5 Feb 2009

Obama keen to avoid 'trade war'

9:51 am on 5 February 2009

United States President Barack Obama has said he does not want his economic stimulus bill to trigger a trade war.

Mr Obama was responding to international criticism of a "Buy American" clause in the $US800 billion economic recovery package for the country.

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

The European Union said the clause would send "the worst possible signal".

A European Commission spokesman said the EU would launch a complaint with the World Trade Organisation if the clause remained.

European and Canadian ambassadors to Washington had already warned that the clause could provoke protectionism and trigger retaliatory moves.

The rescue plan has been approved by the US House of Representatives and is under discussion in the Senate this week, which could sign it off before the weekend.

But in television interviews on Tuesday aimed at drumming up support for the stimulus package, Mr Obama said he did not want to include measures that would signal protectionism at a time of recession.

"I think we need to make sure that any provisions that are in there are not going to trigger a trade war," he told US television network ABC.

Speaking on Fox Television, Mr Obama said he does not want to send a protectionist message on world trade and would look at altering "Buy American" language in the bill.

"I think it would be a mistake ... at a time when worldwide trade is declining, for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade," he said.

On Monday, European Union 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," he said.

Some senior US Republicans have cautioned that the Buy American measure could start trade wars.

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.