U.S. Reviewing 'Buy American' Clause in Stimulus Package

U.S. allies are expressing anger over protectionism

The White House said it was reviewing a "Buy American" clause in Congress's version of President Barack Obama stimulus plan that has sparked angry claims of protectionism from U.S. allies.

The House of Representatives added a measure in its $819 billion version of the economic kick-start package banning the use of foreign steel in infrastructure projects. Moves are underway in the Senate version of the bill to expand the provision to mandate the use of other U.S. manufacturing materials.

The move has sparked a storm of protest from U.S. trading partners including Canada and in Europe, and handed the Obama administration with an early political conundrum.

"The administration is reviewing that provision. It understands all of the concerns that have been heard not only in this room," spokesman Robert Gibbs said at a White House briefing. Gibbs refused to be drawn on whether the Obama administration supported the "Buy American" provision or not, saying he would have an answer once a review had been conducted.

Signs the administration was examining the clause came after the U.S. Chamber of Commerce intensified its campaign against the populist provision, arguing it would torpedo the U.S .leadership role in global trade.

"Some have slammed the U.S. Chamber for opposing Buy American provisions, calling our position'economic treason.' Try 'economic patriotism,'" said U.S. Chamber of Commerce President and CEO Thomas J. Donohue. "Such provisions would cost American jobs, trigger retaliation from our trading partners, slow economic recovery by delaying shovel-ready infrastructure projects, and cede our leadership role as a longstanding proponent of free and fair trade and global engagement."

"If we refuse to buy foreign-made goods, then our trading partners will refuse to buy from us. And since we are the worlds largest exporter, who will be hurt more?"

U.S. trading partners which have complained at the congressional provisions include Canada, the venue for Obama's first trip abroad as president on February 19. Canadian Prime Minister Stephen Harper said he was concerned about "U.S. protectionism" and warned such moves could slow the global economic recovery. It is a "serious concern to us," Harper said, and so "we're joining with all countries in the world to insist that the United States respect its WTO commitments."

The European Union's trade commissioner, Catherine Ashton, has also voiced concern about the "Buy America" provision. "We are looking into the situation. ... Before we have the final text ... it would be premature to take a stance on it," Ashton's spokesman, Peter Power, said in Brussels. "However, the one thing we can be absolutely certain about, is if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore," he said.

Italian Trade Minister Adolfo Urso warned as the U.S. legislation was being developed: "A dangerous new steel war is looming and we need to counter it with strong and decisive actions."

French Economy Minister Christine Lagarde said using protectionist measures to get stalled economies back on track is a "necessary evil" but they must be temporary and agreed with partners.

The Senate is expected to take up the economic stimulus bill next week, and once it has passed the measure must "reconcile" the bill with the House version before sending it to Obama to be signed into law. So there is still ample time for changes to be made, though erasing the "Buy America" clause may entail a price for Obama, as it is being pushed by political allies in states like economically bereft Ohio.

Copyright Agence France-Presse, 2009

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