WASHINGTON - US Treasury Secretary Henry Paulson said Thursday he was
worried about growing calls for protectionism to help ease the massive US trade
deficit, saying protectionist barriers are not the solution to the
US Treasury Secretary Henry Paulson speaks at an Economic
Club of Washington luncheon in Washington March 1, 2007. [Reuters]
"Some politicians from both parties, reflecting what they are hearing from
their constituents, are moving further toward embracing protectionism. This is a
worrisome trend. And it is a trend we must resist," Paulson said in a speech at
the Economic Club of Washington.
Paulson said protectionist barriers in
this country would hurt U.S. consumers and make the United States less
"Free trade is one of the cornerstones of our economic
success as a nation. We must redouble our efforts to demonstrate the benefits of
trade to our standard of living -- and make clear that retreating to economic
isolationism would mean fewer jobs, lower incomes, and lower standards of
Paulson acknowledged that China was a major factor in the US deficit, and
said Washington was working with Beijing to address some factors that skew trade
"We are dissatisfied with the speed with which China is appreciating its
currency, the value of which is not market determined, and with China's
intellectual property protections," Paulson said, repeating a frequent complaint
"We are addressing these issues in our Strategic Economic Dialogue with
China, along with China's need to accelerate the process of opening its economy
to US products and services."
Still, he said new barriers with China, such as tariffs proposed by some
lawmakers, would only stifle trade and economic growth.
"We expect that as China moves forward with its economic reforms,
increasingly opening its economy to competition, this will benefit both of our
nations," the Treasury chief said.
"Stronger growth in all of our trading partners will sustain our own growth
and contribute to a narrower trade deficit."
He said much of the US economy, including millions of jobs, depends on trade.
"Protectionists use the trade deficit as a shorthand criticism of free trade
policy," he said. "They try to convince workers and families that we're getting
a raw deal when it comes to trade. At best, that's bad economics; at worst, it's
The issue of China's currency values is one of the topics being addressed by
the new Strategic Economic Dialogue. This initiative involves top economic
policymakers from both countries in twice-a-year meetings. The next session will
take place May 23-24 in Washington.
Paulson goes next week to China, his third visit there since joining
President Bush's Cabinet in July.
Paulson will meet with Vice Premier Wu Yi. The secretary will hold meetings
in Shanghai, China's financial capital, with financial sector leaders and give a
speech on Chinese financial market reforms.