Buy American plan softened to avoid a trade war

Controversial “Buy American” proposals were watered down by the US Senate yesterday, as the upper house heeded President Obama’s pleas to avoid economic protectionism.
A $900 million economic stimulus bill had included provisions that all manufactured goods bought with the money had to be from the US, a requirement that could violate international trade agreements, as well as making it difficult to buy goods using foreign components such as computers.
That, though, was voted out by Senators, a day after the newly installed President said in a television interview that “we can’t send a protectionist message… that somehow we’re just looking after ourselves”.
Instead the upper house said that while there should be encouragement to use the money to buy US made goods and services, it had to be done in a way that is “consistent with United States obligations under international agreements”.
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This, in particular, is referring to existing free trade agreements with the European Union and in North America. Both EU and Canadian officials had complained about the Buy American measure, saying that it amounted to the start of a "trade war", but yesterday the EU Ambassador to the US, John Bruton, was welcoming the climbdown by senators.
However, the Senate did reject an alternative proposal from defeated presidential candidate John McCain, which would have seen the Buy America clause dropped completely — demonstrating the feeling among American politicians to send some sort of protectionist signal to voters.
The subject is not completely resolved, because a separate bill, which has passed the lower House of Representatives, still requires that billions in infrastructure spending be made on US manufactured iron and steel. Eventually the two bills will have to be merged into a single document for Presidential approval