, Foreign Affairs and Industry and Trade, as well as the Bank of Israel, we are talking about a rare, almost miraculous, phenomenon. Happily, all the indications are that it will be crowned with success, in that the next ministerial meeting of OECD member states - probably in May-June - will agree to accept a short list of new members, of whom Israel will be one. Then we'll find out if all the effort was worthwhile and whether membership of this elite club is really all it's cracked up to be.