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US leadership required in choosing leader for one of the most important policy bodies on the planet

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The Organization of Economic Cooperation and Development (OECD) is one of the most important standard-setting and policy bodies in the world today — and one which most people have never heard of.

The United States needs to play a very active part in choosing the next Secretary General of the OECD because it’s is an important vehicle for maintaining market democracies as global “standard-makers” — rather than “standard-takers” from authoritarian, quasi market economies such as China.

The OECD could be described as a highly exclusive “club,” made up of middle and upper-income market democracies, whose 38 members account for more than 60 percent of the global GDP. It is also part think tank, part data gatherer, and part standard setter. Its influence is enormous both among member-states and non-member states, and it will have even more influence in the coming decade.

I recently co-authored a report, as a part of my day job, which further outlines the very influential role of the OECD on global economics and global standards. The decision for a new leader will be taken in the Fall of 2020 — before the U.S. presidential election — and countries start putting their cards on the table next month.

Founded in 1961, the OECD is the inheritor of what was the Marshall Plan’s secretariat in Europe, then known as the Organization for European Economic Cooperation (OEEC). Its 20 original European and North American members endorsed the founding principle of the prior organization that declared “their economic systems are interrelated and that the prosperity of each of them depends on the prosperity of all.” Today the member countries number 38, with many of the additions coming from Asia and Latin America; Costa Rica became the 38th last month and is the fourth Latin American nation on the list. There are 10 countries with varying levels of observer status orbiting the OECD — including China, Russia, Kazakhstan, Brazil and Argentina — as part of expanded engagement with non-member countries.

The OECD’s work is done in more than a dozen committees that focus on highly technical and complex issues including corruption, taxes, trade, export credit agencies and foreign aid. It is the de facto major league baseball commission for foreign aid and export credit agencies determining what “counts” and what does not. All of the members states contribute to the work. The smaller number of nations makes it easier to get something done than some of the other larger multilaterals.

The OECD is one of the few international organizations the Trump administration has not tried to “disrupt” — and if managed correctly, is one of the few international organizations nimble enough to deal with modern, 21st century challenges. For example, the future of the international consensus on taxation is in its hands; the alignment of countries is very interesting, as it does not contain China but may soon contain Brazil (which makes discussion on critical technology and AI at the OECD very important), and even issues like overproduction of steel may eventually be resolved under the auspices of the OECD. 

Potentially, the OECD could supplant the WTO on trade issues if countries lose faith in the WTO and other institutions.

Also, the OECD is one of the few organizations that offers countries “carrots” as opposed to “sticks” to make major and politically difficult pro-market, pro-democracy reforms.

The OECD’s current Secretary General, Angel Gurria from Mexico, has been at the helm of the organization over the last 14 years, firmly establishing the organization as a pillar of global economic governance architecture alongside the World Bank, the IMF, the G7 and the G20. Mexico is not expected to support him for an unprecedented fourth term. One signal that he is moving on is that his long-time chief of staff just left for a role at UNESCO, which many regard as a signal there will be a change in the Secretary General role. 

One issue facing the OECD is that it must decide as an institution whether it sees itself as largely a more European-aligned organization or one which reflects a broader global but democratic constituency. The member-body is around three-fourths European, and it has been criticized for being biased in Europe’s favor.

Another dilemma is how fast and how should it make available expansion for new countries? Some are of the opinion that OECD should be a more exclusive club, regretting the recent inclusion of some countries, while others believe that if OECD accepts a new member country from the Americas, a country from another part of the world should also be accepted making the political calculus for expansion more tricky.

Yet another dilemma is “what to do about China?” Some members want mainland China as a member because of its size. However, given the issues Chinese membership has created at the WHO and WTO as well as recent developments in mainland China, perhaps the OECD ought to shelve membership with China and instead more actively include Taiwan as at least a formal observer.

The U.S. needs to be very active in deciding the next Secretary General for the new era.

The selection process begins in August, beginning with the nomination of candidates by member countries. The candidates are then reviewed by representatives of all members in individual hearings, and the “stature” of the candidates is confirmed by the Head of Delegations. The process continues with three rounds of consultations. Candidates with less votes are weeded out during the first two rounds, and in the third round a candidate is chosen by “consensus.”

Immediately prior to Gurria, the position was occupied by a Canadian, and before that all were Europeans. Ideally the next head of OECD would be from Australia or New Zealand, “New Europe,” or even the United States. If the U.S. does not put forward a candidate — or if a U.S. candidate does not succeed at winning the role — the U.S. should seek to ensure that a candidate from a country that has not led the OECD gets a “turn.”

All of this will be complicated by the fact that there are three other “big jobs” coming open before the end of 2020: the presidents of the IDB and EBRD and the top job at the WTO. The U.S. has a candidate for the IDB presidency. Will the U.S. putting forward a candidate for a second of these four big jobs make it difficult to win both? The WTO and OECD jobs are seen as “linked” in the eyes of some in the Trump administration, but there may have to be back room deals across all four institutions as this all comes around the same time.

Perhaps the U.S. might put forward an American candidate who is highly qualified — even one who might have dual citizenship from a member country which has not yet led the OECD. Such a U.S. candidate would have management experience in the private sector, perhaps experience in the tech world, and perhaps be a person with significant government experience who would also be acceptable to the Trump administration.

Daniel F. Runde is a senior vice president and William A. Schreyer chair in Global Analysis at the Center for Strategic and International Studies. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America, and the Middle East.

Tags American leadership China Donald Trump economy International order Market economy Mexico multilateral organization OECD Organization of Economic Cooperation and Development Russia Trump economy Trump foreign relations World economy

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