| Imf greenspan call for free trade not protectionism { November 20 2003 } Original Source Link: (May no longer be active) http://www.reuters.com/printerFriendlyPopup.jhtml?type=reutersEdge&storyID=3865529http://www.reuters.com/printerFriendlyPopup.jhtml?type=reutersEdge&storyID=3865529
Top Global Policy Makers Warn on Protectionism Thu November 20, 2003 06:21 PM ET
By Lesley Wroughton WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan and top IMF policy-maker Anne Krueger, fearing that decades of trade liberalization are being reversed, issued stern warnings on Thursday against signs of creeping protectionism.
Their biggest concern is that governments are succumbing to short-term domestic political pressures over job losses and overlooking the biggest benefit of trade -- long-term economic growth.
"We cannot afford -- especially at this juncture -- any risk of a return to protectionism. Trade can sometimes be a controversial domestic policy issue," Anne Krueger, the IMF's first deputy managing director and top trade economist, told an emerging market conference in New York.
"But governments need to resist the pressure to give in to the lobbying of narrow interest groups who cannot benefit at the expense of the wider public," she said.
U.S. steel tariffs, ruled illegal by the World Trade Organization last week, European curbs on farm imports, and this week's U.S. import caps on some Chinese textiles, are some of the protectionist tendencies emerging everywhere, say economists.
Key world trade talks broke down in Cancun, Mexico in September over farm subsidies, a divisive issue between rich and poor countries.
Gary Hufbauer, a trade economist at the Institute for International Economics, cited signs of slowing momentum in trade liberalization.
"Textiles is troublesome and just the harbinger of more to come," said Hufbauer, expressing doubt that a U.S. plan to end all textile and apparel import quotas in 2005 would survive political pressure.
U.S. ELECTION MODE
In the United States, President Bush, a supporter of free trade, is under pressure to protect the ailing U.S. manufacturing industry, which has lost 2.8 million jobs in 39 months, concentrated in states that are key for the 2004 U.S. election.
U.S. manufacturers have blamed China, saying it is keeping its currency artificially low which gives Chinese exports an advantage.
The Fed's Greenspan warned that protectionism could significantly erode the flexibility of the global economy.
"Some clouds of emerging protectionism have become increasingly visible on today's horizon," Greenspan told a monetary conference in Washington on Thursday.
"Consequently, it is imperative that creeping protectionism be thwarted and reversed," he said.
Hoping to influence governments, the heads of the pro-trade IMF and World Bank on Thursday released a joint letter calling for the resumption of world trade talks after Cancun.
The letter noted the benefits of free trade for growth, saying it had been the single most powerful tool in reducing poverty and raising living standards.
The IMF's Krueger said industrial countries could do far more to reduce agricultural subsides and open their markets.
Equally, developing countries could liberalize themselves more, she said. "Failure to resolve the problems encountered at Cancun and restart the Doha process would have seriously unpleasant consequences," she said.
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