WASHINGTON (AFP) -- Federal Reserve chairman Alan Greenspan made a fresh warning on protectionism, saying moves in that direction would be "destabilizing" and cost U.S. jobs.

Greenspan, in remarks prepared for a speech in Dallas, Texas, issued the second warning in three weeks on protectionism, again without specifically mentioning U.S. administration policies.

But his comments came just after a trade war was narrowly averted when Washington backed down over steel imports, and with other trade issues simmering between the U.S. and its trade partners.

"For the most part, we as a nation have not engaged in significant and widespread protectionism for more than five decades," Greenspan said.

"The consequences of moving in that direction in today's far more globalized financial world could be unexpectedly destabilizing. "A likely fall in wage incomes and profits could lead, ironically, to a fall in jobs and job security in the shorter term. So, yes, we can shut out part or all foreign competition, but we would pay a price for doing so -- perhaps a rather large price."

Alluding to another hot-button issue, Greenspan argued that American jobs would not necessarily be protected by a rising in the value of Chinese currency, the yuan, or renminbi.

Revaluing the Chinese currency would do little to protect U.S. jobs, he said.

It is "far more likely that our imports from other low-wage countries would replace" Chinese imports.

"A rise in the value of the renminbi would be unlikely to have much, if any effect on aggregate employment in the United States, but a misaligned Chinese currency, if that is indeed the case, could have adverse effects on the global financial market and, hence, indirectly on US jobs," Greenspan said. He warned that the Chinese central bank must temper its controls on capital, or be confronted with "an overheated economy."

Greenspan made no comments about the current economic climate, nor did he offer any hints about the timing of the Fed's monetary policy moves. Last month, in a veiled warning to the U.S. administration, Greenspan said it was imperative for the growing trend of creeping protectionism to be "thwarted and reversed."

In his remarks, Greenspan reserved his harshest words for those who have taken to the streets of Seattle and other major cities to protest global capitalism and open markets.

"The ultimate arbiter of an economy's ethics is, or should be, the material welfare of the individuals in a society," Greenspan said. "Vigorous economic competition over the years has produced a significant rise in the quality of life for the vast majority of the population in market-oriented economies, including those at the bottom of the income distribution," he said.

Americans have purchased a better quality of life with its prosperity, he said, including better health, education and working conditions.

"One would be hard-pressed to cite examples of free and prosperous societies that suppressed the marketplace," he said.

In an open economy, competition destroys the old and makes way for the new, he said. A million Americans leave their jobs every week, and another million are hired, he said. Creative destruction "is the process by which wealth is created, incremental step by incremental step. It presupposes an continuing churning of an economy in which the new displaces the old, a process that brings both progress and stress."