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THE OECD CODES OF LIBERALISATION
Who belongs to the OECD?
The Paris-based Organisation for Economic Cooperation and Development (OECD) brings together the 24 leading industrial nations: the 12 member states of the European Community (UK, France, the Federal Republic of Germany, Italy, Spain, Portugal, Greece, Luxembourg, Belgium, the Netherlands, Ireland and Denmark); the 6 members of EFTA, the European Free Trade Agreement (Switzerland, Austria, Norway, Sweden, Finland and Iceland); and US, Canada, Japan, Australia, New Zealand and Turkey.
What are the OECD Codes?
All OECD members are bound by the OECD Code of Liberalisation of Capital Movements and the Code of Liberalisation of Current Invisible Operations.
The underlying objective of both Codes is that residents of different OECD states should be as free to transact business with one another as residents of a single country.
What do the Codes cover?
The Capital Movements Code covers virtually all international capital movements, including short-term ones.
The only significant exceptions are mortgage credit, consumer credit and certain operations by governments on their own account.
The Invisibles Code covers current payments relating to foreign trade, production and business, and income from labour and capital. It also covers trade in a broad range of services including insurance, transport, tourism, audiovisual works and banking and financial services.
How do the OECD Codes work?
OECD members have undertaken to work towards removing all restrictions on all operations covered by the Codes. This is achieved through a process of progressive liberalisation. At the Codes adoption, and each time the scope of the Codes is extended, member countries have a once-only opportunity to put down reservations (exceptions) on particular operations. Once reservations have been lodged, countries are not allowed to introduce any new restrictive measures.
Each country's reservations are gradually whittled away through a series of 3-4 yearly country "examinations" when remaining reservations are subjected to close scrutiny by the rest of the OECD membership.
How can the Codes help British business and investors?
The country examination procedure gives the UK the chance to interrogate OECD partners on activities which might be judged incompatible with Code obligations. Cases can also be raised at the quarterly meetings of the relevant OECD committee.
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