Joint government interpretation of investment treaties

investment treatiesDavid Gaukrodger, Senior Legal Advisor, OECD Investment Division

Public debate about investment treaties often focuses on whether treaties are being well-interpreted in investor-state arbitration cases in accordance with governments’ intent. Governments at the OECD have considered the role governments can play in the interpretation of investment treaties through joint government interpretations and other forms of government “voice”.

Shared government interpretations of investment treaties are increasingly recognised as a way to help improve treaty interpretation. The 2001 joint interpretation of the NAFTA agreement by the three NAFTA governments has had a decisive influence on the interpretation of key aspects of that treaty. Along with Canada, Chile, Mexico, the United States and other governments, the European Commission has included in its treaties express provisions allowing for binding joint government interpretations of the treaty. Major recent treaties such as the TPP, the ACIA treaty between ASEAN members, CETA or the Pacific Alliance contain such provisions.

Intergovernmental discussions at the OECD have focused in particular on how joint interpretations might be used for the many existing treaties that do not expressly contemplate them. Vague provisions in many older treaties leave broad scope for interpretation. The existing treaty text may thus frequently allow sufficient scope to achieve a jointly-desired interpretation. A growing range of governments now perceive those treaties to be outdated.

Joint interpretations can be issued at any time and can be a simpler and faster device than renegotiation to address some aspects of treaty policy. They may also allow governments to address unwanted interpretations that could otherwise lead governments to consider terminating treaties. Discussions and exchanges of views with treaty partners about proposed joint interpretations in advance of treaty renewal dates can also help inform future negotiations and decisions about treaties.

At the same time, joint interpretations may be less certain in their effects than formal treaty amendments. It may also be difficult to achieve common views on particular issues and some governments may prefer the flexibility of making submissions as a non-disputing party in particular disputes rather than agreeing to joint interpretations. The evolving views of many governments about treaty policy may, however, provide new opportunities for joint interpretive agreements.

Joint interpretations can help treaties to achieve a better balance between stability and flexibility in order to provide a solid policy framework for investment decisions while allowing for adaptation to changing circumstances. They may help governments to better balance foreign investor protection and the right to regulate because it can be difficult to fully build this balance into treaties in advance. Joint interpretive agreements are also likely to be an increasingly important tool for ensuring that treaties are interpreted in accordance with the treaty parties’ intent and achieve their purposes. Such agreements could allow a substantial range of older treaties to be at least harmonised if not made identical in the short term.

A new OECD paper considers key questions such as the binding nature of joint interpretations or the scope for joint agreements in light of existing treaty language. It identifies a number of empirical and policy questions of interest. An earlier paper addresses the range of options for government voice with regard to investment treaties.

As part of its broad range of work on investment treaties, the OECD offers evidence-based analytical materials and a forum to governments for sustained exchanges on these issues. G20, OECD and other jurisdictions gather bi-annually to discuss investment treaty policy at an OECD-hosted inter-governmental investment roundtable known as the Freedom of Investment (FOI) Roundtable. Non-OECD countries including Brazil, People’s Republic of China, India, Indonesia and South Africa are actively involved. Since 2011, the FOI Roundtable has addressed investor-state dispute settlement (ISDS) and investment treaties at its regular meetings. Summaries of these discussions are available on the OECD website. In October 2015, the OECD launched a broader government-led dialogue about investment treaties.

The FOI Roundtable is addressing issues at the centre of public debate over investment treaties such as the quest for balance between investor protection and governments’ right to regulate, which will be the focus of the OECD’s annual conference on investment treaties on 14 March 2016. These conferences provide opportunities for governments to discuss their policies and work, and to exchange views with stakeholders and experts.

Useful links

The legal framework applicable to joint interpretive agreements of investment treaties

2016 Conference on investment treaties: The quest for balance

OECD work on international investment law

OECD-hosted Freedom of Investment Roundtables

Flabber-gassed by our noxious air: can electric vehicles save us?

The Flocken Electrowagen shows the way
The Flocken Electrowagen shows the way

Shayne MacLachlan, OECD Environment Directorate

Paris is a beautiful city but has an ugly problem with air pollution. Using 2 wheels to get to work, one becomes acutely aware of this insidious addiction to cars, and the “essence” of the problem, DIESEL. Queuing at the red lights (which unlike many Parisians I observe) sucking up the carcinogenic fumes, should I feel happy or sad knowing that those in the cars themselves are getting a worse dose of “the product” than those using greener ways to get about? Switching to electric vehicles could save some lives and certainly might help the French public purse as the health, economic and financial damages of air pollution are costing the country an estimated EUR 100 billion per year.

Commendable effort, limited results

It’s not like Paris hasn’t made a huge effort to reduce air pollutants like benzene, nitrogen dioxide (NO2), ozone and fine particles PM2.5 and PM10. Over the last 10 years it has put in place the Vélib bicycle system, the electric car equivalent Autolib, constructed bus lanes that can be shared by cyclists, closed roads and built car-annoying pedestrian crossings in an effort to encourage cleaner mobility. The speed limit on the périphérique (ring-road) has been reduced to 70kph and it is even letting cyclists run (certain) red lights. Paris is banning trucks and dirty diesel cars during certain hours in the city. Although there have been some improvements, the level of NO2 (although not all comes from dirty transport) in parts of Paris during 2015 regularly exceeded 100µg/m3 and averaged 66µg/m3 over the year which is way above the EU limit of 40µg/m3.

So why the foul air?

Paris is teeming with 4-wheeled vehicles but many city residents don’t actually own cars. If you look at the number plates of the vehicles clogging and gassing the streets, many of them come from “les banlieues”, or suburbs around the city. Even though the trains are very reliable and generally run on time (except from September-December which is strike season), it seems that for many, the comfort and practicality of the car is just too much to sacrifice. This choice often means you’ll be stuck in kilometres of traffic every morning and evening, but it seems drivers can’t give up their personal space with their tunes, make-up kits and phone conversations all to themselves.

Time for a pit-stop switch

So if we can’t forego this crooked comfort, we need a MASSIVE switch to electric vehicles (EVs). France wants to have two million EVs on the road by 2020 but currently just over 1% of new vehicles in France are electric. In Norway, it’s 13%. Cheap oil isn’t helping us switch to electric, but we must stop subsidising diesel to make dirtier vehicles much more expensive to run. Officials in France recently agreed that diesel taxes will increase, and those on gasoline will fall, “to neutralise the difference” in the next 5-7 years. It has taken a while for the light to turn green, but for the residents of Paris and other French cities, this is welcome news.

Purchase price and low fuel costs matter

In 2012, the ITF (International Transport Forum) reported that battery electric vehicles cost €4-5K more to their owners than an equivalent fossil-fuel car over the vehicle’s lifetime. A friend of mine was buying a car a little while back. I asked him why he didn’t go electric and I got a gruff response “it’s out of my budget range”. This is in spite of a healthy government rebate of up to EUR 10k for some EV switches. Studies have found that among the most important incentives to buying EVs are purchase price and low fuel costs. Even with purchase bonuses, the pricing of new EVs means they are still not a viable alternative for many. There could be other reasons too for the slow EV take-up such as the insufficient battery charging infrastructure, the time taken to charge a vehicle when compared to filling up at the gas station and annoying distance limitations. Some drivers are also concerned about whether the power used to charge their EV is coming from renewable or fossil-fuelled sources, and what the batteries are made from and how they are disposed of.

Driving the point home

While governments must hammer down the purchase price of cleaner vehicles with even healthier financial enticements, strong disincentives such as imposing a London- or Milan-style congestion charge for high-polluting vehicles may also push consumers to switch. Add toll-free roads, access to bus lanes and lower registration fees for EVs to the list, and they might look a whole lot more attractive. And with the recent VWgate emissions scandal leaving a sulphuric taste in diesel owners’ mouths, one asks whether it’s not the ideal time to make diesel the new public enemy number one, as we’ve done with our ex-friend coal.

Off and running

So as I finish up this morning’s “blog/moaning session” and run off for some lunchtime exercise, (wondering how long before I cough up a chunk of coal) it seems that the checkered flag is a long way off for successful policies that ditch dirty vehicles and encourage a massive switch to EVs. An even bigger “helping hand” for new EV purchases, along with a tailored package of carrots and sticks, may help reduce my flabber-gas and boost our life-expectancy by a few years. Failing all of that, more of us could work from home but that sounds like a good topic for another time.

Useful links

air-pollution-NOx

OECD work on the cost of air pollution

Rest in peace Moped, electric scooters are here

e-scooter
Moped killer

Minh Ha-Duong  Clean Energy and Sustainable Development lab (CleanED) at the University of Science and Technology of Hanoi (USTH)

In the last decade two-wheeler electric vehicles have been taking over the streets of Asian capitals, to the point that it is time to declare the gas moped commercially dead. Rest in peace.

While in the western world electromobility remains the domain of a technological elite, it has already arrived to the masses in Asia. China counts over 180 million e-bikers and produced nearly 37 million e-bikes in 2013 and 450 million bicycle users are waiting to buy an e-bike as their next mean of transport. In all South-East Asian countries where driving a two-wheeler vehicle is more popular than driving cars, electric vehicles are displacing gasoline vehicles as the dominant mode of urban transportation.

Two-wheel electric vehicles come in different kinds. If it has pedals, then it is called an electric bicycle, the equivalent of a moped. Otherwise it is called an electric scooter. It is dignified by an upgrade to the motorbike category if its top speed is above some legal limit – 50km/h here in Vietnam. All are powered by batteries which are recharged by plugging into a domestic wall socket, demonstrating that the need for a dedicated charging infrastructure was a myth.

The advantages of this means of transportation are that it generally does not require a driving licence, is faster than a bicycle, more convenient than bus and cheaper than a motorbike. Indeed the average e-bike in Asia costs only $167. The market is very different in the western world, where the average e-bike costs $800 in the USA and $1500 in the EU. The savings on fuel costs are also real, even in a dirt cheap oil year.

In some places electric two wheelers have an image issue, as the first segment to have taken the market is e-bikes designed for high schoolers. But producers upgrade technology and design every year. For example, for $720 in Vietnam one can have an electric scooter which goes up to 50km/h, carries two adults thanks to a 1200W power motor, has a 100km range and copies the design of the Vespa Primavera, an iconic Italian model. This cost is about the average monthly salary in Hanoi, or six times the monthly minimum wage in Vietnam.

As the technological frontier moves, the market shifts from basic e-bikes, that already pushed the good old gasoline moped into obsolescence, to bigger electric scooters. This is mostly happening without government subsidies or targeted policy. The market shifts because there is demand and technological progress. The demand pull is allowed by light regulatory constraints, in contrast with motorcycles which are more heavily regulated, not to say banned from some downtown streets in many Chinese cities.

The number of road accidents with e-bikes and e-scooters can only increase a lot, along with the popularity of these vehicles. The accumulation of risk factors to the drivers is worrying: teenagers, people with no driving licence, riding a vehicle with high acceleration, high speed, wearing no protection, riding in urban traffic; weakly enforced vehicles standards and traffic regulations. Risk factors to others also include no registration makes it easier to flee after hitting someone, and the use of the bike lanes endangers slower traffic. There is a controversy about the low noise of electric vehicles: pedestrians can’t hear them coming. Most available studies look at electric or hybrid cars, not at two wheelers, and the other risk factors listed above make it difficult to determine causality, and conclude with robust confidence that silence is a risk factor. I would prefer to make the rest of the traffic quieter than to make the electric vehicles louder.

Is this technological shift a good thing for the environment? Electricity is not yet so green everywhere. More advanced chargers and systems are required to make the electric vehicles a part of the smart grid. Another problem which remains to be managed is that the most popular models have a lead-acid battery. Lead pollutes, especially in countries where the recycling system is inefficient, and each battery contains 10kg of it.

But at the city scale, the environmental benefits are clear: the e-vehicles are silent and release no exhaust fumes. The advantages regarding the local air quality are especially important in Asian capitals, which are the most polluted cities in the world. According to our estimates, a typical gas scooter emits 0.1g of fine particulates per kilometer, or 400g per year. A typical electric scooter causes ten times less emissions in a country like Vietnam where half of the electricity comes from coal.

The market cannot be trusted to produce lighter and cleaner gas vehicles. The switch to electric two wheelers and cleaner power appears a more powerful way to solve the Asian cities air quality crisis.

Useful links

Shifting Towards Low Carbon Mobility Systems OECD International Transport Forum Discussion Paper

Green Car Congress

A dash of data: Spotlight on German households

Leonie Beisemann, OECD Statistics Directorate

German version available here.

Economic growth (GDP) always gets a lot of attention, but when it comes to determining how people are doing economically it’s interesting to look at other indicators that focus more on the actual material conditions of households. Let’s see how households in Germany are doing by looking at a few of these other indicators.

GDP and household income

Chart 1 shows the development of real GDP per capita and real household disposable income per capita since the first quarter of 2007, with this quarter being set to the baseline level of 100. For the most recent quarter for which we have data, Q3 2015, real GDP per capita, which adjusts economic growth for the size of the population, increased 0.1% from the previous quarter (the index increased from 107.3 in Q2 2015 to 107.4 in Q3 2015). Real household disposable income per capita showed stronger growth, increasing 0.4% from the previous quarter (the index increased from 105.9 in Q2 2015 to 106.3 in Q3 2015). However, despite the stronger growth in household income in the most recent quarter, and the sharp drop in economic growth during the financial crisis, GDP has grown more than household income since 2007: 7.4 % versus 6.3%.

Chart1-HHdashboard-Germany-900.fw

The increase in household disposable income in Q3 2015 was caused by an increase in primary income, mainly due to increases in compensation of employees and dividend income. On the other hand, taxes and social contributions paid by households increased more than social benefits received by households, meaning that net cash transfers to households declined slightly (chart 2).

Chart 2 shows that the net cash transfers to households increased sharply during the depth of the financial crisis (at the beginning of 2009), corresponding to when real household disposable income began to diverge from the pattern exhibited by economic growth, as shown in chart 1. This clearly shows that government intervention was successful in cushioning households from the negative effects of the contraction in economic growth.

Chart2-HHdashboard-Germany-900.fw

Confidence, consumption and saving

Household disposable income is a meaningful way to assess material living standards, but to get a fuller picture of household economic well-being it is interesting to look also at households’ consumption behaviour. Consumer confidence (chart 3) fell in Q3 2015 (the index decreased from 101.5 in Q2 2015 to 101.0 in Q3 2015) reversing the upward trend seen during the first two quarters of 2015. Notwithstanding this slight drop in consumer confidence, real household consumption expenditure per capita increased 0.3% in Q3 2015 (chart 4), with the relevant index increasing from 107.1 in Q2 2015 to 107.4 in Q3 2015.

Chart3-HHdashboard-Germany-900.fw

Chart4-HHdashboard-Germany-900.fw

The household savings rate (chart 5) shows the proportion that households are saving out of current income. In Q3 2015, the savings rate was 16.9%, the same rate as in the previous quarter. Overall, German households have a relatively high savings rate (on average 16.7%, one of the highest among OECD countries). It is also relatively stable (the rate varies the least among OECD countries).

Chart5-HHdashboard-Germany-900.fw

 Debt and net worth

The household indebtedness ratio, i.e. the total outstanding debt of households as a percentage of their disposable income, can be looked at as a measure of (changes in) financial vulnerabilities of the household sector and can be helpful in assessing debt sustainability. In Q3 2015, household indebtedness was 85.5% of gross disposable income (chart 6), 0.2 percentage points higher than the previous quarter (mainly related to a rise in long-term loans). Over a longer period of time, since the beginning of 2007, one can observe a steady decline in household indebtedness in Germany.

Chart6-HHdashboard-Germany-900.fw

When assessing vulnerabilities on the basis of indebtedness, one should also take into account the availability of assets, preferably both financial assets (saving deposits, shares, etc.) and non-financial assets (for households, predominantly dwellings). Because information on households’ non-financial assets is generally not available on a quarterly basis, financial net worth (i.e. the excess of financial assets over liabilities) is used as an indicator of the financial vulnerability of households.

In Q3 2015, financial net worth of households was 196.5% of disposable income (chart 7), 3.2 percentage points less than in the previous quarter. The decrease was mainly due to holding losses on equity and investment fund shares on the asset side and the slight increase in household debt mentioned above.

Chart7-HHdashboard-Germany-900.fw 

Unemployment

The unemployment rate and the labour underutilisation rate (chart 8) also provide indications of potential economic vulnerabilities of the household sector. More generally, unemployment has a major impact on people’s overall well-being. In Q3 2015, the unemployment rate in Germany continued its fall since 2007 and at 4.6% it is the lowest rate of unemployment since 1991. The labour underutilisation rate shows a similar pattern: in Q3 2015, it reached a new low of 9.2%.

Chart8-HHdashboard-Germany-900.fw

One should keep in mind that households’ income, consumption and savings may differ considerably across various groupings of households; the same is true for households’ indebtedness and (financial) wealth. The OECD is working on these distributional aspects and preliminary results have been published in “Measuring inequality in income and consumption in a national accounts framework” and in “Household wealth inequality across OECD countries: new OECD evidence”.

While the financial crisis did affect the German economy, its consequences have been relatively modest when compared with other OECD countries. GDP per capita and household income per capita returned to their pre-crisis levels quickly. The positive developments in household income and consumption reflect continuous improvements in the German labour market since 2010. To fully grasp people’s overall well-being, one should go beyond household material conditions, and look at a range of other aspects of people’s lives and how they feel. Indicators on these other aspects (e.g. health, education, environmental quality, and personal security) are regularly published in the OECD How’s Life publications.

Useful links

For many years, OECD has been focusing on people’s well-being and societal progress. To learn more on OECD’s work on measuring well-being, visit the Better Life Initiative.

Interested in how households are doing in other OECD countries? Visit our households’ economic well-being dashboard.

Making Trade and Investment Work for People

NAECKen Ash, Director of the OECD Trade and Agriculture Directorate

Both the UN Sustainable Development Goals (SDGs) and the OECD New Approaches to Economic Challenges (NAEC) explicitly recognize that trade and investment are not goals in themselves, but are a means to an end. That desired end is stronger and more inclusive growth, better jobs for more people, and improved societal well-being. Trade and investment policies cannot deliver these outcomes alone, but they can contribute as part of a wider package of comprehensive structural policy reforms, designed in light of the specific situation in countries at various stages of development.

Global value chains (GVCs) account for an increasing share of world income, reflecting the high degree of economic interdependence among nations today. All countries have increased incomes associated with GVCs, in particular major emerging economies, but these benefits do not accrue automatically. The fragmentation of production across borders highlights the importance not just of open, predictable and transparent trade and investment policies, but also of effective complementary policies that enable less developed countries (LDCs) and small and medium enterprises (SMEs), in particular, to participate in and to benefit from GVCs. In brief, making trade and investment work for people requires a coherent and well integrated public policy agenda.

GVCs magnify the costs of protection. As goods, services, capital, data and people cross borders multiple times, the cumulative effect of a number of individually small costs imposes a significant burden on traders and on investors. These costs can result from explicit restrictions, such as tariffs, from inefficient or unnecessary border procedures, and from constraints on the flow of capital. Where foreign investment is a driver of export capacity, the cumulative effect may even discourage firms from investing, or maintaining investment, in the country. As a result, production facilities, technologies and knowhow, and jobs might move elsewhere.

In a world dominated by GVCs, there is a tendency for more, and more demanding, regulatory standards, driven by the imperative to ensure reliability, quality, and safety. The right to regulate and to protect consumers is not in question, but regulations should be science-based, proportionate and non-discriminatory. Any unnecessary costs imposed by excessive regulatory burden falls most heavily on SMEs and firms in LDCs, where the capacity to adapt is often limited. In too many cases, this can preclude effective participation in GVCs.

There would be no GVCs without well-functioning transport, logistics, finance, communications, and other business services to move goods and coordinate production along the value chain. Today, services represent over 60% of GDP in G20 economies, including 30% of the total value added in manufacturing goods. The supply of these services is often provided through investment, yet services markets remain relatively restricted in many countries, imposing high costs on domestic as well as foreign firms, limiting productivity growth, and constraining participation in GVCs unnecessarily.

GVCs also strengthen the case for unilateral policy reform. Domestic firms benefit from the expanded export opportunities that are often the aim of trade negotiations, but they also benefit from access to world class imports of intermediate goods and services. Opening your own markets, in particular for intermediate inputs, can benefit your own firms and workers. But the gains are even greater when more countries participate and markets for goods, services, capital, technology, data, ideas, and people are opened on a multilateral basis.

GVCs make evident the necessity of more coherent rules for trade and investment; this twin engine of development can only reach its full potential if other policy areas are also better aligned and in coordination with those on trade and investment. These areas include macroeconomic, innovation, skills, social and labour market policies among others. The nature of the enabling environment and complementary policies to accompany trade and investment opening depends on country specificities; while there is no ‘one size fits all’ policy recipe, there are a number of common ingredients.

Trade and investment opening are necessary but insufficient conditions for stimulating much needed and more inclusive growth, development and jobs. Accompanying policies that promote responsible business conduct and enable the needed public and private investments, in particular in people, in innovation, and in strategic physical infrastructure, help ensure not just that growth is realized, but that the benefits are shared widely.

Useful links

OECD work on trade

OECD work on investment

Let’s Get Realistic About a Multilateral Investment Agreement

320px-UN_Vienna_flags
Any chance they’ll all agree?

Shaun Donnelly, retired U.S. diplomat and trade negotiator, now Vice President for Investment Policy at the US Council for International Business (USCIB).  He is a regular participant in the Business and Industry Advisory Committee to the OECD (BIAC) and  OECD Investment work.

I found some very interesting questions and even a few answers in the recent “OECD Insights” blog post on international investment agreements by Professor Jan Wouters from the University of Leuven.  But it seems to me that Professor Wouters’ prescriptions may fit better in a university classroom or a theoretical computer model than in real world of government-to-government diplomatic investment negotiations or in a corporate headquarters making real-world cross-border investment decisions.  As a former U.S. Government trade and investment negotiator and now in the private sector advising/assisting member companies of the U.S. Council for International Business (USCIB), as well as an active participant over the past three years in the investment policy work the OECD and its Business and Industry Advisory Committee (BIAC), I’d like to offer an alternative perspective on some of the international investment issues the professor addresses.

I’m tempted to challenge several of the assumptions that seem to underlie Dr. Wouters’ analysis and prescriptions.  His assertion that multilateralism is an inherently superior venue for all investment issues seems a little naïve to me as a practitioner.  Everyone accepts the theoretical point that in a textbook or the laboratory, multilateral can be the optimal approach – one set of comprehensive, high-standard rules applying to all countries and, by extension, to all investors – a WTO for investment if you will.

The reality is that diplomatic negotiations, investment projects, and job creation take place in the real world, driven by real people representing concrete, real-world interests.  In that real world, governments have a wide range of views on what should or shouldn’t be in an investment agreement. How strong are the protections accorded to investors? Does the agreement include (as U.S. government investment agreements typically do) market opening or “pre-establishment” provisions? Do investors have access to a credible, neutral arbitration process to resolve disputes with host governments?  These are key issues for any government or investor.

Unfortunately, not all players in the investment policy world would share all my views, or those of Dr. Wouters.  Governments vary widely on their policy and political approaches to international investment and, more specifically, to international investment agreements.  Many have views generally in line with those of the U.S. government, sharing a commitment to high-standard international investment agreements.  But some other governments only seem willing to accept much lower standards of investment protection; still other governments are hostile to any international investment agreements.

Some OECD veterans like me recall that some 20 years ago, the then-25 OECD members made a serious attempt to negotiate a Multilateral Agreement on Investment or “MAI.”  Unfortunately, after some early promise, the negotiations broke down over some of the key pillar issues I noted above.  Neither the OECD nor any of its member governments have attempted to revive the search for the elusive multilateral investment agreement framework.  Most OECD member nations seem, explicitly or implicitly, to have accepted the reality that, while multilateralism may be the optimal path, in the investment policy area, it is not, at least for now, a practical way forward.

The lesson I personally draw is clear, and it’s quite different from the approach advocated by Dr. Wouters.  Those Governments around the world that think foreign direct investment is a positive force for economic growth, are trying to make practical progress, not simply engage in endless and frustrating political debates.  They want to negotiate investment agreements that can attract real investment and, thereby, create real economic growth and jobs.  While some of them may see intellectual debates about a theoretical multilateral investment regime at some point in the future as an interesting exercise, their priority is on finding ways to grow their economies today and tomorrow.

So my questions to Dr. Wouters and other advocates of a focus on multilateralism in international investment regimes would include:

  • What kind of investment regime do you really envision?  How strong an agreement would it be?  Would it include the sorts of high-standard protections for investors currently found in recent investment agreements of OECD member countries?
  • What causes you to think there is realistic chance for success in a multilateral investment negotiation?  “Multilateral” now requires nearly 200 sovereign nations reaching a consensus.  Countries ranging from Cuba and Argentina to Japan and Canada; from India and China to the U.S. and the EU; from Russia and Venezuela to Saudi Arabia and Singapore would have to be major players in any multilateral investment effort. What sort of consensus could emerge from that wide-ranging group?
  • When the then 25 “like-minded” OECD member nations couldn’t negotiate an MAI, what causes you to think 200 diverse and widely diverging nations could come together now to negotiate a multilateral investment agreement or framework?

I’d love to be proven wrong, by Dr. Wouters or anyone else, if they can show me a credible path to that elusive high-standard multilateral agreement.  But until someone can show me how to get that done, I believe strongly the better path in the real world is to keep doing what individual governments and groups of countries have been doing for some time, to find willing partners and negotiate strong bilateral or regional investment agreements that work in the real world.  Here in the U.S., we in the business community are excited about the possibility of two “mega-regional” agreements, the recently-concluded Transpacific Partnership (TPP) and the on-going Transatlantic Trade and Investment Partnership (TTIP) as vehicles to update and strengthen investment protections with key partners.

When it comes to investment protection/promotion agreements, let’s focus all of our efforts on paths that we know can work – negotiating high-standard investment agreements.  If/when someone can find that elusive path to a high-standard multilateral agreement, great! I’ll be at the front of the line applauding. But until that path really emerges, let’s stay focused on what works – the bilateral and regional path that has proven it can deliver real results, real investment, growth, and jobs and leave the multilateral investment framework to the theoreticians.

The OECD, specifically its Investment Committee, has long been a place for serious investment policy research, analysis and debate. I’ve been privileged recently to participate in some of those sessions as a business stakeholder as a BIAC representative. I encourage OECD to continue, indeed redouble, that policy work. There are important and challenging issues to address. We in the international business community, along with other stakeholders, can add much to that OECD work.   I simply urge that the OECD investment work focus on concrete investment “deliverables” which can be implemented, rather than idealistic pursuits of some theoretical multilateral panacea.

Useful links

OECD Conference on investment treaties: The quest for balance between investor protection and governments’ right to regulate OECD, Paris, 14 March, 2016. This second OECD Investment Treaty conference will explore: How governments are balancing investor protection and the right to regulate; the search for improved balance through new institutions or improved rules for dispute settlement including the new Investment Court System developed by the European Union; a case study on addressing the balance through substantive law in particular through approaches to the fair and equitable treatment (FET) provision; and how the OECD, working with other international organisations, can support constructive improvement of governments’ investment treaty policies in this regard.

BIAC’s strategic recommendations on investment

Reconciling Regionalism and Multilateralism in a Post-Bali World, OECD Global Forum on TradeParis, 11 February 2014, Rapporteur’s report

Where do OECD countries stand in the “war against cancer”?

SA10519_WCD_Logo_(offene Version)

Gaétan Lafortune, Senior Economist and Principal Administrator, OECD Health Division

In his State of the Union address in 1971, President Richard Nixon declared a “war on cancer”. World Cancer Day provides a timely opportunity to reflect on how much progress has been achieved over the past 45 years in the United States and other OECD countries in winning this war.

The good news is that after a poor initial start in the 1970s and 1980s, the mortality rates from cancer (age-standardised to remove the effect of population ageing) have come down in most OECD countries since the mid-1990s, thanks to a reduction in important risk factors such as smoking and improvements in survival related to earlier diagnoses and better treatments. But still, all countries could do better in their fight against cancer to reduce the number of new cases through public health and prevention efforts, and by detecting cancer earlier and treating it adequately.

Large reduction in cancer mortality rates on average across OECD countries since early 1990s

fig 1

Source: OECD Health Statistics 2015, http://dx.doi.org/10.1787/health-data-en (extracted from WHO).

There were nearly 5.8 million new cancer cases in OECD countries in 2012 (up from 4.6 million a decade earlier) and 2.6 million deaths (up from 2.3 million a decade earlier), according to GLOBOCAN. Cancer incidence is higher in men than in women in all OECD countries, with average age-standardised incidence rates of 310 and 242 per 100,000, respectively.

Data recently reported in Health at a Glance 2015 show that cancer accounted for 25% of all deaths in 2013, up from 15% in 1960, mainly because there has been a much sharper reduction in deaths from cardiovascular diseases over the past 50 years. In several OECD countries, mortality rates from cancer among men are at least two times greater than among women, because of greater prevalence of risk factors (e.g., smoking and harmful alcohol consumption) and later detection.

Cancer Mortality, 2013 (or latest year)

fig 2

Source: OECD Health Statistics 2015, http://dx.doi.org/10.1787/health-data-en (extracted from WHO).

Information on data for Israel: http://oe.cd/israel-disclaimer

Lung cancer continues to be by far the main cause of cancer mortality among men, accounting for 26% of all male cancer-related deaths on average in OECD countries in 2013, but it is also the main cause of cancer mortality among women, accounting for 17% of all deaths. Breast cancer is the second most common cause of cancer mortality among women in OECD countries (15% on average).

Main causes of cancer deaths among men and women in OECD countries, 2013

fig 3

Source: OECD Health Statistics 2015, http://dx.doi.org/10.1787/health-data-en (extracted from WHO).                

The cost of cancer goes far beyond health care

Beyond the costs in terms of human lives, the economic costs of cancer are also considerable. Cancer consumes around 5% of all health care costs, and growth in spending on cancer is outstripping growth in total health expenditure. But the cost of cancer is not only borne by health systems. There are also opportunity costs related to the loss of productivity and working days.

In a population-based cost analysis in the Lancet, the economic burden of cancer across the European Union was estimated at €126 billion in 2009. Health care costs accounted for €51 billion, equivalent to €102 per citizen. Productivity losses because of early death cost €43 billion and lost working days €9 billion. Informal care costs – the cost of work and leisure time carers forgo to provide unpaid care for relatives or friends with cancer – amounted to €23 billion. Lung cancer had the highest economic cost of €18.8 billion.

Much more can be done to improve cancer care, but at what cost?

OECD research indicates that countries can do more to reduce the social and economic costs of cancer, and save lives. Survival after diagnosis of various types of cancer, such as breast cancer, cervical cancer and colorectal cancer, have generally increased over the past decade, thanks to earlier diagnosis and better treatments.

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Further progress is possible. It has been estimated that about one-third of cases could be cured if they are detected on time and adequately treated. Systematic screening of at-risk populations should be implemented where it is proven to reduce mortality, where cost-effectiveness is acceptable, where high quality is assured and the public is educated about the benefits and potential harms of screening.

Making cancer care rapidly accessible and of high quality, continuously improving services with strong governance such as a national cancer control plan, and monitoring and benchmarking performance through better data are also important in improving patients’ outcomes.

But the progress in cancer survival has come with a cost. New types of surgery, radiation therapy and chemotherapy (including the introduction of new high-cost drugs which in some cases prolong the lives of patients by only a few weeks) have contributed to increased survival, but at increasing cost. And it is likely that these costs will continue to grow, with population ageing and improved sensitivity of diagnostic tools leading to the detection of more cases. This will all add up to higher costs.

An important challenge in cancer care that many OECD countries have already started to face is balancing what may be doable given the growing range of possible treatment options and what may be sensible to pay for publicly. Economists can provide some guidance in making difficult decisions about resource allocation through cost-effectiveness analysis. But at the end of the day, it will require hard policy decisions to manage these fiscal challenges responsibly and sensitively.

Useful links

OECD Health Statistics 2015 The OECD Health Database offers the most comprehensive source of comparable statistics on health and health systems across OECD countries. It is an essential tool to carry out comparative analyses and draw lessons from international comparisons of diverse health systems.