WASHINGTON – Federal Reserve (search) Chairman Alan Greenspan (search) 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 (search) 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.
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.
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.
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