World Leaders Wary of U.S. Economic Measures

DAVOS, Switzerland — This was supposed to be the year the United States came in from the cold at the annual gathering of world leaders here. But instead of receiving a warm embrace, American policies were rebuked again and again in rhetoric that recalled the anger of the Bush years — mainly aimed at what the world views as the new threat of protectionism by the United States.

Certainly, there is a deep reservoir of good will for President Obama and the change in direction he represents. But despite the pledges to encourage international trade and economic cooperation that accompanied the closing sessions of the gathering, the World Economic Forum, on Sunday, there were clear signs that deep divisions between the United States and the rest of the world remained.

“There is such a level of concern, despair and anxiety that as welcome as the new president is, no one is inclined to cut the U.S. much slack,” said Richard Haas, president of the Council on Foreign Relations.

Or as Niall Ferguson, the Harvard historian, put it, “If G.M. got a new C.E.O., does that mean people would suddenly want to buy their cars?”

The criticism came from the usual sources, like Prime Minister Vladimir V. Putin of Russia and Premier Wen Jiabao of China, who both criticized a long pattern of excessive consumption, risky borrowing and inadequate regulation in the United States.

But more significant, the brickbats also came from economic and political leaders of European allies like Germany and France……………..

Whether the issue was the recent bailout for the American auto industry or proposals favoring American steel producers in the stimulus package now being debated on Capitol Hill, foreign officials warned that any move toward protectionism would have serious consequences for Washington and the rest of the world.

“We must not allow market forces to be completely distorted,” Angela Merkel, the German chancellor, warned in a speech on Wednesday. “For instance, I am very wary of seeing subsidies injected into the U.S. auto industry. That could lead to distortion and protectionism.”

By the weekend, as word of the “Buy American” provision in the stimulus package to help the United States steel industry spread through Davos, the tone had become sharper.

“It’s extremely preoccupying that one of the first acts of the new Obama administration could be a measure that is clearly protectionist and a distortion of competition,” said Anne-Marie Idrac, the French trade minister, who tried to draw Pascal Lamy, director general of the World Trade Organization, into the battle.

Mr. Lamy, however, said the organization would only act if there has been a “breach of the rules.” “I am not that big cop,” he added.

For all the global affection for Mr. Obama, Washington sent a relatively low-profile contingent to Davos, with Valerie Jarrett, a White House adviser, serving as the administration’s headliner here.

Ms. Jarrett did not address the issue of protectionism directly in her brief speech on Thursday, preferring to stick with the big picture as well as Mr. Obama’s connection to Chicago, her hometown.

Instead, the task of defending American economic policy fell to attendees like Representative Brian Baird, a Democrat from Washington State, who has served in Congress for the last decade.

“The steel issue is vastly overplayed here,” he said. “Even Adam Smith himself said certain key industries deserved to have protection.”

Noting that his district is home to two steel plants — down from three a few years ago — he added, “Steel is one of those industries.”

He suggested that this was not the time to push free-trade dogma on American taxpayers already worried about surging levels of unemployment.

“If you want to kill the W.T.O., that would be the way to do it,” he said.

Davos has always stood for globalization, and the benefits of free trade are an article of faith here. But even Davos die-hards concede that national economic interests have come to the fore amid the global downturn, and voter support for easing trade barriers is at low ebb.

To be sure, for all the foreign criticism over the help for the Detroit automakers, European countries including France, Britain and Sweden have offered up billions in aid for local auto manufacturers. What’s more, France has long protected the French companies it calls “national champions” from the threat of foreign takeover while providing huge subsidies for its farmers.

But beyond the public sparring, many foreign officials are also concerned about how the United States government will pay for Mr. Obama’s proposed stimulus package, which could ultimately cost $1 trillion.

A binge of new borrowing by Washington could effectively crowd out other borrowers by pushing interest rates higher over the long term, and would be especially painful for developing countries that rely on foreign capital. Or, it could stoke inflation when the global economy eventually begins to recover.

Ernesto Zedillo, the former president of Mexico who helped steer his country through a financial crisis in 1994, said developing countries were already having a hard time finding the capital they needed without competing with increased borrowing by the United States. And his country does not have the option of printing money, he said, because the Mexican peso is not a reserve currency like the dollar.

Even the praise for Mr. Obama from other leaders was balanced by criticism of Mr. Bush and past United States policies. “He seems to be very keen to interact with other nations as equals, rather than talking down,” said Kgalema Motlanthe, the president of South Africa. “It is a breath of fresh air.”

But for all the complaining from abroad, no other economic power — not Europe, not Japan and not China — seems ready to step up and fill the role traditionally played by the United States.

“The irony of the situation,” said Mr. Haas, of the Council on Foreign Relations, “is that everyone is still looking to the U.S. for leadership to fix things or at least make things better.”

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