Washington: US Federal Reserve has criticised the outburst by some of the country's politicians against outsourcing from countries like India, saying such protectionism could "erode" global flexibility and put pressure on expansion of trade.

"Protectionism, some signs of which have recently emerged, could significantly erode global flexibility and hence undermine global adjustment process," US Fed chairman Alan Greenspan has said.

"We are already experiencing pressure to slow down the expansion of trade", and the current Doha trade negotiation is in some difficulty owing to such actions, the chief of the US Central Bank said here addressing the conference organised by Federal Bank of Chicago.

He said globalisation has "exposed" US business to greater competition from countries with vast supplies of labour and production capacities.

Greenspan also said that expanded globalisation, fuelled in part by advances in computer and telecommunications policy, also had resulted in rapid increases in foreign investment, particularly in the US.

Though it has helped finance the large US current account deficit, he said, "at some point, international investors will want to diversify, and will not continue to increase their holdings of dollar-denominated assets."

He warned that the US high debt economy would not last and the rising US federal budget deficit (now at $ 400 billion a year) would be a "significant obstacle".