Presidential lobbying didn't help.

Photographer: Mark Wilson/Getty Images

Congress Undermines U.S.'s Global Standing

Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE and chairman of the President’s Global Development Council, and he was chief executive and co-chief investment officer of Pimco. His books include “The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse.”
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The debacle in Congress last week over President Barack Obama's trade agenda was further evidence that domestic political wrangling is harming U.S. leadership in the global economy.

By failing to pass Trade Adjustment Assistance, which provides help to American workers affected by international trade, Congress has raised doubts about the U.S.'s ability to conclude the Trans-Pacific Partnership, an agreement with 11 other Pacific Rim economies. It also dims the prospects for the negotiations on the Trans-Atlantic Trade and Investment Partnership with Europe.

It wasn't the first time recently that Congress sought to derail an agreement the executive branch had successfully advanced abroad. In recent months, lawmakers have again failed to approve reforms to the International Monetary Fund that were crafted by the administration, approved by most of the fund's global membership and are in the U.S. national interest (and they entail neither additional financial obligations nor an erosion of U.S. influence, representation and veto power on major IMF decisions).

As with trade, congressional blockage of IMF reforms had less to do with the merits of the case than with the posturing of individual lawmakers as they prepare to seek re-election. The dysfunction reflects a legislative branch that has been operationally undermined not just by extreme polarization of the two parties, but also by the influence of the extremes within the parties as they set up the terms of the debate for the next presidential-nomination primaries.

Outside the U.S., the image of an uncooperative Congress has also been fueled by the Republican lawmakers who took the unprecedented step of sending a letter to Iran's leadership warning that the nuclear agreement being pursued by Obama could well be overturned after the November 2016 elections.

To be fair, such signals to the rest of the world haven't been emitted by Congress alone. The administration itself slipped in its handling of the Asian Infrastructure Investment Bank.

Ignoring advice to join this new institution and seek to shape and influence it from within, the U.S. embarked on a concerted public campaign to block it. Those efforts were thwarted as U.S. allies joined the China-led initiative, forcing a rather embarrassing retreat. 

All this justifiably worries those who believe that effective U.S. economic leadership is essential to a well-functioning global system. This is especially true now, when world growth is struggling, there are genuine concerns about currency wars and countries have fallen further behind in dealing with some collective challenges, including environmental ones.

Historically, the U.S. has been the most effective in coordinating crisis management efforts, pushing forward multilateral reforms and enabling global policy cooperation. Moreover, there is no credible alternative to U.S. leadership on the international economic stage.

The Group of Seven isn't representative of the realities of recent global economic realignments. The G-20 is unwieldy and lacks sufficient continuity. Europe, with its endless challenges, is too internally focused and preoccupied. China is hesitant to step up to broader international responsibilities. And too many international institutions are burdened with longstanding legitimacy and credibility deficits related to outmoded representation and governance features.

After Congress's loud statement last week, many hope that lawmakers will find a way to put trade authorization back on track this week. Yet such a stop-go strategy is far from cost-free. It does little to restore confidence in Congress, whose public approval rating languishes at or close to record lows. And it suggests to the rest of the world that, due to seemingly endless internal political polarization and dysfunction, the U.S. cannot be relied on to play its natural role as the world’s economic conductor.

Congress would be well advised to take note of this before turning other international economic initiatives into spectacles. And, while it is at it, it should really move to approve IMF reforms that are in both the national and global interest.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mohamed A. El-Erian at melerian@bloomberg.net

To contact the editor responsible for this story:
Max Berley at mberley@bloomberg.net