greenspan analysis from bloomberg.... and i don't think you are going to get your 12 13/16... <ggg> (but what do i know??)
kathy :)
Top Financial News
Wed, 02 Jun 1999, 1:28pm EDT
Greenspan Says Rising Trade Protection Poses Risk to U.S. Economic Growth
By Michael McKee
Greenspan Says Rising Trade Protection Could Slow U.S. Growth
Boston, June 2 (Bloomberg) -- Free trade raises living
standards around the world, including those in the U.S., and
efforts to raise trade barriers would do ''great harm'' to the
U.S. economy, Federal Reserve Board Chairman Alan Greenspan said.
''I am concerned about the recent evident weakening of
support for free trade in this country,'' Greenspan said in the
text of a speech to a Massachusetts export conference.
''Should we endeavor to freeze competitive progress in
place, we will almost certainly slow economic growth overall, and
impart substantial harm to those workers who would otherwise seek
more effective longer-term job opportunities,'' he said.
Protectionism has never worked to benefit an economy,
Greenspan said. ''The evidence is overwhelmingly persuasive that
the massive increase in world competition -- a consequence of
broadening trade flows -- has fostered markedly higher standards
of living for almost all countries who have participated in cross-
border trade. I include most especially the United States,'' he
said.
Greenspan's text -- similar to an address in Dallas on April
16 -- did not mention current U.S. economic conditions or
monetary policy. The chairman will discuss the economy in
testimony before the Joint Economic Committee of Congress on June
17.
The U.S. trade deficit widened to a record $19.7 billion in
March, and Greenspan said that's contributing to an anti-trade
atmosphere. Free-trade legislation is increasingly difficult to
pass in the U.S. Congress, and non-tariff trade barriers ''have
become more prevalent,'' he said.
Steel Criticism
Greenspan's remarks came on the same day U.S. steelmakers
asked the government to impose duties of as much as 223 percent
on imports of cold-rolled steel from Japan, Brazil, China and
nine other countries, the industry's latest bid to drive up
domestic steel prices.
USX-U.S. Steel Group, the nation's biggest steelmaker,
Bethlehem Steel Corp., Steel Dynamics Inc. and five other
companies accused overseas producers of the metal, used in
automobiles and appliances, of ''dumping,'' or selling in the
U.S. below cost.
Greenspan indirectly criticized that complaint, and earlier
steel dumping penalties levied by the U.S., noting dumping fines
are generally imposed because goods are sold below the average
cost of production. Instead, he said, concern should be raised
only when goods are sold below the marginal cost of production --
the cost of producing additional output, not the total cost of
manufacturing itself.
''Anti-dumping initiatives should be reserved, in the view
of many economists, for those cases where anticompetitive
behavior is involved,'' he said.
Instead, U.S. trade laws presume any trade advantage our
partners gain is an expense to this country, an idea that must be
countered, he said. ''The protectionist propensity to thwart the
process of the competitive flow of capital, from failing
technologies to the more productive, is unwise and surely self-
defeating,'' he said.
''Few economists see the world that way. And I am rash
enough to suggest that we economists are correct, at least in
this regard: Trade is not a zero-sum game,'' Greenspan said.
The Fed chairman conceded ''the adjustment process is
wrenching'' for those who lose their jobs because their
industries cannot compete with imports. Yet he noted unemployment
is currently 4.3 percent, near a 29-year low.
''It is difficult to find credible evidence that trade has
impacted the level of total employment in this country over the
long run. Indeed, we are currently experiencing the widest trade
deficit in history with a level of unemployment close to record
lows,'' Greenspan said.
Raising Living Standards
Those who worry about protecting the jobs of workers in old-
line industries such as steel are misguided, he said. U.S. policy
should focus on retraining displaced workers, not on protecting
obsolete technology.
''It is clear that all economic progress rests on
competition,'' Greenspan said. ''It would be a great tragedy were
we to stop the wheels of progress because of an incapacity to
assist the victims of progress.''
Casting trade in terms of employment is a mistake for both sides,
he said. More important to the country is trade's boost for
standards of living, as competition raises productivity.
Americans -- and people around the world -- have benefited
from technological advances brought about by international trade,
Greenspan said.
As older industries which could no longer compete went out
of business, newer, more efficient companies were created that
could produce more for less cost, raising standards of living.
''This is the process by which wealth is created incremental step
by incremental step. It presupposes a continuous churning of an
economy in which the new displaces the old,'' Greenspan said.
''The physical weight of our gross domestic product is
evidently only modestly higher today than it was fifty or one
hundred years ago,'' he said.
Adjusted for inflation, trade across national borders is 14
times greater than it was 50 years ago, while world gross
national product is only five times greater, he said.
Also, new communications technologies helped hasten the end
of communism, because the truth about world conditions and events
became widely available. ''The political pressures to deregulate
moribund industries and open up borders to trade soon became
irresistible,'' he said.
Protectionism in the U.S. has waxed and waned over the
years, Greenspan said. ''From the Luddites to the Smoots and the
Hawleys, competitive forces were under attack. In the end they
did not prevail and long-term advances in standards of living
resumed,'' he said.
©1999 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks.
bloomberg.com |
