Greenspan sees 'great tragedy' if trade protection takes hold
WASHINGTON, Apr 04, 2001 (The Canadian Press via COMTEX) -- Federal Reserve
Chairman Alan Greenspan expressed concern Wednesday that the economic slowdown
could trigger a protectionist backlash against free trade, which he said would
be a "great tragedy" for the United States.
In an appearance supporters hope will build momentum for President George W.
Bush's trade agenda, Greenspan described anti-globalization protesters as
well-meaning but "wrong-headed."
"To most economists, the evidence is impressively persuasive that the dramatic
increase in world competition, a consequence of broadening trade flows, has
fostered markedly higher standards of living for almost all countries,"
Greenspan told the Senate Finance Committee.
He said demonstrators who staged violent protests at a 1999 meeting of the World
Trade Organization in Seattle were operating under the false belief that poor
countries were being harmed by the increasing economic connections between
nations.
Poor countries "need more globalization, not less," Greenspan said, urging rich
nations to dismantle trade barriers so more Third World products can be sold in
their markets. He said such a move would be "probably the best single action"
that could be taken to combat global poverty.
Greenspan was invited to appear before the committee as the Bush administration
works to break a seven-year stalemate that has blocked congressional approval of
the negotiating authority a president needs to strike new trade agreements.
Democrats in the House twice turned back efforts by former president Clinton to
grant this authority. They insisted that any new trade agreements must include
labour and environmental standards to prevent companies from moving factories
out of the U.S. to countries with lax standards.
To overcome these objections, the Bush administration has floated proposals that
would have labour and environmental standards enforced with fines but not
sanctions, similar to provisions in the North American Free Trade Agreement
linking the United States, Canada and Mexico.
Labour unions and environmentalists are urging rejection of this approach,
contending that the NAFTA fine provisions have not worked.
Greenspan said he worried that the current economic slowdown would increase
pressures on Congress to raise protectionist barriers to aid domestic producers.
Among those pushing for such barriers are the steel industry and softwood lumber
producers.
The U.S. lumber industry filed trade petitions earlier this week seeking
billions of dollars in punitive duties against Canadian softwood lumber exports
to the United States. The move came two days after the expiration of a five-year
agreement that had curtailed Canadian wood exports to the U.S. since 1996.
"Were we to move in a protectionist direction, that would create some very
significant problems for the American economy," Greenspan said.
He said the United States had been in the forefront since World War II of
opening up markets and "it would be a great tragedy were that process stopped or
reversed" now.
Greenspan did not give any hints on whether the Federal Reserve, which has cut
interest rates three times to spur the economy, is prepared to cut rates
further, as economists widely believe.
Greenspan criticized the increasing use by American industries of anti-dumping
lawsuits to raise tariffs on imports being sold at what the government
determines are unfairly low prices.
He said efforts to protect a domestic industry from import competition do not
succeed over the long term and simply delay the movement of U.S. capital to more
productive uses.
But Senators Max Baucus, a Montana Democrat, and Jay Rockefeller, a West
Virginia Democrat, argued that such laws were needed to counteract eroding
domestic support for trade liberalization.
"We are not going to move ahead on free trade unless Americans ... are convinced
it will be fair trade," Baucus told Greenspan.
Greenspan's congressional appearance followed a White House event on Monday in
which Bush met with Democratic and Republican leaders in an effort to highlight
the need for authority to negotiate new trade deals.
The administration would like to see progress in this effort before Bush travels
to Quebec City, on April 20-22 to meet with leaders of 33 other countries in the
Western Hemisphere in an effort to advance negotiations to create a
hemisphere-wide free-trade zone. |
