Obama Risks Flap on “Buy American”

WASHINGTON – President Barack Obama risked a backlash within his own party by criticizing "Buy American" provisions in the huge stimulus bill that would ensure that most of the big infrastructure money goes to U.S. suppliers.

The measures, highly popular among congressional Democrats and trade unions, have come under heavy criticism from U.S. trade partners, some of whom threatened this week to file legal actions against the U.S. if the measures become law.

Asked his views on the furor, President Obama said in separate television interviews Tuesday that he wanted to avoid any steps would "signal protectionism" or risk fueling trade tensions.

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

A White House spokesman couldn't be reached immediately to explain Mr. Obama's remarks.

The "Buy American" uproar comes as an early and difficult challenge for the new administration as it tries to navigate between intense domestic and international pressures. By siding with its trade partners in Europe and Asia, the administration could antagonize key allies in Congress as it struggles to win passage of a nearly $900 billion economic-recovery package.

The fight over whether to impose supplier restrictions within the stimulus legislation began last week, after the House passed a bill that would require the use of U.S.-made iron and steel in all public-works projects. The Senate is now debating a potentially larger stimulus package that contains far more restrictive procurement language, saying that "all manufactured goods" used in public-works projects would have to come from U.S. suppliers.

Getting those provisions stripped or toned down in the final legislation would require President Obama to twist arms within his own party at a time when he is also grappling with widespread Republican opposition to the overall package. Senate Majority Leader Harry Reid (D., Nev.) has come out strongly in support of the "Buy American" amendments.

Some prominent Republicans, on the other hand, are opposing the provisions for reasons similar to President Obama's. Senate Minority Leader Mitch McConnell (R., Ky.) said Monday that the Senate should avoid any steps "targeted to set off trade wars when the entire world is experiencing a downturn in the economy." Iowa's Sen. Charles Grassley, the ranking member on the Senate Finance Committee, also opposes the provisions.

Mr. Obama's statements Tuesday came a day after the European Union said in a letter to the White House that the U.S. would set a "very dangerous precedent" if it passed legislation containing a "Buy American" clause.

EU officials said Tuesday that the trade bloc would likely file a complaint at the World Trade Organization if the U.S. stimulus plan contains language strongly favoring U.S. suppliers. The problem, these officials said, is that a clause forcing Washington to favor U.S. goods, as some lawmakers would like, might violate agreements within the WTO that limit discrimination in government spending.

"We would have to look at our all options, including a WTO case, if 'Buy American' passes," an EU official said.

Proponents argue that the purchasing restrictions are essential to ensure that the billions spent by the U.S. government to revive the economy and boost employment actually go to U.S. companies. But critics say that the restrictions would only delay crucial work and impose onerous layers of bureaucracy on what is already likely to be a cumbersome contracting process.

A study released Tuesday by the centrist Peterson Institute for International Economics in Washington concluded that the provision would likely cost far more jobs than it created.