The European Union warned the US yesterday against plunging the world into depression by adopting a planned "Buy American" policy, intensifying fears of a trade war
The European Union warned the US yesterday against plunging the world into depression by adopting a planned "Buy American" policy, intensifying fears of a trade war, reported the Times.
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The EU threatened to retaliate if the US Congress went ahead with sweeping measures in its $800 billion stimulus plan to restrict spending to American goods and services.
John Bruton, the EU Ambassador to Washington, said "history has shown us" where the closing of markets leads u2014 a clear reference to the Depression of the 1930s, triggered by US protectionist laws.
The EU warnings came in letters to US political leaders in Congress -- Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton. Bruton urged them to respect the decision taken by the G20, the world's leading economic nations, in Washington last November to resist protectionism as a defence against the crisis. They are expected to meet again in London in April.
Under the "Buy American" clause passed by the US House of Representatives, American iron and steel must be used in construction projects that form part of the recovery plan. The US Senate wants to extend the scope of the clause before the Bill goes to the White House for approval.
US president Barack Obama has since given a strong signal that he will remove the most provocative passages from the Bill. "I agree that we can't send a protectionist message," he said in an interview. "I want to see what kind of language we can work on this issue. 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."
The European Commission's powerful trade department believes that the US move would violate international trade rules policed by the World Trade Organisation. The Commission also made clear that it was keeping an equally vigilant eye on protectionist moves within Europe as France prepared to insist that its motor manufacturers buy their parts only from French companies.
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