Expectations of the OECD in an
Increasingly Complex World-On the 60th Anniversary of Japan's
Accession to the OECD(Abstract)
March 19, 2024
Keidanren (Japan Business Federation)

１．International Environment and Japan's Current Situation
２．The Current Status of the OECD and Japan’s Position
３．Role Expected of the OECD
４．OECD Organization and Management
５．Expectations of the Japanese Government
６．Activities of Keidanren and BIAC

Background3◼ This year marks the 60th anniversary of Japan's accession to the OECD in 1964.
Japan serves as Chair of the OECD Ministerial Council for the first time in 10 years.
◼ Japan has a great responsibility to steer global governance. At the same time, thisis an excellent opportunity to enhance its international presence by exercisingleadership in rebuilding a free and open international economic order.

• Since its founding in 1961, OECD is contributing tofree and open international economic order bypresenting standards for developed countries, basedon its research, analysis and recommendations.

••

By increasingly confrontational and divisive world,free and open international economic order faces
at great danger.
As the share of OECD members in the world
economy declines with the emergence of the
Global South, the nature of global governance,
including OECD, is being questioned.

•

While Japan conducts responsibilities after joining
the OECD, Japan realized high growth throughbenefiting from the free and open international
economic order.

• Japan is at a turning point, which determine whether
it can maintain its status as advanced nations.
• Japan must shape its future so that we can look backon the sixty anniversary as an opportunity to remain
an advanced nation by re-committing itself toglobalization “re-globalization” and making its
economy and society stronger.

We sincerely hope that the OECD is an organization which contributes to maintaining andstrengthening free and open international economic order on which Japan depends.

1. International Environment and Japan's Current Situation

4◼ In a world with intertwined issues, overcoming confrontation and division and rebuilding a free
and open international economic order is like undertaking a voyage without a chart.
◼ To secure as much predictability as possible, the followings are necessary; (a) evidence-based
policy making, (b) selecting most appropriate policy based on objective evaluation of the
impact, (c) fostering, formulating, and implementing norms and rules.

International Tensions

Economic Activities⚫ Various restrictions are being
imposed
on
trade
and
investment⚫ Measuresviolatingnational
treatment have been taken⚫ Globalization
have
been
highlighted as causes of widening
disparities and adverse effects on
employment⚫ Trade volume growth slows, but
companies operate globally⚫ Cross-border data distribution
volume has increased
significantly⚫ Appropriate use of technologies
that are advancing rapidly andnon-linearly is an important issue

Japan⚫ Japan is not immune to thechanges in the international
environment⚫ With declining population, it isessential for Japan to capture
overseas demand as well as astable supply of food energy
resources

To overcoming confrontation and division, and rebuilding a free and open
international economic order is like a Voyage without a Chart① Formulate policies based on concrete evidence to understand the reality of complex situationsas accurately as possible② Formulate multiple measures to address the issue, evaluate their impact, and select the mostappropriate policy③ Formulate and implement norms and rules to promote cooperation among countries andregions and avoid unnecessary conflicts

2. The Current Status of the OECD and Japan’s Position

5◼ The OECD currently consists of 38 countries. Two-thirds are in Europe.
◼ The OECD examines issues in a variety of fields in each of its policy committees.
The outcomes contribute to the formation of international norms and rules.
◼ As the functions of other institutions decline, the OECD, which shares values, is avaluable forum for constructive discussion.
◼ Japan is expected to play an important role in introducing Asian views and bringing
universality to OECD standards■OECD Members and Candidates
Candidates（38 member countries）

Croatia• Mexico• Norway• Chile• France• Australia• Iceland• Israel• USA• Italy• New Zealand• Türkiye• Colombia• Canada• EU• Switzerland• Korea• Costa Rica

• Japan• Germany• UK• Netherlands• Sweden• Spain• Ireland• Belgium• Austria• Portugal• Czech Republic • Slovakia• Latvia• Luxembourg• Denmark• Greece• Hungary• Lithuania• Finland• Poland• Estonia• Slovenia

BrazilBulgaria
Peru
Romania
Argentina(Accession discussions
opened in Jan. 2022)

Indonesia(Accession discussions
opened in Feb. 2024)＊India Begins Accession discussions to IEA

3. Role Expected of the OECD
(1) Supporting policy establishment through collection, analysis,
and provision of evidence

6◼ In this complex world, where conflict and cooperation are intertwined, it is important toaccurately grasp the actual situation and visualize the problems.
◼ The OECD collects data in various fields from governments and international organizations,enabling international comparisons. In addition, even for issues that have not yet been definedinternationally, the OECD monitors and analyzes the policies of each country and provides
evidence by classifying them.
◼ Now is the time to fully demonstrate and strengthen its think tank function.

e.g. Trade in Value Added（TiVA）

e.g. Market-distorting subsidies⚫ Widening disparities within member states
became headwinds of trade liberalization anddecarbonization becomes an important issue⚫ The OECD uses TiVA statistics to show the
impact of other countries’ demand on
employment through trade and CO2 emissions
associated with the production of imported
goods⚫ It is difficult to ascertain the actual market-distorting subsidies,
since the WTO obligation to notify subsidies is not compliedwith and measures taken by countries lack transparency⚫ The OECD has identified government supports for industries⚫ Usefulineliminating
protectionism
andpromoting trade liberalization as well as aiding
deeper discussion of trade and the environment.

➢ Efforts should be made to raise public awareness of such evidence, as well as to grasp
the reality of new issues that arise in severe international situations (e.g., deterring
acts of economic coercion).

3. Role Expected of the OECD
(2) Contributing to better policy formation through assessmentof policy impact

7◼ The OECD's modeling and other analyses using data and evidence can predict the impact
of various policies and contribute to evaluating policies objectively. This is expected tocontribute to better policy selection by each country.
◼ OECD's ability to share best practices will enable each country to select better policy.
◼ By establishing a certification framework based on objective assessment of policy impact,
countries could be encouraged to adopt better policies.
◼ Peer review is an effective way to ensure accountability and effectiveness, but reviewer’s
objectivity is a prerequisite.

Policy Impact Assessment
e.g. Moratorium on impositionof customs duties on electronictransmissions⚫ Somecountries
raisedobjections to the current
practice of not imposing tariffs
on electronic transmissions⚫ The OECD has estimated thatthe potential impact of tariff
revenues reduced by themoratorium is small⚫ Expect the OECD will workwith the WTO to make themoratorium permanent.

Sharing Best Practicee.g. IFCMA⚫ Allowing various pathways isnecessary to tackle climatechange.
⚫ Expectations of the IFCMA ishigh, whose objective is tomeasure climate change
policies and promote
multilateral dialogue.
⚫ Expect that effective climatechange measures compatible
with economic growth will beshared.

IFCMA：Inclusive Forum on Carbon Mitigation Approaches

Certification Framework
e.g. Reduction of illicit
trade⚫ The OECD pointed out theimportance of ensuringtransparency in free tradezones to reduce illicit trade.
⚫ The OECD has advocated theestablishment of a frameworkto certify free trade zones⚫ Expect that the spread of thecertification framework will
increase transparency in free
trade areas and reduce illegal
trade3. Role Expected of the OECD
(3) Leading international rule-making(i) Rule-making in new fields

8◼ OECD discusses measures to address new issues requiring international coordination.
◼ If each country takes its own countermeasures, there is a risk of regulatory overlap,
inconsistency, or loopholes among countries. The significance of formulatinginternationally applicable rules through the OECD is high.
◼ Even if political attitudes that encourage divisions among member countries are evident,
it is expected that the OECD will quantify the negative effects and encourage theadoption of better policies.

e.g. International taxation

e.g. DFFT

e.g. AI⚫ Inclusive framework with over 140
countries promotes international
taxation rule making based on theopinions of the business.
⚫ OECD, which has accumulated
discussions including non-member
countries, should continue toexamine the issue and reach aconclusion. The discussion should
not be shifted to other fora.
⚫ Companies need to invest money
to deal with new rules. Its practicalburden should be reduced, andpredictability should be increased⚫ Unilateral tax measures such as
digital service taxes or countryspecific national reporting should
be withdrawn.

⚫ Regulations on cross-borderdata flow differ from country
to country.
⚫ We welcome theestablishment of aninternational framework in theOECD to implement DFFT.
⚫ Expect that concrete rules will
be formulated throughdiscussions to eliminate
bottlenecks in each working
group with participation fromthe business community⚫ Expect that discussions will be
initiated to strengthen the
structure and involvement ofmember countries.

⚫ As countries consider rules
on AI, international
coordination is necessary to
avoid excessive suppressionof AI usage and innovation,and to avoid inconsistencies
or loopholes in rules⚫ The OECD AI Principles are
expected to reflect theoutcomes of the G7
Hiroshima AI Process

3. Role Expected of the OECD9(ii) Ensuring the effectiveness of international rules(promoting the adoption of OECD rules by non-member countries)◼ To ensure the effectiveness of international rules, cooperation with non-OECD countries
is essential. It is also necessary to advocate the merits of adopting OECD rules to nonOECD countries.
◼ This will ensure a level playing field between OECD and non-OECD countries.
◼ Implementing support measures such as capacity building or showing the necessity of
adopting and complying with international rules in to participate in the global supply
chain is needed.

Supporting the adoption of rules

Ensuring the effectiveness of rules

e.g. International taxation

e.g. Official Export Credit Arrangements⚫ To facilitate the smooth implementation of
the project on taxation challenges associatedwith the digital economy, the OECD is
working to build capacity and provide
technical assistance to tax administrations indeveloping countries. (The OECD provides a2-3 year support program for developing
countries aiming to introduce a system toaddress BEPS-related issues)⚫ This is an important effort to remove or
reduce obstacles to the adoption of rules
based on OECD discussion with non-member
countries⚫ Export Credit Arrangement regulates the termsof official support to ensure that such support
does not lead to excessive competition⚫ Ensuring a level playing field with countries notparticipating in the Arrangement is an issue⚫ International Working Group including China wasestablished in 2012. However, since there was noprogress in the formulation of the rules, its
activity was suspended⚫ The Arrangement was revised last year
considering competitive conditions with nonparticipating countries⚫ It is essential to work with the western countries
and the EU to ensure fair competitive conditions
with non-participating countries.

4. OECD Organization and Management

10(1) Improving global governance by expanding membership◼ To improve global governance, it is critical for the OECD to strengthen relationships
with non-member countries beyond individual rules.
◼ One way of achieving this is to expand membership.
⚫ Considering the shifting center of global
power, Global South countries that havemade certain contributions to ensuring global
governance through fora such as the G20
would be candidates.

⚫ Sharing the fundamental values (freedom,democracy, the rule of law, and respect for humanrights), a key characteristic of the OECD, andmaintaining
like-mindedness
among
members to prioritize a free and open
international economic system, will be
prerequisites to making appropriate decisions.

➢ In the accession process, in order not to make membership expansion itself an
objective, candidate countries should be encouraged to make necessary reforms,
and their willingness and capacity to abide by OECD rules should be checkedthoroughly.
➢ If these prerequisites are not confirmed, engagement with such countries should
be enhanced, and they should be called upon to adopt and comply with OECD rules
in individual sectors.

4. OECD Organization and Management

11(2) Presenting better alternatives by reflecting views of business community◼ For OECD outcomes to contribute to resolving practical economic issues, it isessential to go beyond statistical analysis and listen to the opinions of business,
which is a key player in the economy.
◼ OECD should prioritize the opinions of BIAC, whose opinions reflect the interests ofthe business community rather than individual companies.
◼ In listening to opinions of various other stakeholders, the OECD should consider
imposing a certain level of accountability on stakeholders to ensure public interest.

e.g. Guidelines for Multinational Enterprises

e.g. Early４AdMa*⚫ The OECD Guidelines for Multinational
Enterprises were revised in 2023.
⚫ Original draft included unrealistic items,
such as requiring due diligence in the value
chain, including consumers.
⚫ Based on input from business, guidelines
were revised to what companies can comply.
⚫ In revising the guidance, business (BIAC)
should be involved from early stages of
discussion to ensure that content is realistic
and companies can comply.

⚫ OECD Working Party on Manufactured
Nanomaterials (WPМN) decided to accelerate
discussion of new chemical management
provisions for advanced materials.
⚫ Early4AdMa was developed to identify safety,
sustainability, and regulatory issues.
⚫ In promoting the development of sustainable
and useful materials and substances, it isimportant to appropriately identify risks to be
avoided, and to proceed with discussion basedon data provided by each country.
*Early awareness and action system for advanced materials4. OECD Organization and Management

12(3) Responding to complex
issues via cross-sector
discussions(4) Establishment anddissemination of norms andrules through cooperation with
the G7, G20, and other bodies(5) Improving awarenessby strengthening
public relations
functions⚫ As complex cross-sector
issues increase and the needfor relevant committees towork together increases, theOECD is responding by
establishing joint meetings.
⚫ Committees’ mandates should
mention collaboration withother committees asnecessary to address crosssector issues.

⚫ OECD is contributing to G7
discussions by providing
evidence and policies.
⚫ Expect that a virtuous cycle inwhich consensus reached at
G7 will be developed to rules
at the OECD.
⚫ It is important to deepen
cooperation with the G20 tolead to the adoption of OECDrules by non-member
countries⚫ Since the OECD is engaged invarious areas with specificand specialized content, it
does not necessarily have ahigh degree of publicawareness compared to its
extensive contribution topolicy discussions⚫ It is important to further
publicize its recommendations
and reports so that they canbe properly evaluated.

Collaboration with the G7, G20, etc.
⚫ At the G7 last year, the OECD provided basis for intergovernmental discussions, including a report on
government support for the industrial sector and the results of a study on data localization measures⚫ Expect that G7 agreement, such as G7 Hiroshima AI Process will be disseminated to the OECDmembers.
⚫ OECD estimation and presentation of the impact of trade liberalization is expected to have the effect of
encouraging them to take liberalization measures.

5.Expectations of the Japanese government

13(1) Active engagement
in rule formation(2) Bridging gaps toachieve agreement(3) Reflection of Asian
viewpoint⚫ Japan needs to engage morein rule formation from initialstages to reflect Japan'svalues and contribute tostrengthening Japanesecompanies’ competitiveness.
⚫ it is important to materialize
last year's G7’s results.
⚫ More efforts is necessary toobtain committee chair posts
and increase the number ofJapanese staff.

⚫ When Europe and the US
take different stances, it
becomes difficult to reachagreement within theOECD.
⚫ In such situations, Japanneeds to bridge the gap
between the two andcontribute to the formationof an agreement.

⚫ Japan should showcase themerits of complying OECDrules and share knowledge,
provide support to countries
that showed willingness tocomply OECD rules.
⚫ Outreach activities throughthe Southeast Asia Regional
Program are significant.
⚫ It is also important to reflect
Asian perspectives in OECDrules.

Reflecting an Asian Perspective: The Blue Dot Network⚫ The Blue Dot Network can be an important tool for promoting the benefits of quality infrastructure.
⚫ The current draft contains wide-ranging and detailed criteria to verify the quality of infrastructure,
which could place excessive burdens on companies and result in underutilization. Thus, screening
items should be simplified as much as possible.
⚫ From the viewpoint of encouraging various and steady efforts toward decarbonization indeveloping countries, technologies in the transition stage such as co-firing and mono-firing ofhydrogen and ammonia in thermal power generation should also be included

6. Activities of Keidanren and BIAC

14◼ BIAC expresses its views in a wide range of areas to ensure that OECD’s research,
analysis, and policy recommendations reflect the realities of the economy andcontribute to free and open international economic order.
◼ Keidanren will continue to actively participate in BIAC activities and provide input
from the perspective of the Japanese business◼ Keidanren will advocate the benefits of adopting and complying to the OECD rules
in dialogues with the business communities of countries that have indicated theirintention to join the OECD

• Established in March 1962
• 47 associations from 38 countries participate• Run by private finance including contribution from member organizations••

Recommend/dispatch suitable personnel fromcompanies/business associations to BIAC activities
Comment/reflect to BIAC’s policy proposals.

Members of BIAC
• Keidanren (Japan Business Federation) participate from Japan• Business organizations from non-OECD members, such as accession candidates,
participate as observers (14 associations from 12 countries)