Trade protectionism

The FX relevant comments from Paulson are that he is against trade protectionism (not surprising). This is somewhat in response to increased protectionist leanings of Congress under Democratic control. Legislation may be introduced in H1 2007, according to some Senators/House representatives, but until anything concrete is devised there are no FX implications. Overall, protectionist policies should be negative for the USD as any measures that inhibit capital flows is bad for a large debtor nation.

Tsy's Paulson: Can't Allow Protectionism To Stifle Growth

LONDON (Dow Jones)--U.S. Treasury Secretary Henry Paulson Tuesday said the U.S. should embrace trade liberalization, arguing that open trade promotes growth and better living standards for the majority of people.

Paulson, in prepared remarks to be delivered before business leaders, said the Democratic takeover of both chambers of Congress following this month's elections hasn't altered the U.S. government's commitment to a successful Doha round agreement to lower trade barriers.

He said the U.S. should resist protectionism, which would "stifle" growth, resulting in fewer American jobs over the long term.

"We must not, in the name of a few jobs today, eliminate many more jobs and higher incomes in the future," Paulson said.

Paulson said protectionist sentiment appears to be rising around the globe, despite robust global economic growth. He said the U.S. should resist trade protectionism.

"We cannot allow protectionist elements to stifle our growth, limit our opportunities, and dictate the terms of our engagement with the world," Paulson said.

09:20 28Nov2006 RTRS-U.S. TREASURY'S PAULSON SAYS TRADE PROTECTIONISM ON RISE DESPITE STRONG GLOBAL PROSPERITY

YIELDING TO PROTECTIONISM WOULD SEND "A TERRIBLE SIGNAL" TO POORER NATIONS

U.S. ELECTION OUTCOME DOES NOT AFFECT U.S. COMMITMENT TO SUCCESSFUL DOHA TALKS

MORE OPEN TRADE IN MANUFACTURING, SERVICES JUST AS IMPORTANT AS AGRICULTURAL TRADE

By Glenn Somerville
LONDON, Nov 28 (Reuters) - U.S. 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 Industry's 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 U.S. 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 United States' top trade priority.

He said U.S. elections earlier this month which resulted in Democrat-controlled U.S. House of Representatives and Senate made no difference to the U.S. 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.