Political Economist

Bridging the gap between rich and poor countries should be as high a priority for the International Monetary Fund as helping to solve the world’s financial imbalances, Dominique Strauss Kahn, the probable next managing director of the IMF told the Financial Times.

The former French finance minister, who is on a world tour to win support for his candidacy to head the IMF, said that “going south of the Equator” would matter just as much as going “east to the Pacific” – a reference to deep concerns about the growing trade gap between China and the developed world. Mr Strauss Kahn will fly to Mozambique on Sunday to meet African finance ministers and then over the following two weeks to Mexico, Argentina, South Africa, Brazil, Saudi Arabia, Egypt, China, South Korea, Japan, India and Russia in what he freely described as a “campaign” among the largest developing countries to get the job.

Asked whether Europe should continue to maintain its stranglehold on the top IMF job as the US does with the World Bank, Mr Strauss Kahn said he supported an open process and would welcome candidates from other parts of the world if they threw their hats into the ring before the closing date at the end of August.

“It is entirely legitimate for any country that is a member of the IMF to promote one of their nationals as a candidate,” he told the FT in his first interview since being proposed for the job.

“But of course that does not mean that a European cannot also be a candidate,” he added.

On Friday the Bush administration formally endorsed Mr Strauss Kahn’s candidacy following his meeting with Hank Paulson, the US treasury secretary.

Mr Strauss Kahn on Friday also met Bob Zoellick, the new president of the World Bank, who moved into the job following the unexpected resignation of Paul Wolfowitz last month.

He said his top priorities would be to address both financial and equity imbalances in the world economy and to improve the governance structure and quota system of the IMF to better reflect the growing weight of developing countries in the world economy.

He said he believed the IMF could “adapt” to make itself more relevant to the challenges of globalisation.

“I believe strongly in multilateralism,” he said.

“I think that at this time of globalisation we need more multilaleralism – not less,” adding that he believed the US had recently become “more committed to “multilateralism”.

He said that the “integration” of poor countries into the global economy would be a top priority if he got the job.

Brazil on Friday claimed victory in its latest assault on US cotton subsidies at the World Trade Organisation, underscoring warnings by the Bush administration that the subsidy-laden farm bill under consideration by Congress risks triggering a wave of trade disputes.

Brazil said a confidential interim ruling by a WTO panel had gone in its favour.

The panel, due to issue its final decision in September, was set up last year to judge whether the US had fully complied with a 2005 WTO appeal verdict condemning several subsidy programmes for cotton farmers.

In response to that verdict, the US scrapped or amended programmes considered to be illegal export subsidies. However, Brazil says this left untouched some of the most trade-distorting subsidies, such as marketing loans and counter-cyclical payments that compensate farmers for low prices.

The US House of Representatives was set to vote late on Friday on a controversial $256bn, five-year farm bill that eliminates subsidies for farmers with more than $1m in adjusted gross income but continues to give generous subsidies in key areas including corn, cotton, soya beans and rice.

The bill was approved by the House agricultural committee on July 19.

The Bush administration has threatened to veto the legislation, saying it leaves the US vulnerable to WTO challenges similar to the case brought by Brazil over support for cotton farmers.

Pedro Camargo Neto, ex-secretary of production and trade at the Brazilian Ministry of Agriculture, dismissed the likelihood of Brazil bringing further cases, such as against soy, sugar and rice, where it would be more difficult to prove damages.

The Brazil ruling should embolden other countries, such as Mexico and Uruguay, to seek redress over rice subsidies.

A US trade official confirmed on Friday that the WTO panel had found that the changes made by the US “were insufficient to bring the challenged measures into conformity with US WTO obligations . . . we are very disappointed with these results”.

Brazil and its allies have pressed for big reductions in US and European Union farm support in the Doha global trade round.

The latest draft text by the chair of the Doha round’s agricultural negotiations calls specifically for deeper and faster-than-average cuts in cotton subsidies in developed countries.

Critics say such subsidies hurt not only Brazil but also millions of poor West African cotton farmers.

Still, with a successful conclusion to the round uncertain, the WTO’s dispute mechanism is increasingly seen as an alternative if ponderous route to the same end.

In 2005, Brazil, Thailand and Australia won another landmark case against EU sugar subsidies and this year Canada and Brazil have each filed new complaints alleging US overspending on trade-distorting farm aid.