Better policies and effective multilateralism: the path to a better future
G7 Summit

Better policies and effective multilateralism: the path to a better future

To meet the major structural challenges facing our world, we need closer cooperation – and the Organisation for Economic Co-operation and Development is working with its members and partner countries to achieve the shared goals of prosperity, stability and peace via specific proposals

In recent years, the world has had to navigate the impacts of major economic shocks: a one-in-100-year pandemic, a major war in Europe, the evolving conflicts in the Middle East and new forms of protectionism. All of this at a time when the world continues to face major structural challenges that require more effective policy responses: climate change, sustainable development, the digital transformation and artificial intelligence, as well as population ageing. 

Although the task may look daunting, closer cooperation across a range of key public policy areas will help bring us closer to our shared goals of prosperity, stability and peace. Through continued policy analysis, dialogue and reform and on the strong foundation of our commitment to effective multilateralism, the  Organisation for Economic Co-operation and Development is working with our members and partner countries to help achieve those objectives. 

Specifically, to secure strong, sustainable, resilient and inclusive growth the OECD proposes that:

We need to remain vigilant in durably tackling inflation. There will be scope to lower nominal policy interest rates this year and next year as inflation declines. Still, the policy stance should remain restrictive in most major economies for some time to come.

We need to find the best ways to secure more robust productivity growth. Lowering barriers in product markets – that is, lowering barriers to entry, expansion and the exit of firms – is key to ensuring greater levels of competition, business dynamism, productivity and growth.

We need to reinvigorate global trade with well-functioning global markets and resilient supply chains and a rules-based trading system in good working order. Globalisation, open markets, and freer global trade and investment flows have been key in increasing incomes and living standards around the world, helping to lift hundreds of millions of people out of poverty. More open trade and more investment means stronger growth, more jobs, higher incomes and lower costs for consumers. This helps put downward pressure on inflation. Our work together needs to focus on boosting supply chain resilience, the social and environmental sustainability of trade, and the effectiveness of our rules-based system with the World Trade Organization at its core.

We need to land our two-pillar reform agenda designed to make our international tax arrangements fairer and work better in a digitalised, globalised world economy. The global minimum tax under Pillar Two is now a reality having come into effect as of January. This is a major success. Based on currently announced plans around the world, we expect about 60% of all in-scope multinational enterprises to be covered by the global minimum tax in 2024, rising to over 90% by 2025. Our updated revenue estimates show that the minimum tax will increase global corporate tax revenues by between 6.5% and 8.1%, providing a much-needed boost to government finances. Over the coming weeks we hope to be able to sign the multilateral convention to give effect to the reallocation of taxing rights under Pillar One as well.

We need to accelerate progress in tackling climate change, by making sure that appropriately ambitious efforts in individual jurisdictions are integrated into globally effective climate action on a path to net zero emissions. This will help countries to achieve the triple energy supply challenge of security, affordability and sustainability. In this context, we must also continue our work to ensure policy coherence, including by pursuing reforms to environmentally harmful subsidies and by repurposing support to nature positive solutions.

We need to strengthen the effectiveness of development assistance in response to pressures on developing countries’ growth, stability and debt sustainability. The OECD is advancing several initiatives, including, in line with the focus of Italy’s G7 presidency, strengthening partnerships with Africa. We are developing an Africa Virtual Investment Platform in partnership with the African Union Commission to help increase both the quantity and the quality of investment in Africa.

And, while responding to the immediate economic challenges, we must also lay the groundwork for longer term growth. We need to ensure we can seize the benefits and opportunities associated with the digital transformation of our economies, including artificial intelligence, while better managing the risks and disruptions associated with them. The OECD is supporting discussions on AI at the G7 through our work to advance the outcomes from the Hiroshima AI Process under Japan’s 2023 G7 presidency, including by developing monitoring mechanisms to support the application of the Hiroshima AI Process Code of Conduct.

Finally, we need to improve our response to the economic, social and fiscal impacts of population ageing. We need to ensure we draw on all of our available human resources – by boosting workforce participation by women and young people, by fully integrating migrant workers into our labour markets and, as we live longer and healthier lives, by working longer. Closing gender gaps in workforce participation and paid working hours could boost gross domestic product across OECD countries by about 9.2% on average by 2060. Reforms will need to continue to be pursued to ensure pension systems are sustainable over the long run. 

Across all these areas the OECD is working with policymakers around the world to help tackle the challenges facing our economies and societies. Supporting this work is at the core of our mission at the OECD – to support member and partner countries from around the world to deliver better policies for better lives.