Greenspan Lauds Free Trade

America should reject protectionism and adversarial trade policies, Alan Greenspan said Friday.

"Trade is not a zero sum game," the Federal Reserve chairman told the Dallas Ambassadors Forum. Greenspan made no comments about monetary policy.

Increased international trade has boosted living standards for people all over the world by allowing capital, labor and resources to be devoted to their most productive uses, Greenspan said in his prepared remarks.

Protectionist policies promoted in the name of preserving jobs or communities are doomed to failure, he said. Antidumping laws, in most cases, are simply futile efforts to hold back the inevitable shifts in global production.

In the past few months, U.S. steel producers and workers have demanded government action to stop the flood of cheap foreign steel. The International Trade Commission is considering punitive tariffs while the House has passed a steel import quota bill.

"It is clear that all economic progress rests on competition," he said. "Protecting markets from new technologies has never succeeded."

Greenspan has often spoken of the benefits of free trade, but rarely has he been as vigorous in his criticisms of job-protecting policies, antidumping laws or the government's trade negotiating stance.

"I regret that trade policy has been inextricably linked with job creation," Greenspan said. "We try to promote free trade on the mistaken ground that it will create jobs. The reason should be that if enhances standards of living through the effects of competition on productivity."

Greenspan acknowledged that trade destroys jobs, even as it creates new ones.

"Economists will say that workers should move from the steel districts of Western Pennsylvania to a vibrant Silicon Valley," he said. "And eventually they, or more likely, their children, will. But the adjustment process is wrenching to an existing workforce made redundant largely through no fault of their own."

"Our efforts should be directed at jobs skills enhancement and retaining," he 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."

Rex Nutting, Washington bureau chief for CBS MarketWatch