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The US and the next leader of the OECD

Australia’s candidate for Secretary-General is a favourable contender, but American backing is still up in the air.

OECD headquarters in Paris (Hervé Cortinat/OECD/Flickr)
OECD headquarters in Paris (Hervé Cortinat/OECD/Flickr)

Although it may not regularly make headlines, the Organisation of Economic Cooperation and Development (OECD) is an important multilateral institution. With its standard-setting capability, the organisation’s 300 committees and 3300-member secretariat have carved unique policy niches on trade, anti-corruption efforts, international taxes, digital transformation, artificial intelligence, and official development assistance through the Development Assistance Committee.

With 38 members that represent almost two-thirds of global economic activity, the OECD is the world’s most elite club of free-market economies. This exclusivity has helped the OECD avoid the modern expansion fatigue of other multilateral organisations, such as NATO, whose “open door policy” has hindered its ability to effectively influence its member nations.

The OECD is also exceptional as one of the few multilateral organisations that can mobilise membership status as a “carrot” for countries to undertake substantial domestic free-market reforms. For the newest OECD member, Costa Rica, to join last May, it passed 14 different domestic reforms to match OECD recommendations. As other countries have steadily sought to join the OECD ranks throughout the 21st century, the benefits of membership clearly outweigh the initial costs.

2021 is an especially important year for the OECD. The organisation celebrates its 60th birthday, and its long-time leader, Secretary-General Angel Gurría, is stepping down in May after a 15-year tenure.

2021: A Year of Change?

Because the Secretary-General holds important agenda-setting abilities, selection has historically reflected power struggles among countries hoping to influence the organisation. The first four secretaries-general were European, and reflecting the expansion of the organisation, the past two have represented Canada and Mexico.

The OECD is one of the most influential multilateral organisations in which China is not a full member, and it remains one of the few Western institutions that is a standard-maker instead of standard-taker.

The selection process for Secretary-General formally began last September, when the selection committee began accepting nominations. After shortlisting a subset of candidates, the committee is now holding rounds of consensus-building consultations with member state representatives to reach a formal agreement by 1 April.

Ten candidates were originally nominated, including Mathias Cormann (Australia), Anna Diamantopoulou (Greece), Vladimír Dlouhý (Czech Republic), Philipp Hildebrand (Switzerland), Kersti Kaljulaid (Estonia), Ulrik V. Knudsen (Denmark), Michał Kurtyka (Poland), Christopher Liddell (United States), Cecilia Malmström (Sweden) and William Morneau (Canada). On 13 January, Vladimír Dlouhý and Michał Kurtyka withdrew from the race after the first round of interviews. On 19 January, Chris Liddell of the US withdrew his nomination. Of the currently remaining seven candidates, a source for the Sydney Morning Herald confirmed that Cecilia Malmström, Philipp Hildebrand and Mathias Cormann are in a tier of the most-favored candidates. Out of the second tier, Kersti Kaljulaid of Estonia could garner the most support. A second round of inteviews will leave four or five candidates, and another round will winnow it to two and then the winner.

The front runners and the issues

The US will likely back the Australian. Prime Minister Scott Morrison reportedly mentioned the Cormann candidacy on a congratulatory call to President-elect Joe Biden in November. The Australian candidacy would likely reflect US interests, including aligned positions on digital taxes, OECD expansion beyond Europe and other issues.

Sweden’s Cecilia Malmström most recently served as the EU Commissioner for Trade from 2014 to 2019 and is a long-time member of the European political scene. Malmström’s policy platform centres on restoring economies post–Covid-19, taking swift action on climate change and pushing the OECD to focus more on gender equality, youth, and low-wage workers. She is also the only woman in the top tier of candidates, and if selected, she would become the first female OECD Secretary-General.

It has been more than 25 years since a European country has led the OECD, and with 70% of member states being European, there is surely support for a candidate from the neighbourhood. However, Malmström has spoken out against corruption and governance practices in OECD member states, such as Hungary, Greece, and Poland multiple times, and her record may make it difficult for Europe to build a united bloc to support her candidacy. Furthermore, she could be associated with a period of EU hostility towards big US tech companies (if indirectly), such as Google and Apple.

The other European front runner is Philipp Hildebrand of Switzerland. He is a current vice chairman at asset manager BlackRock and the only private-sector candidate. However, he does have public-sector experience from his time with the Swiss National Bank and as chairman of the OECD Committee on International Payments Balance. His platform champions private-sector engagement, net-zero carbon emissions economies by 2050, ending tax evasion in a digital economy and addressing economic and social inequality.

Key parts of his platform mirror those of Malmström and the interests of powerful European members. He could become an ideal compromise candidate for European member states.

However, Kersti Kaljulaid could surprise. She currently serves as the president of Estonia, a role she began in 2016. During her tenure, she has helped Estonia become one of the world’s most digitally advanced countries, and Kaljulaid’s priorities for the OECD also centre on digital transformation. She has emphasised the importance of reforming the international tax system, innovating identification methods and maintaining democracy during digital transformation. If chosen, she would also become the first female OECD Secretary-General.

Mathias Cormann, ex–finance minister of Australia, is the only non-European candidate among the front runners. If selected, he would be the first Secretary-General from the Asia-Pacific. In fact, his platform is unique for its commitment to expanding OECD engagement with the Asia-Pacific. Other key ideas of his platform include environmental action, Covid-19 recovery and anti-corruption efforts.

Australian Prime Minister Scott Morrison (left) and then–Minister for Finance Mathias Cormann arrive for a press conference at Parliament House in Canberra to announce Cormann’s candidacy for OECD Secretary-General, 8 October 2020 (Sam Mooy/Getty Images)

Cormann’s globally oriented vision for the OECD and emphasis on anti-corruption make him a very attractive candidate for the US. Beneficially, as a Belgian native with strong connections to Europe, he may also be an ideal compromise candidate between European and non-European states.

Some worry that his affiliation with the centre-right Liberal party and their weaker stance on climate-change policy may damage his bid. However, this view overlooks that many governments in the OECD are led by centre-right parties, including Japan, Chile, Colombia and a number of European countries. Cormann should make the list of the two finalists.

How should the US engage?

The US has not been very engaged up until this point in the selection process, because it notionally had a candidate of its own until 19 January. While the critical period of country consultations is happening now, senate confirmation of top State Departments posts will not come until after a Secretary-General is selected, hampering US decision-making and involvement.

The OECD is one of the most influential multilateral organisations in which China is not a full member. China’s steady rise may also incentivise the US and other concerned countries to support an Australian candidate at a time when Australia is in a significant trade dispute with China.

The OECD remains one of the few Western institutions that is a standard-maker instead of standard-taker. The US can block a candidate, but it cannot impose a candidate on the other members. No matter whom it chooses, the Biden administration has to decide on a candidate soon.

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