G20 and OECD – is there a case for OECD enlargement to all?

05.01.2023

A brief analysis, commissioned by the OECD

OECD has specified the membership criteria  since its foundation in 1961. In the beginning there were basic values: pluralistic democracy, respect for human rights, and a competitive market economy. The Noburu report from 2004 added: like-mindedness, significant player, mutual benefit and global considerations. The framework for considering now prospective members includes evaluation of the country’s system of government and economic performance over the last half decade. 

We are far away from the realization of the concept of the end of history. Thereby even readiness and commitment to rule of law and protection of human rights, but also open, transparent and free market economy seem no more self-explanatory even among democratic societies as it was imagined in 1990s. Keeping public integrity is an ever-moving target, unlike formally signing the OECD Convention. 

Values and results matter the most, if to talk about pre-accession evaluation. For example, Estonia became member of OECD in 2010, Latvia in 2026 and Lithuania in 2018. Instead of handling those three Baltic states altogether, as has been the case in many international organizations, every country and its readiness was investigated separately. Are they treated differently after their accession? Of course, not. As a matter of fact, in terms of GDP per capita, Lithuania has shown better results than Estonia during last years. 

Risks and trends of enlargement

More detailed description of OECD membership criteria enables more objective assessment of the prospective members. It is important to take into account not just the current situation, but also potential opportunities and threats. 

Comparing list of 38 OECD members with those of G20 we may bring out some risk opportunities regarding further enlargement of OECD. Conditionally we may divide the countries which belong to G20, but are not members of OECD, into several categories. Let’s use risk matrix to assess these potential members of OECD as the possible sources of problems in terms of the values and membership criteria of the Organization. The states are listed below according to their population.

Probability / likelihood   Impact / consequence / severity

Table 1. Riskiness related to the accession of some G20 countries to OECD membership.

1. China (1 413 mln) - probability is very high, impact is extremely high as well. China declares and promotes non-Western values and is unwilling to improve insufficient situation with human and minority rights, as well as intellectual property protection. Still, their ambition to dominate the world stage is more focused on power games of economic means, not on brutal warfare (as is the case with Russia). Cultural traditions and bureaucracy level make it difficult to acquire more transparency for Chinese society even if there is more political will . 
2. India (1 376 mln) – because of its large population and socio-economic challenges, the risk indicators are high for India. Global considerations prevent the accession to OECD. Still, India remains the largest democracy in the world, which does not pay efforts to oppose the rest of the world. 
3. Indonesia (276 mln) – although this presidential democracy has its difficulties with corruption or tensions (historically with East Timor and Aceh), currently it is a developing economy which might become member of OECD someday in case of willingness. Just like India, its high impact comes from the large number of population. 
4. Brazil (216 mln) – recently this country suffered a turmoil of Bolsonaro fans in the footsteps of Trump. Maintaining rule of law is a crucial question for the country. Together with Argentina and Peru, Brazil’s potential membership in OECD is under negotiations. President Lula might strengthen this course. So far, corruption, crime and social inequality weaken the potential of this emerging economy.
5. Russia (145 mln) – the nightmare of international cooperation, as long as this failed empire exists. Pluralistic democracy to no one, prosperity to the few. How do we imagine “high-level discussion of policy issues pertaining to the promotion of international financial stability”, involving Russia? Accession talks to OECD were halted in 2014 and terminated in 2022. 
6. South Africa (61 mln) – rainbow country of ubuntu concept and with 11 official languages is currently facing high crime and unemployment, failing government and collapsing infrastructure. World Economic Forum declared in 2022 that South Africa is at risk of state collapse. Therefore – no fast accession to OECD. 
7. Argentina (47 mln) – their return to democracy has recently faced the accusations of corruption, bribery and misuse of public funds during previous presidencies. Despite of that, Argentina seems to be on the promising track again. Still turbulence of global economy might influence Argentina strongly.
8. Saudi Arabia (35 mln) – unitary Islamic absolute monarchy has highly competitive economy but does not have any need or organic wish to become democracy and to follow Western values. They can be valuable economic partner, but not in the framework of OECD. 

Just like G7, also G20 needs to push out Russia from the framework, in the name of better ability to work and keeping the common values alive. Ukraine is currently the last country to present its application to OECD membership. After recovery from war, continuing EU-integration and successful implementation of the new Marshall Plan, Ukraine with its strong economic potential will be a serious candidate to take the Russia’s position also in G20. 

Another candidate will be Poland with its long-time aspirations towards G20. If Poland is capable to keep their current position as the closest ally to Ukraine, the Warsaw-Kyiv axis will become growingly dominant also in the framework of EU and NATO. Definitely, that would be a benefit not just for the post-Eastern bloc (including Baltic states), but in a long term also for the existing axis of Berlin-Paris.

As a conclusion, we can bring out the forecast regarding future enlargement of OECD: 

1. Yes to strengthening regional players: Brazil and Argentina (and possibly Poland and Ukraine), less Indonesia might be interested in joining the OECD. Still, stability and needful criteria must be met for the accession.
2. Serious doubts with countries unable to fill the criteria in the perceptible future: there are severe value differences concerning Saudi Arabia and governance problems concerning South Africa. 
3. No to the global headache: India might be too large for OECD, China plays anyway its own game. Russia must be isolated anywhere at the international stage. 

Further relations of G20 and OECD

The idea about using OECD as a secretariat for Group of Twenty is a subject to rise up periodically. OECD is among of permanent guest invitees to participate in the pre-planning and policy proposals for G20 summits. As an example from last years, we can bring out OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). OECD considers itself as a strategic advisor for G20, providing data, analytical reports and proposals on specific topics in close cooperation with IMF, UNDP and other relevant international organizations. 

Evidently OECD can assist G20 even more and on a regular basis. On behalf of the academic researchers, economists and specialists of public administration it is logical to recommend this development as a management model for the future. Permanent secretariat could give more professional approach, stable governance and sustainable policymaking for G20. Also, better transparency and accountability, strengthened legitimacy of the group and efficacy of its declarations would be the benefits. 

However, implementation of that kind of model seems to lack political willingness. In terms of population, the smallest member of G20 is Australia with its 26 million people. It is evident that every member does have enough administrative resources to take care for temporary secretariat – just like in the case of EU presidency. Keeping all preparative and administrative activities under the full control of a hosting country (India in 2023), ensures also more opportunities and free hands in policymaking during the presidency. 

In this context China and Brazil as permanent non-members of OECD supported French President Sarkozy’s initiative about the establishment of a permanent G20 secretariat, while full members Italy and Japan opposed it. Fear about bypassing formal rules and decision-making procedures characterizes even the largest states.

Stronger OECD strengthens the world

OECD is continuously capable to share its intellectual support and operational assignments for G20 and other international organizations. As a highly recognized knowledge hub, OECD will remain strong partner for its member states. Deepening roots of populism have brought self-deceiving narratives to the policymaking arena, promising mystic historic significance for several nations just in their own eyes. OECD can be the neutral expert to give assessment regarding the status of democracy and market economy in one or another country. 

OECD’s expanding range of expertise includes green growth, environment and energy, employment and consumer protection, financial reforms and taxation, investment and trade. Challenges on these discourses have become more serious during last decade. OECD has proved itself as a neutral and multifunctioning auditor on a broadening variety of issues. Thereby growing cooperation of international entities will rely on OECD also in the future. One of the results would be a growing number of states, willing to become the members of OECD. 

But here is also an important precondition, a dramatic “if”. As can be seen on the case of Hungary or some non-European countries, there is a growing tendency to give up democracy in the name of “more easily explained” current time and a simpler worldview. Certainly, these populist processes make OECD even more irreplaceable. Someone must make the audit and say out loudly uncomfortable truth. And OECD has a mandate, managing skills and brains, not just for global minimum corporate tax. Therefore, it is possible to make the forecast: OECD will grow, both in terms of quality (expertise of issues for research) and quantity (number of members), but not to a great extent. 

© Eero Raun, 2023