The European Union's top diplomat in Washington is warning the Obama administration and Congress that protectionist measures under consideration in a massive US economic stimulus bill would backfire if enacted.
John Bruton, the European Commission's ambassador to Washington, complained in letters ON Monday about "buy American" provisions in the proposed legislation. They would require major public works projects to favor US steel, iron and manufactured goods over imports. The European Commission provides the executive leadership to the European Union.
The letters, sent to senior lawmakers and officials including Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner, note that the United States and other countries pledged not to resort to protectionism at a meeting of world leaders in November.
Failing to meet that obligation "risks entering into a spiral of protectionist measures around the globe that can only hurt our economies further," Bruton wrote. His office provided The Associated Press with a copy of the text.
Bruton told the AP that he worries that the measures could lead to a trade war at a delicate time for the world economy. "Measures of this nature, if they breach WTO rules, are likely to be the subject of legal action. There is always the possibility of retaliatory measures to be taken," he said.
He said that if passed, the measures could undermine the effect of the stimulus on the American economy, because of the damage to trade.
"You would be getting less of a bang for your buck, less stimulus for your stimulus," he said. "It doesn't make economic sense."
The provisions are in an $800 billion-plus bill already approved by the House of Representatives and a different version under consideration in the Senate. The Senate version states that none of the funds from the stimulus may be used for a project "unless all of the iron, steel and manufactured goods used in the projects are produced in the United States." The House version leaves out manufactured goods.
President Barack Obama, who has argued that stimulus measures are urgent, is unlikely to block passage of any bill approved by Congress. He could, however, press lawmakers to remove the protectionist measures before the legislation is passed. So far, the administration has only said it is reviewing the measures. On Monday, the Senate's senior Republican criticized them. Sen. Mitch McConnell of Kentucky, the Senate minority leader, predicted in comments to reporters that including the "buy American" provisions would cause trade wars.
"I don't think we ought to use a measure that is supposed to be timely, temporary and targeted to set off trade wars," McConnell said.
"The entire world is experiencing a downturn in the economy," he said. "I think it's a very bad idea."