Globalization – the increasingly free movement of people, capital, goods and services across borders – enriches the American economy by more than $1 trillion annually, or nearly 10% of the gross domestic product, according to C. Fred Bergsten, a leading economist and head of the Washington-based Institute for International Economics.

And if America were to push for an even more liberal global trade regime – the heart of globalization – its dividend would increase by $500 billion each year, Dr. Bergsten said yesterday at the launch of a new book, The United States and the World Economy: Foreign Economic Policy for the Next Decade, at the Council on Foreign Relations.

But he warned that there was a downside to globalization. The loss of some 200,000 American jobs annually that critics have attributed to American companies moving manufacturing overseas, among other factors, results in the loss of nearly $50 billion to the U.S. economy. And another $1 billion to $2 billion is spent by America on what economists call trade adjustment assistance.

Dr. Bergsten – who once served as an international economic affairs assistant to Henry Kissinger when the latter was President Richard Nixon’s national security adviser – said that he was particularly worried about the current-account deficit – which includes the trade deficit – was approaching $700 billion, or 7% of America’s GDP. As a result, America must borrow $5 billion a day from foreign sources to finance the deficit, mainly from China, Japan and Asian central banks.

“This foreign financing could decline precipitously at virtually any moment and trigger a free fall in the exchange rate of the dollar that could drive up interest rates, perhaps to double digits, and cut growth dramatically in the U.S. and the world as a whole,” Dr. Bergsten said. “China, which has averaged annual growth of 10% for 25 years, has already replaced the U.S. as the main locomotive of global economic growth,” Dr. Bergsten said.

He said that he was also discouraged by the continuing high price of oil, now around $50 a barrel. He said that the price could well rise to $70 a barrel, creating effects of American and world inflation, interest rates and economic growth that would be “severe.”

Dr. Bergsten also urged that the Chinese and Japan should stop intervening in the currency markets, where last year they bought more than $500 billion in dollars. “Market manipulation by key foreign countries is a major component of both the current-account and energy problems facing America,” Dr. Bergsten said, adding that China should revalue its currency, the yuan, by 25%.

“We need reduce the budget deficit substantially, we need to increase our savings rate, currently zero percent, and come up with programs to cushion the impact of trade-induced dislocation on American workers,” he said. “American workers need to learn to compete more effectively in the global economy.”