Noe van Hulst, Ambassador of the Netherlands to the OECD
The report International Regulatory Co-operation: the Role of International Organisations in Fostering Better Rules of Globalisation, recently launched at the OECD together with 5 other international organisations (FAO, ISO, OIML, UNECE, WHO) is not an obvious choice for the most exciting report of 2016. The sheer size of the report defends itself against being read as Winston Churchill once famously said. However, upon closer inspection it contains very valuable lessons on how to increase the impact and relevance of rulemaking and standard setting by international organisations like the OECD. Let me draw out three points that struck me in particular.
The first point is that international organisations are often much better in developing and producing standards (‘upstream’) than in ensuring that these standards are actually implemented in practice in member countries (‘downstream’). But of course what matters most is how the standards actually impact real life and the behaviour of agents. The first lesson is therefore that international organisations need to pay much more attention to monitoring and measuring implementation. This applies both to legally binding instruments and to non-binding rules and standards (so called ‘soft law’), certainly now that soft law has become a more important policy tool for most international organisations, including the OECD. A concrete example are the OECD Guidelines for Multinational Enterprises. This year we are rightly celebrating the 40th anniversary of this unique instrument, completely revised and updated in 2011. All OECD countries are legally obliged to establish National Contact Points (NCPs) that are adequately positioned and equipped to handle complaints from third parties (NGOs, trade unions etc.). However, even 5 years after the revision of the guidelines there are still 17 countries that do not have a functioning NCP. This distorts the level playing field in business and hence we collectively have a problem here. In the area of international tax standards (BEPS, automatic exchange of information) we may face similar issues. If we don’t do what we say, then we shouldn’t be surprised by declining trust in institutions. We need to fix the embarrassing implementation-delivery gap. In OECD we have mechanisms like (voluntary) peer reviews that can help in this respect. But they are often quite labour-intensive and costly. I think we may need to be more creative and invent other (quicker) methods to monitor and check implementation, possibly with the help of stakeholders and new technologies, big data, geo-mapping, etc., where applicable. International organisations can help each other in learning from best practices in this field.
The second lesson is that we need a more systematic evaluation (both ex-ante and ex-post) of the actual influence and impact of standards. Did these standards actually achieve what they were designed for in the first place? We obviously can’t take this for granted and ideally speaking standards should be designed in a way that facilitates ex-post evaluation of their impact. Again, also in the OECD setting we are well advised to take this lesson to heart and embark on regular external evaluations of the impact of our standards.
The third lesson emerging from the report is the need to avoid confusion and achieve more consistency among standards in overlapping policy areas. This is very important for agents that are supposed to implement the standards, e.g companies. Examples include the OECD MNE Guidelines and the ILO MNE Declaration, where work is underway to achieve greater consistency of definitions among other things. Similar issues could arise in the area of international tax standards (BEPS implementation) as well.
How important is standard setting in the OECD? In the last 10 years we can clearly see a growing importance of OECD standards in the global arena. I already mentioned the MNE guidelines which, despite lagging implementation in some countries, have definitely become a key instrument and lightning rod in promoting RBC around the world, mainly thanks to the unique grievance mechanism it provides. The same is true for the leading role the OECD has been tasked with by the G20 to design standards against tax evasion by companies. Similarly, the OECD Anti-Bribery Convention has recently received increasing attention by policymakers as a useful tool in the global fight against corruption. Finally, the OECD Codes of Liberalisation of Capital Movements are in the G20 spotlight as a relevant instrument to increase stability in financial markets. There are many other important OECD standards worth mentioning of course, but the ones highlighted here represent a set of standards of key significance for a rule-based open global economy.
The beauty and strength of OECD standards is that they are open to adoption by non-OECD countries. In this sense the OECD role as standard setter is a unique avenue to spread good practices to non-OECD countries and have a positive impact way beyond our membership. This is a process already underway since a recent inventory shows that 132 non-member countries have already adhered to 59 OECD legal instruments currently in force.
However, there is still ample room for improvement in this field, particularly concerning the key set of OECD standards previously mentioned. Apart from putting the dissemination of OECD standards at the very heart of our Outreach Strategy, the OECD can also use its role in serving the G20 Presidency as another channel to help make OECD standards a global success. Last but definitely not least: for this to happen also requires OECD countries tangibly applying the lessons learned from the recently launched report on international standard setting.