Federal Reserve chief says protectionism would harm U.S. economy

Xinhua
A retreat into protectionism and isolationism would be self-defeating and harm U.S. economy, Federal Reserve Chairman Ben Bernanke said Tuesday.

"Restricting trade by imposing tariffs, quotas, or other barriers is exactly the wrong thing to do," said the Federal Reserve chief in a speech addressing the Montana Economic Development summit 2007.

"Such solutions might temporarily slow job loss in affected industries, but the benefits would be outweighed, typically many times over, by the costs, which would include higher prices for consumers and increased costs, and thus reduced competitiveness for U.S. firms," said Bernanke.

He said the better approach to mitigating the disruptive effects of trade is to adopt policies and programs aimed at easing the transition of displaced workers into new jobs and increasing the adaptability and skills of the labor force more generally.

Bernanke also noted the global trade would bring benefit to U.S. and the world consumers.

"Exports are important, but so are imports. Without trade, some goods would be extremely expensive or not available at all, such as the Valentine's Day roses of my earlier example or out-of- season fruits and vegetables," he said.

"One of the great attractions of globalization is that it brings to consumers the best of many cultures. And of course, global trade allows many types of goods, especially consumer goods, to be purchased at lower prices," he added.

"In the long run, economic isolationism and retreat from international competition would inexorably lead to lower productivity for U.S. firms and lower living standards for U.S. consumers," he said.

The real reason for the U.S. trade deficit was that Americans save less and spend more, while some countries like China save too more and spend less, he said.