Seeking Approval (Extract)

By ZIV HELLMAN
Extract from an article in issue 3, May 26, 2008 of The Jerusalem Report. To subscribe to The Jerusalem Report click here. Israeli leaders have termed the country's bid to join the Organization of Economic Cooperation and Development (OECD) "a matter of strategic importance" Will Israel soon belong to an exclusive economic club that includes giants such as the United States, Switzerland and Japan, and serve as a model for other nations of the world? That possibility seems increasingly likely as Israel vies for membership in the prestigious Organization for Economic Co-operation and Development (OECD). The acronym OECD may not be one that trips easily off the tongue of most citizens. But Israel's accession to the OECD, a major international organization that grants membership only to countries that accept the principles of representative democracy and free markets and have attained a high level of economic development, would serve as a stamp of recognition that Israel has "made it." It would also spur the country to adopt the highest international standards of legislation and help attract foreign investment. Israel has been vying to join the club for the last ten years, but it was only in May 2007 that the OECD Ministerial Council announced that it would consider Israel's candidacy - along with that of Chile, Estonia, Russia and Slovenia. A final decision is expected by 2009 or 2010, when the current 30 OECD members are expected to vote on Israel's membership. Although membership will not have immediate impact on the fabric of life of the average Israeli, Oded Brook, Head of International Affairs in the Ministry of Finance, says that "Israeli membership in the OECD will eventually lead to economic gains that will benefit every citizen. The effort to attain membership has already prompted major reforms in legislation, such as capital market reforms, anti-corruption laws, international tax accords and pension rights, with more on the way. This will boost Israeli adherence to the highest international standards in virtually every aspect of government, legislation and regulation," maintains Brook. Israeli leaders have termed the goal no less than a "matter of strategic importance." Sitting in his Jerusalem office behind piles of documents related to the OECD, Brooks explains that OECD membership is seen as "an important step for influencing the global economic agenda and attracting international investment. The prestige of being an OECD member, along with Israel's pledges to adhere to the organization's standards, would boost its standing in the eyes of investment ratings agencies." Being invited to begin the accession process, however, is not a guarantee that membership will automatically be extended at the end of the process. The OECD Working Group on Enlargement is currently studying the extent to which Israel meets the criteria for membership, based on what is termed "positioning" and "like-mindedness" - meaning progress in approaching OECD standards. The secretary-general of the OECD, Angel Gurría, has publicly pointed to several areas in which Israel needs to show structural progress, including increasing competitiveness, boosting productivity, and combating poverty and inequality. But improvement in these broad areas is not a necessary condition for Israel's joining the OECD. The real key to accession is the extent to which Israel can adopt the technical, legislative and regulatory steps that will align it with OECD standards and legal instruments, as spelled out in what is termed the "road map" for Israeli membership. Most observers expect Israel will be able to fulfil those terms. Israel's effort to persuade the OECD that it is up to par with international standards has already had a significant impact in several spheres. Israel has established an inter-ministerial committee to formulate policy guidelines for the reduction of greenhouse gas emissions and has prepared its first national greenhouse gas inventory. Laws have been passed to ensure that Israeli laboratories produce safety data on par with laboratories in OECD countries - thus removing a potential non-tariff trade barrier between Israel and OECD member nations. The Israeli government has accepted broad recommendations covering areas such as supply chain management, labor relations, combating bribery and money laundering, consumer welfare and taxation, in an effort to harmonize with OECD benchmarks. To bolster its case, Israel has pointed out the extent to which its laws are already up to OECD standards, citing reforms towards reducing government expenditures, cutting taxes, breaking up monopolies, privatizing state-owned companies, promoting competition, and revamping the pension system and capital markets. For a country like Israel, attaining full membership in the OECD is akin to achieving a stamp of recognition as a "developed" country. To be sure, from any number of perspectives, including per capita GDP, industrial output, exports and maturity of domestic financial markets, Israel has for a long time staked a claim as a developed nation. In terms of per capita GDP, for example, Israel is far more similar to the countries of Western Europe than developing nations such as Brazil or China. Despite this, it has often been classified among what are termed "emerging economies," especially because economists frequently use the list of full OECD members as the de facto roll of officially developed nations when conducting statistical studies. By joining, Israel will move from being compared against this list to being on the inside - and in exchange will formally commit itself to implementing the standards and practices characteristic of the world's most advanced economies. With 30 full-member countries, 70 non-members participating as observers, and international partners such as the World Trade Organization, the Bretton Woods organizations, the European Commission and the G8, the OECD is a dynamic international incubator for new ideas in areas such as trade, the environment, technology, taxation and agriculture. The organization - which has its headquarters in Paris - serves as the venue for many high-level conferences and meetings, supports groundbreaking public policy research and promulgates the spread of effective policies. With a very broad mandate covering economic, environmental and social issues, the OECD enables governments to compare experiences and answers to common problems, identify "best of breed" practices and coordinate policies. Members also speak about the "soft power" aspects of OECD activities - meaning peer pressure between participants that can be an incentive to improve policies and lead to non-binding instruments that may eventually develop into binding treaties. OECD negotiations have in the past spawned agreements on taxation treaties, multilateral investment agreements, and anti-bribery conventions. Extract from an article in issue 3, May 26, 2008 of The Jerusalem Report. To subscribe to The Jerusalem Report click here.