Greenspan Warns of Slowdown Risks

Federal Reserve Chairman Alan Greenspan said Tuesday that the world economy had benefited enormously from open trade, and warned that any “notable” slowing in economic growth could revive latent protectionism.

Addressing a central bank conference in Mexico City, Greenspan said reducing trade barriers and increasing the “interaction among national economies has engendered benefits that have significantly exceeded their costs over the years.”

“Any notable shortfall in economic performance from the exemplary standard of recent years runs the risk of reviving mistrust of market-oriented systems, even among conventional policymakers,” he said.

Greenspan, speaking just a day ahead of a Fed interest rate meeting, did not say whether he thought such a substantial slowing of the U.S. economy was imminent. Nor did he make any reference to the current state of the economy or the outlook for interest rates. Fed policymakers are expected to keep rates on hold when they meet today.

The powerful central bank chief, long an ardent supporter of free trade, said the best the Fed could do to spread the benefits of globalization was to stick to its legal mandate.