US warns of trade protectionism

London, Nov 28 | Updated: Nov 29 2006, 09:15am hrs
US Treasury Secretary Henry Paulson said on Tuesday trade protectionism was on the rise despite strong global prosperity and warned it was a potentially dangerous trend. We cannot allow protectionist elements to stifle our growth, limit our opportunities, and dictate the terms of our engagement with the world, Paulson said in prepared remarks for delivery to the Confederation of British Industrys annual conference.

Giving in to protectionist sentiment would send a terrible signal, Paulson said during a joint appearance with British Chancellor of the Exchequer Gordon Brown. The US Treasury chief, who was in London on a quick one-day stop, said that developed nations must beware of sending a signal that they were unwilling to help poorer countries develop their economies. Paulson, who recently authored a joint appeal with Brown to restart the Doha round of free-trade talks, said achieving a successful outcome remained the US top priority.

He said US elections earlier this month which resulted in Democrat-controlled US House of Representatives and Senate made no difference to the US commitment toward reopening the Doha trade talks. The Doha talks broke down in July, primarily due to differences over farm trade. Paulson said while reducing agricultural subsidies was important, it was just as vital to find ways to boost trade in manufacturing and services. Paulson said countries that opened their borders to trade almost invariably achieved increased prosperity.

Despite the known benefits of trade, the protectionist sentiment that is rising in our two nations and elsewhere around the world is predicated on a false assumption that trade harms our economies, Paulson said.

Meanwhile, the United States needs greater foreign exchange flexibility from China, Paulson said on as the dollar continued its slide against most major currencies. He said there had been a fair amount of tension between Beijing and Washington over economic policy the US has long wanted China to let its yuan currency rise against the dollar. Part of this relates to a widespread feeling in the US that the benefits of trade between the two countries arent being shared evenly or fairly, he said. There is a need for flexibility and greater currency flexibility.

But he added the dialogue between the two countries was also focused on longer-term issues related to China opening up its markets and pursuing economic reforms. The way forward is going to be not simply by talking about the level of currency but by opening up financial markets first of all and making sure that there is access to opportunity to China for British firms, he said.

Despite the known benefits of trade, the protectionist sentiment that is rising in our two nations and elsewhere around the world is predicated on a false assumption that trade harms our economies, Paulson said.

Reuters