Mideast Briefing: Israel Joins the Organization for Economic Cooperation and Development

Mideast Briefing: Israel Joins the Organization for Economic Cooperation and Development

The Organization for Economic Cooperation and Development (OECD) voted unanimously last week to invite Israel to join the group, along with Estonia and Slovenia. At a May 27 ceremony the three countries will formally become members of the international economic agency that more or less defines the developed world. To understand the meaning of this development for Israel it may be helpful to think in three contexts: What is the OECD and what does Israel’s accession tell us about the organization? How does this decision reflect and affect the Palestinian-Israeli conflict? What does this decision tell us about Israel?

1. According to its website, “OECD brings together the governments of countries committed to democracy and the market economy from around the world to: support sustainable economic growth; boost employment; raise living standards; maintain financial stability; assist other countries' economic development; contribute to growth in world trade. The Organization provides a setting where governments compare policy experiences, seek answers to common problems, identify good practice and coordinate domestic and international policies.”

Founded in 1948 as the Organization for European Economic Cooperation, its original purpose was to help administer Marshall Plan aid to Europe. During the Cold War, the OECD was, in the words of its own Noboru Report on Enlargement Strategy and Outreach, “a stronghold of economic policy for democratic societies … so as to ensure the political and social conditions in which democracy can exist.” But the world changed. Donald J. Johnston, then its secretary-general, enunciated the challenge for the OECD with the end of the Cold War: “In order to remain an influential actor in the global architecture of international policy analysis, dialogue and rule-making, the OECD must innovatively and selectively adjust its membership to the new global context.”

The OECD faced a new international “architecture,” squeezed between other international economic organizations like the World Bank, the World Trade Organization and the International Monetary Fund, and such important regional economic bodies as ASEAN (Southeast Asia), MERCOSUR (South America), the African Union’s NEPAD and APEC (Pacific Rim). The OECD had to change or admit irrelevance.

Under the chairmanship of Japanese Ambassador Seiichiro Noboru, a committee developed criteria for the expansion of the OECD, which was designed to meet these challenges. The “Noboru Report” provides answers to two key questions: Why is the OECD expanding? What does it seek in new member nations like Israel? Noboru delineated a strategy of focusing on what OECD does particularly well: “peer learning/influencing and rule-making which are built on sound analysis.” In the committee-structured OECD, representatives of member countries meet as peers, supported by a first-rate economic research mechanism, to define and promote best economic practices, often formulating rules that set standards.

Since this consultation process is seen as unique to OECD, Israel’s inclusion is a sign that other OECD members believe it can add substantively to the consultative process. In its background note to the accession, the OECD cites Israel’s nearly 5% of GDP invested in research and development. Speaking in 2007, OECD Secretary General Angel Gurria noted: “Israel has a lot to contribute; not only as a successful emerging economy with vast development experience, but also as a source of avant-garde solutions to key global challenges like water scarcity and agricultural optimization. Israel is now a powerhouse in the field of information technology and software.” Clearly, Israel has capabilities and wisdom to share with the world, and the world has taken notice.

2. Much was made about the effect of Israel's membership on the Israeli-Palestinian conflict. The Guardian’s Seth Freedman, echoing the Palestinian line, wrote that the “OECD is ushering Israel in too easily” (“…demonstrates certain states' willingness to overlook Israel's questionable behavior as an occupier in favor of enhanced fiscal and political ties.”) This is somehow a quid pro quo for Israeli concessions in the peace process, suggested Haaretz commentator Aluf Benn.
Actually, the opposite is true. The heart of the Israeli achievement with accession to the OECD is that it does not move the peace process in any detectable way. The accession is the recognition by a major international body that Israel has a valuable and rich existence outside the context of the conflict.

For this reason, the way the Palestinian Authority handled the issue is particularly vexing. Proximity talks are beginning. The two sides are urged by the Obama Administration to refrain from steps that might cause distrust. Nevertheless, the PA Foreign Minister, Riad al Malki, sent a letter to all OECD member countries urging them to vote against Israel's accession. Prime Minister Salam Fayyad followed with phone calls. The PA’s strategy on the eve of new peace talks is to urge the world to view Israel only in terms of the conflict – in other words, that all interactions with Israel be prejudiced by one’s political feelings regarding the negotiations.

Even if, as Benn notes, the U.S. played a key role in lobbying OECD member states, Israelis noted with concern the American silence on this PA activity, and said that it did not bode well for the proximity talks.
The anti-Israel lobbying by the PA shows that Palestinian leaders view this as a zero-sum game. They are on automatic pilot: If it is good for Israel, it must be bad for Palestine. Palestinian public figures do not realize that when building toward peace, Israeli accession to the OECD is a win/win situation. The Palestinian economy is and will continue to be inextricably tied to that of the “Hebrew tiger,” and so Palestinians have a vested interest in Israeli accession to the OECD, but Palestinian leaders seem incapable of thinking about their national interests in such terms. It is a worrying omen. Will the Mitchell team recognize the need to change longstanding zero-sum thinking in the PA?

3. Even before accession, Israel has already been well served by having to meet OECD standards in order to be accepted. The OECD’s public statement upon accession cited achievements in fighting corruption generally, legislating against international bribery, protecting intellectual property, etc.

But Israel faces the challenge of OECD membership with mixed feelings. Membership highlights those areas in which the country still has a long way to go. Indeed, the OECD has been clear that the new members are being accepted in the expectation they will continue to work to achieve OECD standards in certain areas. For Israel, this means greater integration of the Ultra-Orthodox and Arabs in the work force, important improvements in the performance of the educational system, and addressing the wide gap between the wealthiest and poorest Israelis. In responding to the accession offer, Prime Minister Binyamin Netanyahu, Finance Minister Yuval Steinitz, and Bank of Israel Governor Stanley Fischer all stressed commitment to addressing these areas of weakness.

Israel has now “joined the club” of developed nations, one of a handful of states created after World War II that completed the transition from developing to developed nation. It stands to both give much to the other member states and to gain much by from learning from its peers and applying the lessons. In this way accession may contribute to ending the systemic international demonization and obsession with this country’s flaws. If the OECD decision shows the way toward such a paradigm shift, that may be the most important gain of all.

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