New U.S. Treasury Secretary Criticizes Protectionism
Washington File Staff Writer
Washington - U.S. Treasury Secretary Henry Paulson warns against protectionism in the United States and other countries as world markets become increasingly competitive.
"I am very concerned about the anti-trade rhetoric I hear coming from some quarters here and around the world," he told students and faculty at Columbia University in New York City August 1. It was his first major speech since the Senate confirmed him in late June.
Blaming the failure of World Trade Organization (WTO) talks on anti-trade sentiments, he said that some countries increasingly are treating market access as "something that should apply to someone else's home market and not their own."
Paulson said the Bush administration will continue to try to revive the WTO negotiations, officially know as the Doha Development Agenda. (See related article.)
The former head of Goldman Sachs, a prime Wall Street investment firm, Paulson said he will be a strong advocate for free trade and will encourage other countries to open their markets to U.S. exports and capital.
He said trade will dominate his agenda when he travels to Asia in the fall.
Paulson said the United States also needs to keep its markets open if it is to retain its competitive edge in an increasingly competitive global economy.
"We need to welcome competition and not run away from it," he said.
He acknowledged, however, the challenge of convincing Americans that the benefits of open markets are greater than losses stemming from them because the gains are often broader, less visible and delayed, while losses, such as displacement of workers, are immediate.
Paulson said he believes that a strong U.S. dollar is in the nation's interest, which was also the view of his predecessor, John Snow. Paulson added, however, that "currency values should be determined in open and competitive markets in response to underlying economic fundamentals."
Some private economists argue that the value of the U.S. currency must come down by 15 percent to 30 percent to bring the $800 billion U.S. current account deficit in 2005 to a more sustainable level. The current account balance is a broad measure of a country's economic transactions with an outside world that includes trade, transfer payments and investment income.
Paulson outlined his top priorities for the remainder of the President Bush's second term. In addition to strengthening trade and investment policies, he cited reforming social benefit programs, advancing energy security and addressing income inequalities as the long-term challenges that can be addressed from the "position of strength we enjoy today."
Paulson said he is not afraid to face the challenges of reforming Social Security, a public pension fund, as well as Medicaid and Medicare, health care programs. The costs of these programs that are projected to put a growing financial burden on the federal budget could "significantly" weaken U.S. economic flexibility and erode its competitiveness, he said.
President Bush's proposal to overhaul Social Security by introducing private pension accounts for younger workers stalled in Congress in 2005.
Paulson said he would work with Congress to achieve a bipartisan solution of the problem.
The full text of Paulson's remarks can be viewed on the Treasury Department's Web site.