Ethernet flow control doesn't really fix congestion except in very special cases.
Consider a very simple topology:
A C
\ /
S1===S2
/ \
B D
Say hosts A and B are both sending data to C, as fast as they can, via switches S1 and S2 (which are connected via a high-speed link). And say the sum of these two flows is more than the capacity of the link to C.
S2 is receiving packets destined for C faster than it can forward them, but sending an Ethernet pause frame from S2 to S1 is not a very productive way to alleviate the situation, because it also disrupts any traffic that would be bound for D. It just moves the bottleneck elsewhere and causes collateral damage.
Consider a very simple topology:
Say hosts A and B are both sending data to C, as fast as they can, via switches S1 and S2 (which are connected via a high-speed link). And say the sum of these two flows is more than the capacity of the link to C.S2 is receiving packets destined for C faster than it can forward them, but sending an Ethernet pause frame from S2 to S1 is not a very productive way to alleviate the situation, because it also disrupts any traffic that would be bound for D. It just moves the bottleneck elsewhere and causes collateral damage.