|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.
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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
EU ambassador to Washington
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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.
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.”
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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 Democratic 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.
Page last updated at 11:27 GMT, Tuesday, 3 February 2009
Source: BBC News