You are here: Home » International » News » Economy
Business Standard

US primacy seen ebbing at global meet

Washington's retreat is not so much by intention, but a result of dysfunction and a lack of resources to project economic power as it once did

Jonathan Weisman  |  Washington 

As world leaders converge here for their semiannual trek to the capital of what is still the world's most powerful economy, concern is rising in many quarters that the is retreating from global economic leadership just when it is needed most.

The spring meetings of the Monetary Fund and have filled with motorcades and traffic jams and loaded the schedules of President and Treasury Secretary Jacob J Lew. But they have also highlighted what some in and around the world see as a government so bitterly divided that it is on the verge of ceding the global economic stage it built at the end of World War II and has largely directed ever since.

"It's almost handing over legitimacy to the rising powers," Arvind Subramanian, the chief economic adviser to the government of India, said of the in an interview. "People can't be too public about these things, but I would argue this is the single most important issue of these spring meetings."

Other officials attending the meetings this week, speaking on the condition of anonymity, agreed that the role of the United States around the world was at the top of their concerns.

Washington's retreat is not so much by intent, Mr. Subramanian said, but a result of dysfunction and a lack of resources to project economic power the way it once did. Because of tight budgets and competing financial demands, the United States is less able to maintain its economic power, and because of political infighting, it has been unable to formally share it either.

Experts say that is giving rise to a more chaotic global shift, especially toward China, which even administration officials worry is extending its economic influence in Asia and elsewhere without following the higher standards for environmental protection, worker rights and business transparency that have become the norms among Western institutions.

President Obama, while trying to hold the stage, clearly recognizes the challenge. Pitching his efforts to secure a major trade accord with 11 other Pacific nations, he told reporters on Friday: "The fastest-growing markets, the most populous markets, are going to be in Asia, and if we do not help to shape the rules so that our businesses and our workers can compete in those markets, then China will set up the rules that advantage Chinese workers and Chinese businesses."


In an interview on Friday, Lew, while conceding the growing unease, hotly contested the notion of any diminution of the American position.

"There is always a lot of noise in Washington; I'm not going to pretend this is an exception," he said. "But the United States' voice is heard quite clearly in gatherings like this."

Nonetheless, the challenges keep mounting.

An overhaul of the IMF's governance structure, negotiated five years ago in large part by President to give China and other emerging powers more authority commensurate with their growing economic strength, has languished in Congress. That, in part, propelled China to create its own multilateral lending institution in direct competition with the behemoths in

The efforts to secure an ambitious 12-nation Pacific trade agreement, championed by Obama and recently backed by a handful of key lawmakers, has set off perhaps the biggest fight of his presidency within his own party, with trade unions, environmentalists and liberal activists lining up in opposition to the White House. There is a strong possibility that Obama could lose the battle.

Even the United States' Export-Import Bank, a lending agency similar to export financing arms in countries around the world, could be killed in June by conservatives in Congress, leaving would-be foreign customers in the cold and many American exporters at a disadvantage to competitors abroad.

"I've been searching for a word to describe it, and the one I use is 'withdrawal,' best I can come up with," said Edwin M. Truman, a former Obama Treasury official now with the Peterson Institute for Economics. "We're withdrawing from the central place we held on the stage."

In Washington, that concern crosses party lines.

"This is really about a crossroads for America and its leadership for the world," said Representative Dave G. Reichert, Republican of Washington. "We set the tone, we set the path for the global by being leaders. And if we don't, other countries step in."

The costs could be real. Failure to bolster the and other institutions weakens the West's hand in confrontations like the one with Russia over Ukraine, which has begged for multilateral economic assistance. Senator Lindsey Graham, Republican of South Carolina, pointed to conflicts like the one in Syria, suggesting that fears the and will be unable to help rebuild the shattered country only opens the door to confrontational actors like Iran.

"Sometimes we can only hope it's China that steps in," he said.

But China's rising sway in Africa, South Asia, and even Latin America could blunt efforts by the United States and its allies on a range of issues, from stemming violent extremism to slowing climate change.

For much of Washington and the world's economic leaders, China's creation of the Asian Infrastructure Investment Bank crystallized the choice policy makers face. Earlier this month, Lawrence Summers, who was a top economic adviser for both President Bill Clinton and Obama, declared that China's establishment of a new economic institution and Washington's failure to keep its allies from joining it signaled "the moment the United States lost its role as the underwriter of the global economic system."

For years, China had threatened to establish institutions to rival those dominated by the West, like the IMF, and Asian Development Bank - or even to establish its currency, the renminbi, as a reserve currency to rival the dollar.

In 2010, Obama brokered a deal to raise China's stake in the I.M.F. to 6 percent from 3.8 percent, still far below the United States' vetoing share of 16.5 percent but enough to give Beijing a larger say. Congress has blocked the proposed adjustment.

First Published: Sat, April 18 2015. 21:30 IST
RECOMMENDED FOR YOU