Protectionism Trade

Fearing a deepening downturn, China's government is using its muscle to prop up the nation's economy. It's encouraging banks to lend. It's investing billions in infrastructure. It's stockpiling key raw materials. And it's placing restrictions on purchases of foreign goods. Those measures have helped keep China growing faster than any other major country. Its economy is projected to expand by 7.2% this year, according to a recent World Bank estimate.

From Paris to Berlin, and from Warsaw to Rome, governments are showing increasing hostility toward foreign companies wishing to take over prized national assets. The obstacles faced by bidders from abroad include discriminatory laws and downright opposition against individual mergers. The trend has caused concern not just in the boardrooms of acquisitive European companies, but also in the European Commission.

The momentous power shift on Capitol Hill last week briefly sounded alarm bells on Wall Street. Some investors quickly dumped healthcare and defense stocks on fears that the Democratic takeover of Congress would hurt those industries. But apart from those sectors, the market couldn't identify many other potential casualties of the changeover.

The Bush administration Monday criticized China's record on opening its markets and said the U.S. would not hesitate to seek economic sanctions if that record did not improve. Calling China's performance "decidedly mixed," U.S. Trade Representative Susan Schwab released a 100-page report that accused China of failing to live up to commitments it made five years ago, when it joined the World Trade Organization.

Growing protectionist sentiments in this country, which have escalated tensions between the United States and some of its key trading partners, are threatening to stall the global movement toward freer trade. That in turn could provoke trade wars that would slow global economic growth and penalize American consumers through higher prices for a wide variety of goods, including clothing and television sets, some economists fear.

As the proposed Chinese purchase of Unocal Corp. fanned protectionist passions in Congress, Federal Reserve Chairman Alan Greenspan warned senators Thursday not to let their frustrations with China's economic policies breed reactions that would do the U.S. economy more harm than good. Proposed tariffs against Chinese goods and other forms of protectionism would significantly lower U.S. living standards and would not save American jobs, Greenspan told members of the Senate Finance Committee.

Two U.S. senators said Thursday that they had agreed to delay a vote on a bill threatening China with steep tariffs after being convinced that China could revalue its currency soon. Sen. Charles E. Schumer (D-N.Y.) and Sen. Lindsey Graham (R-S.C.) told reporters that they had struck a deal with Treasury Secretary John W. Snow to put their bill on hold until later this year, giving China more time to act on its own to revalue the yuan.

For Hollywood, the decision this week by delegates to a key United Nations agency to back a treaty to promote cultural diversity is reading like the script to a bad sequel. On Friday, the Motion Picture Assn. of America trade group warned in a statement that the U.N. Educational, Scientific and Cultural Organization accord was protectionism in disguise, the latest attempt by some countries to enact barriers that could allow them to restrict the importing of American movies and music.

U.S. lawmakers should avoid protectionist policies as labor markets pass through a realignment that is causing a "high degree of pain" for some workers, Federal Reserve Chairman Alan Greenspan said. "Competition from abroad has risen to a point at which developed countries' lowest skilled workers are being priced out of the global labor market," Greenspan said via satellite to the HM Treasury Enterprise Conference in London.

Mexico partially lifted its ban on U.S. beef imports, announcing that boneless cuts from animals less than 30 months old and veal from animals less than 9 months old could be imported. The government had imposed a ban Dec. 24, the day after a single case of mad-cow disease was reported in Washington state. Mexico has been the second-largest foreign market for U.S. beef. From Associated Press