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Banking

Baker's big worry is protectionism. (interview with James Baker, U.S. Treasury secretary) (interview)

BAKER'S BIG WORRY IS PROTECTIONISM

It seems a long time ago that James Baker III returned in triumph from the summit in Tokyo, an international economic coordination agreement in one pocket, and cheerful forecasts for world growth in another.

The growth envisioned in May has not materialized. Coordination of economic policy appears to have evaporated. The US trade deficit still gapes open, despite the Treasury Secretary's earnest efforts, producing a fearsome imbalance in the world's economic structure.

In an exclusive interview with Euromoney editor Neil Osborn last month, Baker confessed to being a worried man. His fear is protectionism--a theme he returned to repeatedly during the conversation. The world comprehends neither the strength of protectionist sentiment in the US, he said, nor the imminence of the danger that Congress might pass protectionist legislation that would snarl world trade patterns. The trouble is, he added, everybody is bored to tears with pious talk about the virtues of free trade, which makes defending it that much harder.

Nevertheless, Baker remains optimistic that the coordination mechanism he is attempting to build will eventually be fully functional. There are clearly some grounds for this optimism. Even Baker's sternest critics cannot deny his achievement in reducing the value of the dollar so sharply after the Plaza meeting of September 1985.

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