EU attacks 'Buy American' clause

Buy American is meant to ensure that only US goods are used in public works

The EU has increased its pressure on the US to reconsider the "Buy American" clause in the $800bn (£567bn) economic recovery package now before Congress.

The clause seeks to ensure that only US iron, steel and manufactured goods are used in projects funded by the bill.

A European Commission spokesman said it was the "worst possible signal" the Obama administration could send out.

The EU will launch a complaint with the World Trade Organisation (WTO) if the clause remains, the spokesman said.

The EU and Canadian ambassadors to Washington have already warned that the clause could promote protectionism and trigger retaliatory moves.

The rescue plan has already been approved by the US House of Representatives and is under discussion in the Senate this week.

Mixed trade signals

"There isn't a great deal of scope for doing much more but if America went ahead and did this we would have to take it up with the World Trade Organisation," the European Commission trade spokesman, Peter Power, told the BBC's Chris Mason in Brussels.

British Conservative Members of the European Parliament warned of the dangers of "a new economic iron curtain" being drawn across Europe.

We regard this legislation as setting a very dangerous precedent at a time when the world is facing a global economic crisis John Bruton EU ambassador to Washington Obama diary: First 100 days Dire warnings about protectionism

The clause "sends a terrible protectionist signal to the rest of the world, and particularly the EU," said Syed Kamall, the Conservative international trade spokesman in the European Parliament.

The White House has said it is reviewing the Buy American part of the stimulus bill, although Vice President Joe Biden said last week that it was legitimate to have some portion of it in the final measure.

Barack Obama's signals as a presidential candidate on the campaign trail last year that he could rip up the North American Free Trade Agreement were seen as a political gesture to win round the sceptical white working class vote, says the BBC's Jonathan Beale, in Washington.

Perhaps that has become more important with the economic crisis, but it leaves one wondering where the Obama administration really stands on free trade, our correspondent adds.

'Retaliatory risk'

EU Ambassador to Washington John Bruton said that, if passed, the measure could erode global leadership on free trade.

"We regard this legislation as setting a very dangerous precedent at a time when the world is facing a global economic crisis."

Barack Obama says he expects a "difficult few days"

Canada's ambassador to Washington warned Senate leaders that if Buy American was in the final legislation, it would set a negative precedent with global repercussions.

"The United States will lose the moral authority to pressure others not to introduce protectionist policies," Michael Wilson wrote in a letter to the senators.

Canada was hoping to be exempted from any Buy American measures, said International Trade Minister Stockwell Day.

"These protectionist measures, in a time of recession, only make things worse," he told broadcaster CBC.

"It can only trigger retaliatory action and we don't want to go there."

There is also opposition from some senior US Republicans who say the measure could start trade wars.

Mr Obama has urged the US Congress not to delay his stimulus plan over modest differences.

The Democrat leader in the Senate, Harry Reid, has said he hopes the stimulus can be approved by the end of the week.

It is unlikely that the package will be able to pass the Senate without Republican support.

Meanwhile, Mr Obama is expected to name Republican Senator Judd Gregg as commerce secretary.

Mr Obama will hope that Mr Gregg's nomination can help secure approval for the stimulus package, our Washington correspondent says.

Mr Gregg would be the third Republican in Mr Obama's cabinet.

The president's first choice for the post, New Mexico Governor Bill Richardson, withdrew following questions about his links to big business.

Doesn't the EU have a clause like this? Where deals must go through EU member countries first?

I seem to recall this being the case and pushing Australia out of buisness with Europe and having to grow larger dependencies with Asia.

Interesting to see how it plays out.

I don't know about the clause.. I know it has never been excercised though as any uproar towards the EU is news-worthy enough...
I can imagine it in place, mainly for farmers. Farming is the highest costplace of the EU and a lot of farmers cannot compete with richer countries both in the EU and other developed nations like the US.
So it is entirely possible that they have a clause for them, though the EU usually supports farmers with guaranteed prices and subsidys.

I certainly hope that the US will not put this clause through... I cannot imagine that their own market is larger then the rest of the world buying US steel. So if all the countries would switch it would end up with more job-losses in the end (IF the external steel market is greater then the internal)

I don't see the problem. It is a US economic stimulus package. It's not like this bill is forcing all the other companies to switch to US steel only. If you are trying to create work for US citizens, it doesn't make sense to buy things from other countries.

I think these foreign countries are just greedy and want us to buy their goods with our economic stimulus package. They should write their own stimulus package that uses their own local goods.

Granted, if this does spark some form of trade war, then I'd rather it not go through.

The EU is the largest contributor outside of the Iraq War for the global economic crisis. That's like accusing someone of murder when you have blood on your own hands.

The EU should be torn down, its hurting the individual countries in Europe and eroding their individual cultures.

"Buy American" has been a slogan for 2 decades now, promoting products made in the US keeps people in this nation employed. Every nation should be concerned about their own people first, the people paying for the country to run.

Protectionism is bad mkay. Pissing of your allies is bad aswell. Pissing of China who you own 22,5% of your foreign debt to, is bad. You know that Europe will not stand by while you do this, they'll do something similar to you. And voila we've reached nothing. Nothing good will come from this.

"Organization that likes to sell stuff to other organization: Stop encouraging your guys to buy stuff from each other rather than us!"

No big surprise there. Nothing unusual about the actions of either side, and I'm sure the exact opposite can/has/will happen at some point. It would probably suck if this turned into a giant tariff race, but hopefully these are only temporary measure.

Also, inb4 rabid euroskeptics... no wait, too late already. =P

There is a big difference between promoting soemthing, and having it put into law-form.

The bill is not here to limit what you buy, far from it. But what it does is probably cheapen the home-made steel or increase importfares on foreign steel. This falsifies free trade/sparks protectionism.

It's the domino-effect. If the US protects it's own steelindustry, the EU will protect it's chemical industry or instance, or certain parts of manufacturing, I don't know...
Long story short, the consumer pays more due to increased prices - no competition means prices can go up... which hurts the economy in the long run

*Edit:

This should actually be attacked even further. I mean, the EU is hurting economies?  How is getting rid of roughly 16 different currencies for one pretty strong coin hurting?
Plus, the free trade agreements where certainly beneficial to all economies due to no more import-taxes.

And then we have the increased income for all EU citizens and the increased wealth in a lot of poorer nations. Spain for instance would be nothing without EU help to, for instance, help farming and increase infra-structure. Eastern Europe is also aided a lot.
And if it was hurting so much, then why is Turkey jumping through all those hopes to joing the EU?

Even if I have to take a most negative stance towards the EU then still it is the richest countries in the West that pay the most... in short, there are only a few nations that pay more then that they recieve. My country being one of the givers and I still applaud all efforts as it benefits us in the long run. 

There's a lot of weirdness in this thread...

Actually the US does the same thing with subsidies.  Farmers have generally struggled in the US without them so in order to maintain prices, the US gives certain benefits to farmers.

It would also increase the value of the dollar.  Since the value is relative to imports/exports, fewer imports would cause it to increase.  This means that it would be harder for other countries to buy from us so it is directly hurting them.

Wow.  Just wow.

People like you worry me.

@WoW - You should have been worried by me a LONG time ago.

@esmoreit - With the amount of outsourcing going on compounded with job cuts in the US, the law makes sense, trying to keep jobs in the US and trying to improve US-based businesses. As you say, if the EU was to protect chemical interests/manuacturing, it would then make US owned chemical manufacturers seem a more viable option.

Trust me, I understand that free trade is a good thing overall, as there's less cost involved. But how can consumers buy goods if they don't have jobs? The US unemployment situation hasn't been this bad in ages, I believe it was said, since WWII. That's a LOT of progress undone. As the saying goes, drastic times call for drastic measures