2ND LD: OECD voices inflation concern amid food, energy price hikes

Asian Economic News, June 9, 2008

PARIS, June 5 Kyodo

(EDS: RECASTING WIH CHAIR'S SUMMARY)

Economic ministers from the 30-member Organization for Economic Cooperation and Development wrapped up their two-day meeting Thursday with a chair's summary voicing concern over inflation stemming from food and energy price hikes.

''Ministers were concerned about inflationary pressures and indications that inflationary expectations may be drifting upwards,'' the OECD ministers said in the statement.

They also said the fast growth of emerging economies lies behind the surges in food and energy prices.

''Rapid growth in emerging market economies is one factor boosting commodity prices,'' the ministers said.

The OECD ministers said that overall global economic performance has been better than expected over the past year despite the global financial turbulence but called for ''continued close policy coordination to facilitate the expected upturn.''

On sovereign wealth funds, the economic ministers urged recipient nations to ensure free investment activities by such funds.

The ministers, however, also called on sovereign wealth funds to ensure transparency in their investment activities, while welcoming the contribution of such funds to global economic growth.

Investment activities by such state funds, typically operated by emerging economies and oil-producing countries, have made some developed countries including the United States wary due to national security concerns and the SWFs' enormous impact on global financial markets.

The chair's summary is likely to be reflected in discussions at the Group of Eight summit of major economies to be held in Japan's northernmost main island of Hokkaido next month.

The annual OECD Ministerial Council was chaired by French economic minister Christine Lagarde.

On climate change, the OECD ministers stressed the merits of international trading of greenhouse gas emissions quotas to curb global warming. Some European countries have already commenced trading emissions quotas.

''Many ministers observed that market instruments, including taxes and carbon-trading schemes, financial and tax incentives, removal of subsidies, loan guarantees, and elimination of tariffs on environmental goods and services are key to addressing climate change,'' the OECD ministers said.

They also underlined the importance of comprehensive measures, including technological innovation and the so-called ''sectoral approach,'' which requires cutback targets for individual industrial sectors such as steel and electric power generation.

''These mechanisms must be complemented with other instruments, especially investment in clean technologies, regulatory instruments and standards, and sectoral approaches,'' the chair's summary said.

The sectoral approach is the brainchild of Japan. Japanese Economy, Trade and Industry Minister Akira Amari told a news conference Wednesday following the first day's session that the approach would enable countries to simultaneously pursue two goals of engineering economic growth and preserving the global environment, so it must be attractive to developing countries.

In the chair's summary, the OECD ministers also called for advancing the ongoing Doha Round negotiations for global trade liberalization under the World Trade Organization.