US Federal Reserve chairman Alan Greenspan has criticised the outburst by some US politicians against outsourcing to 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," Greenspan said.

Outsourcing and India: Complete Coverage

"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 in Washington 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, fueled 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."