Protectionism could harm the prospects for globalisation and the US' ability to handle its huge trade deficits, Alan Greenspan warned today. In a speech to a conference in the US, he argued that if globalisation is allowed to proceed and create a more flexible international financial system, "history suggests that current imbalances will be defused with little disruption". But he said that "clouds of emerging protectionism have become increasingly visible" and that this could "significantly erode" the flexibility of the global economy.
"Consequently, it is imperative that creeping protectionism be thwarted and reversed," Greenspan said. His comments follow the announcement by the White House that it is to levy quotas on imports of certain textiles from China, including robes and bras. The US is already embroiled in a dispute with the EU over its implementation of tariffs on steel imports. The EU is threatening to retaliate with levies of its own after the World Trade Organisation this week ruled that the US tariffs are illegal. //www.fxcentre.com