| Greenspan warns against protectionism { January 13 2004 } Original Source Link: (May no longer be active) http://www.washingtonpost.com/wp-dyn/articles/A12769-2004Jan13.htmlhttp://www.washingtonpost.com/wp-dyn/articles/A12769-2004Jan13.html
Greenspan Voices Concern About Protectionism
By JEANNINE AVERSA Associated Press Writer Tuesday, January 13, 2004; 1:29 PM
WASHINGTON - Federal Reserve Chairman Alan Greenspan renewed a warning Tuesday that "creeping protectionism" could hurt the flexibility of the global economy, something that has played an important role in helping the United States and other countries weather economic hard times.
"Some clouds of emerging protectionism have become increasingly visible on today's horizon," Greenspan said in a speech delivered in Berlin at an event sponsored by Germany's central bank.
A copy of his remarks was distributed in Washington.
"The costs of any new protectionist initiatives .... could significantly erode the flexibility of the global economy," Greenspan added. "Consequently, it is imperative that creeping protectionism be thwarted and reversed."
Greenspan did not single out the protectionist moves that concerned him.
The Fed chairman's comments come amid a time of tensions surrounding globalization and the world's trading climate. President Bush had imposed steep tariffs on certain types of foreign steel. But he lifted them in December under threat of retaliation by Europeans and other trading partners. On Capitol Hill, there has been various calls by members of Congress to raise protectionist barriers, especially in dealings with China.
In his speech, Greenspan didn't talk about the future course of interest rate policy in the United States or the current state of the economy.
In a question-and-answer period following the speech, Greenspan was hopeful the U.S. economy would eventually produce "marked increases in employment" but he didn't elaborate on the timing. The nation's payrolls grew by a minuscule 1,000 jobs in December. Although the jobless rate fell to 5.7 percent, it was because thousands of potential workers gave up looking.
Amid signs that the economy is gaining traction, business analysts believe Fed policy-makers will hold a main short-term interest rate at a 45-year low of 1 percent at their next meeting on Jan. 27-28.
Thus far, swollen deficits in the United States' broadest measure of trade - called the current account trade deficit - have been "seemingly uneventful" and inflation remains subdued even as the dollar has fallen by roughly 25 percent against major foreign currencies since early 2002, Greenspan said.
"Inflation, the typical symptom of a weak currency, appears quiescent," he said. "Certainly euro area exporters have been under considerable pressure," he said. The euro has surged in value against the U.S. dollar, making U.S. goods more competitive in foreign markets and European goods less competitive.
German Chancellor Gerhard Schroeder and Greenspan met before the Fed chairman's speech and discussed the euro's recent surge against the dollar. They didn't say whether governments should step in and halt the climb.
In the question and answer session, Greenspan noted that Treasury Secretary John Snow is the United States' chief spokesman on U.S. dollar policy. "I regret that the American government has appointed the secretary of the Treasury as the sole spokesman for currency policy and as an economist I find that frankly frustrating but I will adhere to that," Greenspan said.
The United States' current account deficit narrowed slightly to $135 billion in the July to September quarter and was on track to setting an all-time record high of more than $500 billion for all of 2003, economists say.
© 2004 The Associated Press
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