Fed's Dudley delivers robust defense of free trade

(Reuters) - New York Federal Reserve President William Dudley on Thursday delivered a robust defense of free trade, warning that limiting trade would slow economic growth and lower living standards around the globe.

The comments came as U.S. President Donald Trump set the stage for new tariffs on steel and aluminum, a move that he suggested would boost free trade but that in some quarters is seen as restricting it.

"Although the debate about globalization is not new, I believe we are at a particularly important juncture," Dudley said in remarks prepared for delivery at the Central Bank of Brazil in Sao Paulo. "If support for liberalized trade and an integrated global economy were to suffer a significant setback, the consequence could be slower economic growth and lower living standards around the world."

While restricting trade can protect some lower-wage jobs, and provide a temporary boost to domestic spending and output, he said, "these would likely be offset by a range of other costs," including a reduction in productivity growth.

It also won't change the gap between imports and exports, he said. Trump has repeatedly said the U.S trade deficit is too big and needs fixing.

At the same time, Dudley noted that communities that are hurt by free trade need to be provided more support.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)

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