As the United States moves to limit its imports from China, the head of the independent U.S. central bank, Alan Greenspan, warns against trade protectionism. Mr. Greenspan spoke Thursday at a conference in Washington.
Ostensibly, Mr. Greenspan was speaking about the problems of the chronic U.S. trade deficit and how to finance it. The venue was a day-long conference on the euro currency, the relatively new monetary unit used by most European Union members. But at the end of his 20 minute speech on the U.S. trade deficit, Mr. Greenspan turned his attention to protectionism. He said he was concerned that clouds of emerging protectionism have been increasingly visible.
"The costs of any new such protectionist initiatives, in the context of wide current account imbalances, could significantly erode the flexibility of the global economy," he said. "Consequently, it is imperative that creeping protectionism be thwarted and reversed."
There is little doubt Mr. Greenspan was referring to the new Bush administration restrictions on Chinese textile exports to the United States. Earlier this week the U.S. said the growth of U.S. imports of three categories of Chinese-made apparel would be held to seven percent per year. The Chinese promise retaliation.
The surge of Chinese imports is blamed for significant damage to the U.S. textile and apparel industry with corresponding bankruptcies and job losses. Commerce Secretary Don Evans accuses the Chinese of unfair trading practices, since so many of their manufacturing firms are state owned. There are expectations that Washington may announce further restrictions on Chinese imports. The U.S. trade deficit with China this year has soared to $120 billion.
With a presidential election next year, the Bush administration is being very sensitive to complaints from U.S. industries that are losing market share to Chinese imports. The United States is also under pressure in the steel sector as its punitive tariffs on certain imports have been found to be in violation of World Trade Organization rules.
Mr. Greenspan left little doubt that he favors freer trade and opposes protectionist restrictions.