Bernanke warns against trade barriers

WASHINGTON — A move to protect threatened American industries and workers from foreign competition would be a serious mistake that would jeopardize the sizable benefits of free trade, Federal Reserve Chairman Ben Bernanke said Tuesday.

“Restricting trade by imposing tariffs, quotas and other barriers is exactly the wrong thing to do,” Bernanke said in remarks to an audience at Montana Tech in Butte, Mont.

“In the long run, economic isolationism and retreat from international competition would inexorably lead to lower productivity for U.S. firms and lower living standards for U.S. consumers,” Bernanke said.

As America’s trade deficits have soared, Congress and the Bush administration have come under increased political pressure to erect trade barriers against a flood of imports that critics contend have contributed to the loss of more than 3 million manufacturing jobs since 2001.

The Fed chairman said that restricting imports might temporarily slow job losses in affected industries, but those benefits would be outweighed “many times over by the costs, which would include higher prices for consumers and increased costs, and thus reduced competitiveness, for U.S. firms.”

The better approach to dealing with job losses in such industries as textiles is to improve government retraining programs, Bernanke said.