Organisation for Economic Cooperation and Development (OECD) – UPSC Notes

The Organisation for Economic Cooperation and Development (OECD) is an international, intergovernmental economic organisation of 38 Member countries, including European, American and Pacific nations. It was founded in 1961 to stimulate economic progress and world trade. OECD provides its Member countries with a platform to compare policy experiences, look for solutions to common issues, identify good practices and coordinate domestic and international policies of its Members. OECD is an official United Nations observer.

Overview of OECD

EstablishmentSeptember 1961
TypeInternational organisation
HeadquarterParis (France)
Number of Member Countries38 Members
Official languagesEnglish.

Historical Background – OECD

The Organisation for Economic Cooperation and Development (OECD) originated from the Organisation for European Economic Cooperation (OEEC).

Organisation for European Economic Cooperation (OEEC)

In 1948, Organisation for European Economic Cooperation (OEEC), led by Robert Marjolin (a French economist and politician), was formed to administer American and Canadian aid in the framework of the Marshall Plan for the reconstruction of Europe after World War II. Marshall Plan, also known as European Recovery Program (ERP), was an American initiative enacted in 1948 to provide foreign assistance to Western European economies after the end of the Second World War.

OEEC originated from the work done by the Committee of European Economic Cooperation in preparation for the Marshall Plan in 1947 and started its operation on 16 April 1948. Since 1949, its headquartered in Paris, France. After the end of the Marshall Plan, the OEEC focused on economic issues.

In the 1950s, OEEC played a vital role in establishing the European Economic Community (ECC), which has grown into the European Union (EU) to set up a European Free Trade Area. A European Nuclear Energy Agency was formed on 1 February 1958 under the OEEC.

Establishment of OECD

Following the 1957 Treaty of Rome (Treaty to launch the European Economic Community), the Convention on the ‘Organisation for Economic Cooperation and Development (OECD)’ was drawn up to reform the OEEC.

In January 1960, European countries reached a resolution to set up a body that would deal not only with European and Atlantic economic issues but devise policies to assist less developed countries. This reconstituted organisation would bring the United States and Canada (who were already OEEC observers) on board as full Members.

The Convention transforming the OEEC into the OECD was signed on 14 December 1960 at the Chateau de la Muette in Paris (France) and entered into force on 30 September 1961. Hence, OEED was reformed into OECD, extending the membership to non-European nations. OECD consisted of European Countries plus the United States and Canada in 1961.

Founding Member of OECD

The official founding Member countries of OECD are as follows:

  1. Austria
  2. Belgium
  3. Canada
  4. Denmark
  5. France
  6. Germany
  7. Greece
  8. Iceland
  9. Ireland
  10. Italy
  11. Luxembourg
  12. Netherlands
  13. Norway
  14. Portugal
  15. Spain
  16. Sweden
  17. Switzerland
  18. Turkey
  19. United Kingdom
  20. United States

Out of these, three countries: the Netherlands, Luxembourg, and Italy, ratified the OECD convention after September 1961.

During the next 12 years, Japan, Finland, Australia and New Zealand joined the OECD.

Enlargement to Central Europe

In 1989, the OECD began to aid countries in Central Europe to prepare the market economy reforms. In 1991, the Programme “Partners in Transitions” was launched to benefit Czechoslovakia, Hungary, and Poland, which included a membership option for these countries. As a result, between 1994 and 2000, Hungary, Poland, the Czech Republic, and Slovakia became Members of the OECD.

Further Enlargement

Mexico joined the OECD in 1994 and South Korea in 1996.

In the 1990s, several Europan countries expressed their willingness to join the organisation. In 1996, Estonia, Latvia, and Lithuania signed a Joint Declaration expressing their readiness to become Members of OECD. Slovenia also applied for its membership in 1996.

In 2003, the OECD formed a Working Group to prepare a plan for the enlargement and cooperation with non-members. The Working group suggested that the selection of candidate countries be on the basis of four criteria: Mutual benefits, Like-mindedness, Significant player, and Global considerations.

The Working Group presented its recommendation at the OECD Ministerial Council Meeting on 13 May 2004. As a result, on 16 May 2007, the OECD Ministerial Council Meeting decided to open accession discussion with Estonia, Slovenia, Russia, Israel, and Chile to strengthen cooperation with Brazil, India, China, Indonesia, and South Africa through the process of enhanced enlargement. Chile, Slovenia, Israel and Estonia, all of these countries, became Members of OECD in 2010.

In 2013, the OECD decided to open membership talks with Latvia and Colombia. In 2015, it opened discussions with Lithuania and Costa Rica. Latvia became OECD Member on 1 July 2016 and Lithuania on 5 July 2018.

On 30 May 2018, Colombia signed the accession agreement and became OECD Member on 28 April 2020. On 15 May 2020, the OECD decided to extend a formal invitation for Costa Rica to join the OECD, and it joined on 25 May 2021 as a Member of OECD.

About OECD

OECD is an international organisation that works to build better policies for better lives. The organisation aims to shape policies that foster equality, property, opportunity and well-being for everyone.

The Members of OECD are democratic countries that support free markets. The Majority of the OECD Members, regarded as Developed countries, are high-income economies with a very high Human Development Index (HDI). Their collective population is around 1.3 billion. In 2017, the OECD Members countries) collectively comprised 62.2% of the Global nominal GDP (US$ 49.6 trillion) and 42.8% of the Global GDP (Int$ 54.2 trillion) at purchasing power parity.

The headquarters of OECD is at the Chateau de la Muette in Paris, France. OECD is also an official observer of the United Nations.

Organisational Structure

OECD Council

The OECD Council is the overarching decision-making body of the OECD. It consists of ambassadors from the Member countries and the European Commission. The Council, chaired by the Secretary-General of OECD, meets regularly to discuss the essential work of the organisation and share concerns and take decisions on consensus. The Member countries operate collectively through the Council to provide direction and guidance to the work of the Organisation.

Once a year, the OECD Council meets for the Ministerial Council Meeting, which brings together heads of the government, economy, trade and foreign ministers from the Member countries. The OECD Ministerial Council Meeting monitors and sets priorities for work, discusses the global economic & trade context and delves further into matters such as the budget or the accession process.


The OECD operates through more than 300 committees, working groups and experts, covering almost all areas of policy-making. Committee participants come from Member and partner countries and represent state bodies, academia, and business and civil society.

The Committee suggest solutions, assesses data and police successes and reviews policy actions among Member countries. They cover the same matters as Government Ministries, like education, trade, finance, environment, and development, and cooperate with country-level experts. Some discussions can evolve into negotiations in which all OECD countries define and follow standard global rules.

OECD Secretariat

The OECD Secretariat, led by the Secretary-General, carries out the work of the OECD. It includes directorates and divisions that work with the policymakers and shapers in each country, providing insights and expertise in close coordination with Committees. Directorates report to the Secretary-General. The employees of the Secretariat include economists, scientists, lawyers, political analysts, sociologists, digital experts, statisticians, and communication professionals.

The Secretariat collects data, monitors trends, and analyses & forecasts economic development. It also researches social changes or growing patterns in trade, taxation, education, environment, agriculture, technology, and other areas.

In addition to its headquarters in Paris (France), the OECD also has centres in Berlin, Mexico, Tokyo, and Washington D. C., which are part of the OECD’s public affairs and communication team.

Specialised Bodies

The OECD formed agencies such as the OECD Development Centre (1961) and International Energy Agency (1974). It has several specialised bodies:

  • Africa Partnership Forum
  • Business and Industry Advisory Committee (BIAC)
  • Development Assistance Committee
  • OECD Development Centre
  • International Transport Forum (ITF) (formally known as the European Conference of Ministers of Transport)
  • International Energy Agency (IEA)
  • Nuclear Energy Agency (NEA)
  • Multilateral Organisation Performance Assessment Network (MOPAN)
  • Partnership for Democratic Governance (PDG)
  • The Sahel and West Africa Club
  • Trade Union Advisory Committee (TUAC)

Decision-Making Process

OECD decisions are taken through voting and require unanimity among all those voting. But, dissenting members who do not wish to block a decision but merely to signal their disapproval can abstain from voting.

OECD Member Countries

  1. Australia
  2. Austria
  3. Belgium
  4. Canada
  5. Chile
  6. Colombia
  7. Costa Rica
  8. Czech Republic
  9. Denmark
  10. Estonia
  11. Finland
  12. France
  13. Germany
  14. Greece
  15. Hungary
  16. Iceland
  17. Ireland
  18. Israel
  19. Italy
  20. Japan
  21. Latvia
  22. Lithuania
  23. Luxembourg
  24. Mexico
  25. Netherlands
  26. New Zealand
  27. Norway
  28. Poland
  29. Portugal
  30. Slovakia
  31. Slovenia
  32. South Korea
  33. Spain
  34. Sweden
  35. Switzerland
  36. Turkey
  37. United Kingdom
  38. United States

Countries interested in OECD Membership

In 2005, Malta applied to join the organisation. In 2012, Romania reaffirmed its intention to become a Member of OECD. Other countries that have shown interest in OECD Membership are Argentina, Peru, Malaysia, Brazil and Croatia.

Membership under negotiation

Countries whose membership is under negotiation are Argentina, Brazil, Bulgaria, Croatia, Peru, and Romania.

In January 2022, the OECD reported that it had begun talks aiming toward joining Argentina, Brazil, Bulgaria, Croatia, Peru, and Romania.

In June 2022, during the annual OECD Ministerial Council Meeting, the roadmaps for accession to the OECD Convention for Brazil, Bulgaria, Croatia, Peru, and Romania, were adopted.

Countries whose accession talks were terminated

In May 2007, the OECD decided to open accession negotiations with Russia. However, in March 2004, the OECD halted membership talks with Russia in response to its role in the 2014 Annexation of Crimea. On 25 February 2022, the organisation terminated the accession process with Russia after it invaded Ukraine.

Objectives of OECD

The primary objective of the OECD is to improve the world economy and encourage global trade. It provides a forum for Governments of various countries to work jointly to find solutions to common issues. It entails collaborating with democratic countries that share a commitment to improving the economy and overall well-being of their citizens. The main focus of OECD is to help governments around the world in achieving the following:

  • To improve confidence in markets and the institutions that support them.
  • To obtain healthy public finances to attain long-term economic growth.
  • To grow through innovation, environmentally friendly practices and the sustainability of developing countries.
  • To provide resources for people to develop the skills they need to be productive.

Functions of OECD

The OECD plays an integral role in promoting global economic stability. Together with governments, policymakers, and citizens, the OECD works on establishing evidence-based international standards and finding solutions to various social, economic, and environmental challenges.

It works to publish and updates a model tax convention that serves as a blueprint for allocating taxation rights among the countries.

It is responsible for publishing economic reports, statistical databases, analyses, and forecasts on the global economic outlook.

The group analyses the impact of social issues on economic growth and gives recommendations to foster economic growth globally. These recommendations also take into account the environmental concerns associated with economic development.

It endeavours to eliminate bribery and other forms of financial crimes worldwide.

The OECD also maintains a “blacklist” of countries that are considered uncooperative tax havens.

It works in the G-20 countries to eradicate tax avoidance by profitable firms. It also encourages the G-20 nations to promote tax reforms.

From improving economic performance and generating jobs to promoting education and fighting tax evasion, it provides a unique forum and knowledge hub for data and analysis, exchange of experience, best-practice sharing, and advice on public policies and international standard-setting.

Publications – OECD

The Organisation for Economic Cooperation and Development (OECD) publishes reports, books, statistics, working papers, and reference materials.

  • OECD Economic Outlook
  • OECD Factbook
  • OECD Communication Outlook
  • OECD Internet Economy Outlook

India and OECD

India is not a Member of the Organisation for Economic Cooperation and Development (OECD). But, India became the 27th Member of the OECD’s Development Centre.

On 16 May 2007, the OECD Council at the Ministerial level adopted a resolution to strengthen the cooperation with India, China, Brazil, Indonesia, and South Africa through a programme of enhanced engagement, defining these countries as essential partners of the OECD.

The OECD Analysis and Statistical Databases include India as a Key Partner.

The involvement of Indian policymakers in the OECD bodies and forums is encouraged to take advantage of OECD’s technological expertise and analytical ability.

Areas of work

OECD-India collaboration continues to build in the areas like anti-corruption, governance, corporate, economic policy, environment, fiscal relations and responsible business, steel, trade and investment, etc.

India’s Participation in OECD Activities

India participates in selected OECD committees and their subsidiary bodies. India is also a member of the Global Forum on Transparency and Exchange of Information for Tax Process, the International Transport Forum, and an association country of the International Energy Agency.

Engagement in the G-20 involves the active role of India in the Global Steel Forum and its compliance with the G20/OECD Corporate Governance Principles.

Indian Ministers and officials also have attended the OECD Ministerial Council Meetings.

The OECD has acknowledged the contribution of the Indian GLP program and designated India as the Vice-Chair of the OECD Working Group on Good Laboratory Practice (GLP).

OECD administers and publishes the Programme for International Student Assessment (PISA). India has participated in the PISA test only once, in 2009.

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