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The case for Cormann: Why Australia must be US pick for OECD

The case for Cormann: Why Australia must be US pick for OECD
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With just 37 member states, the Organization for Economic Cooperation and Development (OECD) is the most important international organization that you probably don’t know much about. However, it’s time for everyone — especially Americans — to start paying attention.

The organization will face a turning point in March 2021 as a new leader, the “Secretary-General,” is selected for the first time in 14 years. The Biden administration has thus far remained quiet on the race. The next leader will have to make critical decisions affecting international approaches to tax systems, digital transformation, trade, foreign aid, and education. More broadly, the new Secretary-General will set the organization’s influential path in the multilateral ecosystem for the next five years, at minimum.

The United States has much at stake — and supporting the Australian candidate, Mathias Cormann, will be America’s best bet.

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Why does the OECD matter?

Founded in 1961, the OECD is an elite club of free-market economies and the world’s premier standard-setting institution. The OECD holds outsized influence from its agility in policy creation, high levels of technical expertise, and ability to influence member state actions. Furthermore, while many selective international organizations, such as the EU and NATO, have felt expansion fatigue, the OECD has been able to expand while further growing its international influence. Even before joining, having “OECD status” remains so attractive that states will wade through multi-year negotiations and undertake major domestic reforms to achieve membership

The OECD also stands out as one of the most powerful organizations where China is not a full member. In recent years, China has altered the rules-based international system from human rights to cybercrime by setting up its own institutions and ignoring guidelines. The OECD is the most promising center of gravity to halt erosion of the international system by setting global norms.

The ongoing consultations and swirling rumors

The OECD selects the Secretary-General through rounds of consensus-based consultations with member states. To date, the selection committee has conducted three rounds of consultations, and four of ten candidates remain in the race: Mathias Cormann of Australia, Anna Diamantopoulou of Greece, Philipp Hildebrand of Switzerland, and Cecilia Malmström of Sweden. With only four candidates left and a March deadline, names could be quickly whittled down.

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The private nature of consultations means that public declarations of support are rare. However, informed conjectures can be made. For members from Latin America and the Asia-Pacific, Mathias Cormann may be attractive as the only non-European candidate. The United Kingdom is also reportedly supporting Cormann. For Southern and Eastern European members, Anna Diamantopoulou could be an ideal pick as her views are generally supported and the regions have yet to send a Secretary-General. On the other hand, Western and Northern European countries will likely be debating among Philipp Hildebrand and Cecilia Malmström.

As Biden reasserts American international leadership, the OECD could be the ideal forum to constructively shape and contribute to the international order. To realize this vision, a Secretary-General favorable to the United States’ orientations would surely help.

Among the remaining candidates, Mathias Cormann would be the most strategic choice.

Possible opposition

Before arguing Cormann’s advantages, it is important to address that his selection could be blocked by adamant member states. Some believe that the OECD should pick a candidate from Europe as a European has not led the organization since 1996.

Cormann is also facing backlash for his environment record as Finance Minister under the Liberal-National coalition. The OECD is a leader on international climate cooperation, and with the environment as a key point of the “Better Policies for Better Lives” initiative, states may feel inclined to avoid Cormann’s selection. However, this view overlooks Cormann’s campaign commitments. Most recently, Cormann championed achieving global net-zero emissions by 2050 under the Paris Accords, a comparable view to other candidates.

Synergies between Cormann and the United States

Though other candidates are undoubtedly qualified, Mathias Cormann’s candidacy stands out for his clear calls to lead an OECD that is “engaged with all the world’s regions, including the Asia-Pacific.” As a non-European representative, his leadership would be an especially credible signal. The United States has vested interests in expanding the OECD to increase global policy reach and to incorporate more countries that are favorable to the United States’ policy positions. With membership on the table for Argentina, Brazil, Bulgaria, Croatia, Peru, and Romania, backing Cormann's bid for this specific selection would be a smart move.

Cormann’s views on taxes and the economy also align with the United States. Of the remaining candidates, he is likely to be sympathetic toward large American tech companies in finding a way forward on the ongoing digital tax debate. While the Biden administration may be more likely than the previous administration to find compromise, a reversal of position to support increased digital taxes under proposed Deputy Assistant Secretary for Multilateral Tax, Itai Grinberg, is unlikely. Furthermore, though the current digital tax debate may evolve before the next Secretary-General takes office, the stakes will remain high. Debates on similar topics will likely continue, and it would benefit the United States and American companies to have someone in their corner. Cormann has also championed anti-corruption initiatives, similar to the Biden administration’s concerns on illicit finance.

The Biden administration is likely to continue the focus on competition with China that was a priority for the Obama and Trump administrations. Supporting Cormann in the Secretary-General selection will be an easy way to show solidarity with Australia, as China-Australia ties have worsened in the last year, while also sending a signal about how the U.S. will engage with a critical source of standards and influence.

Time is of the essence for American involvement. Of the candidates, Cormann is the most promising as an international leader who has commensurate experience in the Asia-Pacific and in interacting closely with powerful non-market economies.

A strong U.S. push could settle him as the ideal compromise between all OECD parties, especially with his ties to Europe as a Belgian-native.

In the consensus-based OECD system, Cormann need not be the most popular candidate, but one that checks some of the boxes for all parties. Though the Biden administration will have to contend with major domestic issues, active participation in the current race will provide a major payoff of favorable OECD leadership for the United States.

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.