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Obama warns of 'trade wars' from stimulus clause

world Updated: Feb 04, 2009 15:09 IST

AFP
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President Barack Obama warned on Tuesday that "Buy American" provisions in Congress's version of his economic stimulus bill could ignite "trade wars" and exacerbate slumping worldwide growth.

"I think that would be a mistake right now. That is a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe," Obama told ABC News in an interview.

Following sharp protests from US trading partners over the measure, the president said: "I think we need to make sure that any provisions that are in there are not going to trigger a trade war."

The "Buy American" clause in the nearly 900-billion-dollar bill being debated in the Senate bars the use of any stimulus funds to buy steel, iron or other manufactured goods for infrastructure construction projects from abroad.

A narrower version of the clause, popular in US states suffering gravely from the economic downturn, was included in a House of Representatives version of the stimulus passed last week.

"I agree that we can't send a protectionist message. I want to see what kind of language we can work on this issue," Obama said in another interview with Fox News.

"I think it would be a mistake though, 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."

US trading partners in Europe, Canada and elsewhere have reacted with fury to the clause, warning it could start a global round of tit-for-tat trade reprisals akin to the tariff wars of the 1930s Great Depression.

After meetings in Washington on Tuesday with Secretary of State Hillary Clinton and US senators, German Foreign Minister Frank-Walter Steinmeier expressed his own disquiet about the "Buy American" clause.

Briefing reporters, he said "new protectionist tendencies worldwide" would do the global economy "no good."

"I am convinced that both the United States and its economy, as the European and German one, are depending on open markets, on open exchange, and closed markets will be no help at all in this given situation," he added.

Both the US and European economies "are dependent on open markets, on open exchange, and closed markets will be no help at all in this given situation," Steinmeier said.

Canada's ambassador to the US, Michael Wilson, said the plan could trigger a worldwide depression, and Washington would lose the moral authority to avert it.

"We are concerned about contagion, that is, other countries also following protectionist policies," Wilson wrote in a letter to US Senate leaders.

"A negative precedent set here in the United States can have repercussions around the globe and could provoke debilitating beggar-thy-neighbor policies," Wilson added.

If Canada or the United States, the world's biggest trading partners, "were to introduce new barriers or preferences at this time, we would load increased costs and burdens onto businesses," he wrote.

The European Union's ambassador to Washington, John Bruton, told AFP Monday he had written to the leaders of Congress to warn the legislation set a "very dangerous precedent."

The Buy American provision, if signed into law, could spur other countries to set up protectionist barriers and ultimately cost American jobs, he said.

The current economic crisis is global in nature, Bruton added, and "if it needs to be solved, it needs to be a global solution and that global leadership comes together in the G20."