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Pr
epared for Members and Committees of Congress

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The Organization for Economic Cooperation and Development (OECD) is an intergovernmental
economic organization in which the 30 member countries discuss, develop and analyze economic
and social policy and shares expertise and exchanges with more than 70 developing and emerging
economies. The member countries include Australia, Austria, Belgium, Canada, the Czech
Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan,
Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak
Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States. While all
of the member countries are considered to be economically advanced and collectively produce
three-fourths of the world’s goods and services, membership is limited only by a country’s
commitment to a market economy and a pluralistic democracy. In May 2007, the OECD agreed to
invite Chile, Estonia, Israel, Russia, and Slovenia to open discussions for membership and offered
enhanced engagement with a view to possible membership to Brazil, China, India, Indonesia, and
South Africa.
The member countries rely on the OECD Secretariat in Paris to collect data, monitor trends,
analyze and forecast economic developments, research social changes and patterns in trade,
environment, agriculture, society, innovation, corporate and public governance, taxation,
sustainable development, and other areas to inform their discussions and to assist them in
pursuing their efforts to develop common policies and practices. The U.S. has sparred
periodically with other OECD member countries over various issues, including U.S. antidumping
laws. Christopher F. Egan was appointed by President Bush to serve as the U.S. Ambassador to
the OECD and confirmed by the Senate on October 26, 2007. Key issues for Congress include
OECD work on coordinating national approaches to curtailing bribery and the illicit use of tax
havens. Congress appropriated about $117 million to the OECD in FY2008. This report will be
updated as events warrant.

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Background ..................................................................................................................................... 1
OECD Issues ................................................................................................................................... 2
OECD and the Financial Crisis ....................................................................................................... 2
Issues for Congress.......................................................................................................................... 3

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Author Contact Information ............................................................................................................ 6

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The United States, along with a number of European countries, formed the predecessor
organization to the OECD, the Organization for European Economic Cooperation (OEEC) in
order to administer aid under the Marshall Plan for the reconstruction of Europe after WW II. In
1961, the OECD was formed to take over from the OEEC with a mandate to build strong
economies in its member countries, improve efficiency, hone market systems, expand free trade,
and contribute to development in industrialized as well as developing countries. Presently, the 30
member countries of the OECD are focusing an increased amount of their attention on developing
and newly emerging economies that adopt free market systems. As a result of this broader
perspective, the OECD is shifting its emphasis from focusing exclusively on the members of the
OECD to assessing the manner in which various policy issues affect a broad range of countries,
including the impact globalization is having on world trade, wages, and industrial development.
The OECD is organized around three main bodies: the Council, the Committees, and the
Secretariat. Committees are comprised of representatives of all the member countries. The
overriding committee is the Council, which has decision-making power. It is composed of one
representative for each member country, generally at the level of Ambassador, gives guidance to
the OECD, and directs its work. Since the work agenda is set by unanimous consent by the
Council, a veto by a Council member removes an item from the agenda. The Council meets at the
ministerial level once a year, when foreign, finance and other ministers from member countries
raise issues and set the priorities for OECD work for the coming year. About 200 committees,
comprised of some 40,000 senior government officials from the member countries meet to review
and contribute to work that is conducted by the Secretariat. In many cases, these committees
serve as conduits for providing information on work that is being conducted by officials among
the OECD member countries on economic issues. Furthermore, the Council determines the
OECD’s budget, which presently amounts to about $470 million. The United States, which
appropriated about $117 million in FY2008, based on the relative size of its economy, is the
largest contributor to the OECD’s budget.
The Secretariat is comprised of a staff of about 2,500, mostly economists, scientists, lawyers, and
other professionals, who are organized into directorates to support the work of the Committees to
deliver the work program approved by the Council. As a result, the Secretariat is organized along
substantive areas to mirror the work of the Committees, although the structure is flexible enough
to handle cross-disciplinary studies. There are 15 directorates that focus their work in such areas
as: employment and labor; environment and economics; trade and investment; biotechnology,
agriculture and science; public management; and globalization and development. One directorate
collects data, monitors trends, analyzes and forecasts economic developments, while other
directorates research social changes or evolving patterns in trade, environment, agriculture,
technology, taxation, and more.
In the 1990s, the OECD, under the direction of its member countries, including the United States,
spearheaded an international agreement to outlaw crimes of bribery and it continues to coordinate
efforts that are aimed at reducing the occurrence of money laundering and corruption. Also, the
OECD is a pivotal player in promoting corporate codes of conduct that attempt to develop a
voluntary set of standards for multinational firms that can be applied across national borders. In
addition, the OECD provides a vast amount of statistical information and data on the member
countries that are made comparable to facilitate comparison and analysis. These data include
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national accounts, economic indicators, labor force and employment, migration, education,
energy, taxation, tourism, and environment.
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The OECD is a strong proponent of the view that increasing world economic growth and welfare
is best supported by a free and open flow of goods, services, and capital. As a result, it views its
own role in this process as that of a leading proponent of the benefits of globalization and as a
facilitator in promoting a dialogue among its members and with developing countries to develop
institutions and regulatory structures that can make these benefits available to the OECD
members and to developing countries. The core work of the OECD Committees and Working
Groups is organized around five main areas in order to provide the members with studies,
technical knowledge and expertise, and to help develop guidelines and codes. These areas
include:
Trade and Investment Liberalization. Work in this area includes promoting the benefits of
open markets and analyzing trade as it relates to competition policy, the environment, labor
standards, and foreign investment. Work is also being conducted on the areas of export credit
policies, electronic commerce, corporate governance and codes of conduct, international
taxation principles and the linkages between trade, investment and economic development.
Policy Reform and Development. This work focuses on the newly emerging economies of
Russia and South Eastern Europe where the OECD is attempting to promote peace, stability,
and economic and social progress by achieving economic integration. The OECD is
attempting to establish standards for fair and non-discriminatory treatment for domestic and
foreign investors, with the full protection of property rights.
Managing New and Evolving Technologies. This area focuses on developing the necessary
ground-work for the approval, adoption, and dissemination of new technologies to non-
members. Such technologies include biotechnology and related food safety issues.
Public Governance. National governments face increased challenges coordinating trade and
economic issues. The OECD is working with national governments to find ways to include a
broader representation of groups and viewpoints to satisfy public expectations for input into
policy issues.
Social Protection. Globalization has created fears that segments of national economies will
be permanently displaced. The OECD is working with national governments to address the
needs of individuals and the member countries to utilize the human resources in each
member country.
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The OECD also moved in 2008 to apply its expertise and experience to respond to the financial
crisis and economic downturn that began to affect most of its members. On December 23, 2008,
the OECD published its contribution1 to the ongoing discussion about the optimal policy course

1 The OECD report is titled, OECD Strategic Response to the Financial and Economic Crisis: Contributions to the
Global Effort, OECD Report C(2008)191/Final, December 23, 2008. A copy of the report is available at:
(continued...)
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to follow to recover from the current financial and economic crises. The report provides a
comprehensive strategy for OECD and non-OECD members to follow in order to lessen the
negative impact of the current economic recession and to “put the global economy back on a
sustained growth trajectory.”2 This approach is based on the OECD’s experience in the areas of
market reform and corporate governance. In particular, the OECD focused its response on two
priority areas: 1) finance, competition, and governance; and 2) restoring sustainable long-term
growth. In the first area, the OECD argues that it is particularly well suited to provide an
“institutional framework for an ongoing dialogue between different policy communities.” The
OECD report argues that this dialogue should focus on such issues as: transparency; corporate
governance; competition; tax; pensions; and financial education.
In the second area, restoring sustainable long-term growth, the OECD argues that it can
contribute as a result of its expertise in such areas as: open markets; employment; environment;
and innovation. In this area, the report argues in favor of low carbon paths to growth; ecology-
friendly innovation, and knowledge creation. In addition, the OECD approach favors a “healthy
balance between governments and markets,” and attempts to “define exit strategies for
governments to withdraw their intervention in the private sector,” once the current crises have
been resolved.
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Among some consumer groups, there is growing concern over the economic impact of
globalization. These concerns, in turn, are spurring some groups to single out the OECD for
criticism as a result of the OECD’s leading role as a proponent of free trade, open markets, and
globalization. One criticism, in particular, that is expressed by some groups, is the view that the
OECD represents a danger to national sovereignty because they claim it is one among a number
of international bodies that exceeds the authority of national governments, yet is accountable to
no one. Others view the OECD as an economic cartel dominated by the United States and serving
mainly the economic and political interests of the United States.3 These groups also argue that the
OECD is pursuing free trade and open markets at the expense of the poorest and least developed
countries; that the pursuit of free market economics worsens further the disparity of income
between the richest and the poorest countries; and that the OECD is promoting the expansion of
multinational corporations at the expense of national governments and national economic
interests.
The OECD is the creation of its member countries and, therefore, reflects their interests and
views of its members and is independent of any other international organization,. As such, it
contends that it has no hidden or independent agenda of its own, but that its agenda is set by its
members. It also argues that free trade and open markets have proven to be the best route to
economic development and to higher national incomes and that its members promote better
understanding of the economic and social problems of developing countries.. The United States
plays a leading, but not a commanding, role within the OECD. This means that, at times, the

(...continued)
http://www.olis.oecd.org/olis/2008doc.nsf/LinkTo/NT00007AB2/$FILE/JT03257899.PDF
2 Ibid., p. 3.
3 See The OECD’s Crocodile Tears at http://www.flyingfish.org.uk/articles/oecd/tears.htm
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United States carries a larger than average portion of the burden for determining the agenda of the
OECD and in helping to direct the course of policy developments. This also means that the
United States often is a target for criticism from groups that object to the policies or the
performance of the OECD.
The United States plays an active role in the full array of OECD activities, including chairing 29
committees. In support of the needs of developed countries in the WTO negotiations, the OECD
has pursued analytical research into: the impact regional trade agreements are having on the
multilateral trading system; the agricultural policies of OECD countries; the issue of labor
mobility; the impact of barriers to trade in services; and the trade policy implications of changes
in the structure of national economies. U.S. delegates actively participated in efforts to strengthen
competition and antitrust policies within OECD countries, and to extend and strengthen the
OECD’s anti-bribery convention. In addition, U.S. delegates have supported efforts within the
OECD to review national regulatory reform efforts, because they argued that targeted regulatory
reform, especially transparency, can benefit domestic and foreign stakeholders alike by improving
the quality of regulation and enhancing market openness.
In 2002, U.S. delegates pressed for greater support for the OECD’s Arrangement on Guidelines
for Officially Supported Export Credits, which restricts the use of tied aid financing in promoting
exports. They gained support in 2002 for a U.S. proposal to merge and update two agreements
that banned tied aid in Central and Eastern Europe and key countries of the former Soviet Union,
respectively, and formally incorporated the new agreement into the Arrangement. The United
States also proposed applying the rules governing the use of tied aid to untied aid and a formal
review of the use of “market windows,” or quasi-government financial institutions that support
national exports, but are not subject to multilateral rules. U.S. negotiators oppose the efforts by
some OECD members to shift the issue of export credit controls to the World Trade Organization
(WTO), because U.S. negotiators believe that a consensus favoring controls on export financing
would be unlikely since the WTO forum would include those very developing countries that
benefit the most from export credit subsidies.
U.S. delegates have also placed a high priority on international investment issues in the OECD.
As part of the OECD’s Declaration on International Investment and Multinational Enterprises,
each OECD member has designated national contact points (NCPs), or the government agencies
designated by each country to monitor implementation of the Guidelines within their territory.
The U.S. national contact point is the Director of the Office of Investment Affairs, the
Department of State. The United States also pressed for and contributed to a working paper on the
general treatment and expropriation obligations in international investment agreements in order to
clarify the content of those obligations for arbitrators, investors, and the international community.
U. S. efforts also focused on the OECD’s High Level Process on Steel to address overcapacity in
the global steel market and any market-distorting practices that contribute to excessive and
inefficient steel capacity. In December 2002, participants agreed to develop the elements of an
agreement for reducing or eliminating trade-distorting subsidies in steel and to explore
developing a voluntary commitment to refrain from introducing new subsidy programs that may
maintain or enhance steel capacity. The United States also supported efforts to establish a joint
trade capacity building database to assist trade negotiators from developing countries.
Another area of concern for U.S. delegates has been the issue of tax havens. During the last half
of the 1990’s, the OECD member countries initiated efforts to curtail the use of tax havens for
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illicit tax purposes as part of their efforts to curb “harmful tax competition.”4 The OECD member
countries defined harmful tax competition as attempts to attract foreign investment in financial
and other mobile services by providing preferential tax treatment to such investment through a
regime that excludes local residents from benefitting from the regime or that limits access to the
local market, thereby protecting the local market from foreign competition, coupled with a lack of
transparency and a lack of effective exchange of information for tax purposes. OECD member
countries initiated these efforts because they were concerned that certain kinds of tax competition
for internationally mobile capital were anticompetitive. This project has evolved over time. The
main focus now has shifted to improving the transparency of tax and regulatory regimes and to
establishing effective exchange of information for tax purposes. U.S. delegates led the efforts to
refocus the project on advancing the longstanding policy of promoting the exchange of
information for tax purposes.
The issues of bribery and tax havens have been major concerns among the OECD’s members and
have prompted certain changes in U.S. laws. International flows of capital and goods and services
around the world, a phenomenon referred to as globalization, have grown dramatically over the
last decade and are producing significant challenges for the OECD member countries, including
the United States. International flows of capital are the prime mover behind exchange rates and
global flows of goods and services, and represent the heightened growth of foreign investment
and cross-border business transactions. One outcome of this global expansion of business
transactions, however, has been the increased use by multinational corporations and nations of
voluntary, legally enforceable, and industry-specific codes of conduct. One such code promoted
by the OECD is the Convention on Bribery of Foreign Public Officials in International Business
Transactions, which focuses on a set of issues related to the bribing of public officials. Since the
Convention entered into force on February 15, 1999, 37 countries, including the United States,5
have passed national legislation implementing the Convention. The U.S. delegates also pushed to
have the OECD update its landmark 1998 study on Counterfeiting and Piracy to determine the
extent and current impact of these activities and to improve law enforcement efforts among
OECD countries.
Since the terrorist attacks of September 11, the Financial Action Task Force on Money
Laundering (FATF), the body within the OECD that has pursued improvements in the anti-money
laundering mechanisms in tax havens and among its own member countries, has redirected its
efforts to focus on terrorist financing. In April 1990, FATF released its Forty Recommendations,
which provide its members with a comprehensive plan for combating money laundering. On
October 31, 2001, the FATF issued a new set of guidelines and a set of Special Recommendations
on terrorist financing6 (updated in 2004). In the accompanying statement, the FATF indicated that
it had broadened its mission beyond the issue of money laundering to focus on combating
terrorist financing and that it was encouraging all countries to abide by the new set of guidelines.
The Nine Special Recommendations agreed to by the FATF members are:
• Take immediate steps to ratify and implement the 1999 United Nations
International Convention for the Suppression of the Financing of Terrorism and

4 Harmful Tax Competition: An Emerging Global Issue. Organization for Economic Cooperation and Development,
Paris, 1998. http://www.oecd.org/daf/fa/harm_tax/harmfultax_eng.pdf
5 P.L. 105-366, November 10, 1998.
6 FATF Cracks Down on Terrorist Financing. Washington, FATF, October 31, 2001, p. 1.
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Security Council Resolution 1373 dealing with the prevention and suppression of
the financing of terrorist acts;
• Criminalize the financing of terrorism, terrorist acts and terrorist organizations;
• Freeze and confiscate funds or other assets of terrorists, adopt measures which
allow authorities to seize and confiscate property;
• Report funds they believed are linked or related to, or are to be used for
terrorism, terrorist acts or by terrorist organizations;
• Provide the widest possible range of assistance to other countries’ law
enforcement and regulatory authorities in connection with criminal, civil
enforcement, and administrative investigations;
• Impose anti-money laundering requirements on alternative remittance systems;
• Strengthen customer identification requirements on financial institutions for
domestic and international wire transfers of funds;
• Ensure that entities such as non-profit organizations cannot be misused to finance
terrorism.
• Countries should have measures in place to detect the physical transportation of
currency or bearer negotiable instruments (cash couriers), including a declaration
system or other disclosure obligation.

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James K. Jackson

Specialist in International Trade and Finance
jjackson@crs.loc.gov, 7-7751

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