Fed's Poole warns on risks of trade protectionism

LITTLE ROCK, Ark, Aug 17 (Reuters) St Louis Federal Reserve Bank President William Poole said on Friday that rising protectionism in the United States was a worry and the Doha round of world trade talks were on the verge of collapse.

Poole did not comment on the policy outlook in his speech because he wanted to observe a blackout period after an earlier Federal Reserve Board decision to cut its discount rate.

The Fed cut its primary discount rate by half a percentage point to 5.75 percent in response to ongoing turmoil in financial markets sparked by concerns about credit availability. The discount rate is an emergency borrowing facility for banks experiencing liquidity issues.

Poole usually holds an exhaustive question and answer session with his audiences and the media, but said that he was ducking it this time around because of the Fed move.

''It is standing practice for members of the FOMC (Federal Open Market Committee) to have a silence period on economic policy decisions and the prospects for the economy and the markets ... on either side of policy decisions,'' he said.

Poole said in his speech that the slackening in trade liberalization could have serious consequences.

''The Doha Development Agenda multilateral trade negotiations are on the verge of collapse. A collapse of the Doha round would raise doubts about the future effectiveness of the World Trade Organization,'' he warned.

The current world trade talks to reduce barriers to imports are called the Doha round because they were launched in Doha, Qatar, in 2001.

Poole also said recent safety worries on products imports from China must not be allowed to create barriers to trade.

''My concern is that certain groups will attempt to use concerns over safety and job loss to restrict imports and thereby pursue an agenda of economic isolation in an increasingly globalized world.'' Recent scares following the discovery that Chinese imports of pet food and toothpaste into the United States contained impurities were compounded after a major U.S. toy maker withdrew millions of toys with lead paint.

''It is easy for retaliatory trade measures to escalate and derail the desirable movement to a more open trading environment. It is in the best interests of all the countries of the world to avoid trade wars,'' Poole said.

REUTERS SRS RAI2042