Fed: Trade frictions threaten resilient economy

By Ros Krasny

BILOXI, Mississippi (Reuters) - Officials from the Federal Reserve on Saturday warned of dangers from a rising tide of trade disputes and the harmful impact on what one otherwise termed a "resilient" United States economy.

Three regional Fed presidents steered clear of current economic or monetary policy topics at a panel discussion on the southern U.S. economy at the Southern Governors' Association conference.

The presidents of the St. Louis, Dallas and Atlanta Feds, respectively, mostly focused on the dangers of protectionism and the need for an educated and flexible work force to cope with rising foreign competition.

The governors convened their meeting in this small city on the Mississippi Gulf coast to mark the second anniversary of Hurricane Katrina, which flattened much of the region in August 2005. Biloxi and nearby communities were "ground zero" for the storm.

RESILIENT ECONOMY

In some of his first remarks since taking over as president at the Atlanta Fed in March, Dennis Lockhart hailed the "resilience" of the region since Katrina, which he said was characteristic of the broader U.S. economy.

But St. Louis Fed President William Poole warned of protectionist sentiment radiating from Washington, which he said could undermine U.S. exports and the growth in better-paying jobs often associated with export industries.

"Some U.S. legislative proposals seem to be based on a presumption that trade retaliation is an effective strategy; however, economic history suggests otherwise," Poole said.