Is America losing its influence?

Is America losing its influence?By David Gergen, CNN Senior Political November 12, 2010 3:08 p.m. EST

Editor's note: David Gergen, a senior political analyst for CNN, has been an adviser to four U.S. presidents. He is a professor of public service and director of the Center for Public Leadership at the Harvard Kennedy School.

(CNN) -- Opening The New York Times on Friday morning, I blinked. The headline on its lead story, spread over two columns, blared out, "Obama's Economic View Is Rejected on World Stage."

Whether or not you like this president, the headline should make every American wince. Yes, other presidents have experienced setbacks, but it has been a long time since any of them has been so publicly rebuffed in a gathering of the world's major nations. Indeed, since World War II, our presidents have dominated the world's economic decision-making.

In this case, Obama took double blows. His hosts in South Korea resisted making concessions that would have wrapped up the biggest bilateral trade deal for the U.S. in more than a decade -- a deal that Obama insisted be done by this week. No one knows now if it will be completed.

Meanwhile, at a meeting of the G-20 nations in Seoul, Obama ran into more trouble. For months he and Treasury Secretary Timothy Geithner have been pointing toward these talks as a place to secure a firm agreement from China to increase the value of its currency and to gain agreement from China, Germany and others to reduce their trade surpluses. The doors were slammed in American faces. China refused to make firm promises, and the U.S. was lectured by China, Germany, Brazil and others that it was manipulating for a weaker dollar so that it can increase exports.

There is a suggestion coming from the White House that the press is being unduly dramatic in its reporting on these setbacks. But is this believable about The New York Times? Hardly.

No, what we have here is something more serious: not only a president who is personally weakened by elections at home but a proud nation that is also weakened in the eyes of the world.

For too long, the U.S. has been seen by a growing number of other nations as acting recklessly with our finances. Within less than a generation, we have fallen from being the world's biggest creditor to the world's biggest debtor. Fingers are also pointed at us for causing the Great Recession.

We increasingly face a stark choice: Either we get our economic house in order or we will lose much of our influence -- and our leadership -- on the world stage.

Time to take a more welcoming look at the national deficit commission? I think so.

The opinions expressed in this commentary are solely those of David Gergen.

Summit Shows U.S. Can Still Set Agenda, if Not Get Action

It could have been far worse.
That was the consensus among the leaders of the Group of 20 economic powers as they dispersed Friday, following a two-day summit meeting dominated by anxieties over currency and trade frictions. In their fifth meeting since the 2008 financial crisis, the leaders agreed in essence to a year-long cooling-off period during which they will slowly tackle persistent economic imbalances.

“In Seoul, there was too much jostling over currencies, deficits and exports for the G-20 leaders to make any significant breakthroughs,” said David Shorr, who studies economic diplomacy for the Stanley Foundation, an organization in Muscatine, Iowa, that advocates international cooperation. “But there was also enough concern to avert a disastrous breakdown.”

The meeting still showed the power of the United States to set the agenda for international discussion, even if the result — charging the International Monetary Fund with analyzing the sources and consequences of the imbalances — was far less robust than American officials had hoped for.

Expectations for this summit meeting had been low, particularly because officials from China and Germany, the world’s two biggest export-driven economies, had repeatedly criticized the United States for weakening the dollar as a means of supporting a sluggish domestic recovery.

But in interviews here, officials from Europe and the United States said that weakening, specifically the decision by the Federal Reserve to inject $600 billion into the economy, was not a major topic of discussion in the leaders’ private meetings.

In those discussions, including at a dinner on Thursday and a lunch on Friday, there was considerable agreement on the need to address a fundamental trade, or accounts, imbalance: some economies are spending, buying and borrowing too much and others too little.

Jose Manuel Barroso, president of the European Commission, said in an interview here that the G-20 joint statement on the need to curb those imbalances was significant given that some countries did not even support raising the issue just two years ago.

“This represents a quantum leap in terms of global economic governance,” he said. “I think very frankly that the G20 has passed the test.”

For his part, President Obama suggested that the attention on imbalances had overshadowed significant agreements on overhauling financial regulations and improving development assistance for poor countries.

“Naturally there’s an instinct to focus on the disagreements, because otherwise, these summits might not be very exciting — it’s just a bunch of world leaders sitting around intervening,” he said at a news conference. “And so there’s a search for drama. But what’s remarkable is that in each of these successive summits we’ve actually made real progress.”

Even the British prime minister, David Cameron, who on Thursday said the G-20 was past its “heroic phase,” called the forum essential.

“If we didn’t have the G-20 there would be the real danger that countries might go off and pursue their own interests,” he said, adding: “I don’t accept the idea that the G-20 process isn’t working. It’s a process.”

China’s increasingly vocal and assertive posture was a defining theme of the meeting, as was the candid American acknowledgment that the recovery of the United States — essential for global economic growth — requires outside help.

Squabbling over highly technical language in the 22-page joint statement was so intense that a meeting of key officials from the G-20 countries stretched into Friday morning, only hours before the leaders were to bless the communiqué. And in their closed-door meetings, leaders were not shy about sharing their views.

“There were robust conversations,” Mr. Cameron said, when asked to characterize the leaders’ meetings. “What I witnessed were relatively good-natured conversations. Yes, of course there were pressures and tensions, but it was right that they were addressed at a forum like this instead of slipping over into bilateral action.”

Mr. Obama found himself defending the Fed’s decision buy government bonds to lower long-term interest rates, even though he has tried to avoid commenting on the central bank, an independent entity.

At the leaders’ dinner on Thursday, Mr. Obama acknowledged that the Fed’s monetary policy offered the most promising course of speeding the American recovery, given the political impediments to any additional fiscal stimulus measures, according to Mr. Barroso.

The Obama administration made it clear that it was not seeking to dictate the terms of economic debate, as it once could have done, but was seeking to foster international norms.

“What the IMF can do is the necessary function of playing the role of referee or of independent arbiter,” a senior administration official said. “The IMF has to play that role – there’s no alternative to it.”

A common complaint about the G-20 is that it lacks enforcement mechanisms. The forum, still largely informal, operates by consensus and peer pressure, not sanctions and rules. So the rationale for cooperation on reducing imbalances is an argument that the benefits outweigh the costs.

The challenge ahead will be to specify how to measure broad imbalances, and then to fix them.

“You have to have numbers,” said the senior American official, who spoke on condition of anonymity according to ground rules set by the White House. “This is economics. Just like a thermometer has numbers on it, you have to have numbers, and everybody recognizes that.”

Or as Dominique Strauss-Kahn, the managing director of the I.M.F., put it: “Now we have to see — after six months, after one year, after two years — if we’re able to give some flesh around the bone.”

Some observers have doubts. John Kirton, a political scientist at the University of Toronto and the co-director of the G-20 Research Group at the university’s Munk School of Global Affairs, said he was disappointed that the leaders did not comment on the economic turbulence still roiling parts of Europe, most notably Ireland.

“The G-20 has successfully moved toward becoming a global economic steering committee, but perhaps at the expense of abandoning the core crisis response responsibility that gave it birth,” he said.