WASHINGTON: US President Barack Obama said he wants to drop his earlier proposed ‘Buy American’ clause in the nearly US$900 billion (S$1.4 trillion) economic stimulus Bill being considered by Congress.
In a series of interviews he gave American television networks on Tuesday, Mr Obama said that he did not intend to send a protectionist message on world trade, and thereby sparking off a trade war.
Saying that the ‘Buy American’ clause would be a ‘mistake’ and that he plans to alter it, Mr Obama told ABC: ‘I think we need to make sure that any provisions that are in there are not going to trigger a trade war.’
On the Fox channel, he admitted that the contentious provision, coming at the critical time of weakened global trade, would send the wrong message. ‘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.
This week, the US Senate began considering an US$885 billion stimulus Bill which requires all ‘manufactured goods’ purchased with stimulus money to be made in the United States. The House already has approved a narrower Bill mandating the use of domestic iron and steel.
To supporters, including labour unions that helped the Democrats retake the White House last year, a ‘Buy American’ clause is just common sense at a time of economic crisis and massive layoffs.
Opponents, however, say it could breach US trade commitments and ignite a disastrous round of beggar-thy-neighbour retaliation like that which worsened the Great Depression.
Both the European Union and Canada have already warned the administration against the consequences of resurgent economic nationalism. A European Commission spokesman revealed the EU’s plans to launch a complaint with the World Trade Organisation in case the clause is not removed.
US business groups also oppose the measure. If other countries enact similar limits, US exporters such as big equipment maker Caterpillar and plane maker Boeing would lose lucrative foreign sales.
A new study said on Tuesday that the more limited ‘Buy American’ clause would create only 1,000 new steel industry jobs and might cost as many as 65,000 across a number of sectors.
‘The negative job impact of foreign retaliation against Buy American provisions could easily outweigh the positive effect of the measures on jobs in the US iron and steel sector and other industries,’ Mr Gary Hufbauer and Mr Jeffrey Schott, senior fellows at the Peterson Institute for International Economics, said in the report.
About 6,500 US jobs could be lost if nations shut off 1 per cent of that market to US exporters and about 65,000 US jobs could be lost in the ‘extreme case’ that 10 per cent was shut off, the report said.
REUTERS, ASSOCIATED PRESS