WASHINGTON - A move to protect U.S. industries and workers from foreign competition would be a serious mistake that would jeopardize the sizable benefits of free trade, Federal Reserve Chairman Ben S. Bernanke said yesterday.

"Restricting trade by imposing tariffs, quotas and other barriers is exactly the wrong thing to do," Bernanke told an audience at Montana Tech in Butte, Mont.

"In the long run, economic isolationism and retreat from international competition would inexorably lead to lower productivity for U.S. firms and lower living standards for U.S. consumers," Bernanke said.

As U.S. trade deficits have soared, Congress and the Bush administration have come under increased political pressure to erect trade barriers against a flood of imports that critics say have contributed to the loss of more than three million manufacturing jobs since 2001. The U.S. deficit in trade with the rest of the world was a record $765.3 billion last year.

The Fed chairman said restricting imports might temporarily slow job losses in affected industries, but that would be outweighed "many times over by the costs, which would include higher prices for consumers and increased costs, and thus reduced competitiveness, for U.S. firms."

The better approach to dealing with job losses in such industries as textiles, which have been hurt by foreign imports, is to improve government retraining programs, Bernanke said. He said it also was important to improve the quality of education that future workers received so they would be prepared for the jobs of tomorrow.

Democrats in Congress have contended the administration has failed to protect U.S. workers from unfair foreign competition from low-wage nations such as China.

Last year's trade gap was the fifth consecutive record, as the deficit with China rose to $232.5 billion, the largest imbalance ever recorded with a single country.

Responding to questions from Sen. Max Baucus (D., Mont.), Bernanke said the reason for the U.S. trade deficit was that Americans saved less and spent more in contrast to a country such as China, which has a high savings rate and depends on export-led growth.

Bernanke said that interest rates remained low in the United States because of the continued flood of foreign investment into the country. But he said this would not always be the case and "that is why it is important to work on increasing our savings rate."

In his remarks, Bernanke sought to allay fears that jobs in the service sector, in which more than 80 percent of Americans work, could be "outsourced" to other nations, causing massive job losses in this country. He said those concerns were not justified because closeness to customers and knowledge of local conditions would remain critical factors for many service jobs.