Treasury's Paulson frets about protectionism

updated 3:09 p.m. ET Aug. 1, 2006

WASHINGTON - Treasury Secretary Henry Paulson voiced support for a strong dollar on Tuesday and said America “must welcome competition, not run away from it” if the country wants to maintain a competitive advantage.

Delivering his first major speech since he was sworn in three weeks ago as the nation’s 74th Treasury secretary, Paulson said he would work to tackle long-term problems such as the need to overhaul the government’s three huge benefit programs — Social Security, Medicare and Medicaid.

Mindful that the country must borrow $2 billion daily from foreigners to finance its huge trade deficits, Paulson, like his predecessors, expressed unwavering support for keeping the dollar’s value strong against other currencies.

“I believe that a strong dollar is in our nation’s interest and that currency values should be determined in open and competitive markets in response to underlying fundamentals,” Paulson said in a speech to students at Columbia University’s School of Business in New York. Copies of his remarks were distributed in Washington.

Paulson voiced concern about protectionist tendencies. And his comments on the dollar stuck closely to the views expressed by John Snow, his immediate predecessor, and also other Treasury secretaries beginning with Robert Rubin in the mid-1990s.

Both the Clinton and Bush administrations have been careful to avoid any comments that could be viewed as efforts to devalue the dollar for fear that currency markets could push the dollar’s value down so sharply that it could destabilize the U.S. economy.

While America’s current account trade deficit hit an all-time high of $804.9 billion last year, Paulson said it would be wrong for the United States to erect protectionist barriers to keep out foreign products.

Paulson said he was “very concerned about the anti-trade rhetoric I hear coming from some quarters here and around the world.”

Echoing comments made by President Bush on Monday, Paulson said the administration would keep searching for ways to revive the Doha Round of global trade liberalization talks, which collapsed a week ago.

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