Federal Reserve Governor Henry C. Wallich warned yesterday against extending the concept of protectionism to international finance.
Speaking at a conference on foreign banking, he noted that "national banking systems have been in the vanguard of an integrating movement at a time when in other fields--such as trade--there is a rising tide of protectionism." He urged that differences between countries would be "more appropriately dealt with in bilateral negotiation rather than by unilateral U.S. action."
Financial services, including banking, are among the areas mentioned in several bills now before Congress to amend the Trade Act of 1974. These would allow the president to impose sanctions against foreign countries to deal with problems of reciprocal market access or discriminatory treatment abroad of U.S. goods, services or investment.
Specifically, legislation proposed by Sen. John Heinz (R-Pa.) would allow the president to ask banking regulators to take reciprocity issues into account when considering applications from foreign banks. Wallich objects to the idea of applying reciprocity to international finance, and suggests that national treatment is more practical.
Reciprocity means, for example, that if American banks are allowed to deal in stocks and bonds in Germany--where it is legal for banks to do so--then German banks should be allowed to trade securities in America. National treatment means only that foreign firms receive the same treatment in the host country.
Wallich observed that bilateral progress on equalizing banking has been made recently between the United States and Spain and Denmark and Canada.
He said U.S. banks in Japan were not discriminated against but were "just not making headway."