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Europeans: 'Buy American' Could Ignite Trade War

Wednesday, 04 Feb 2009 05:27 PM

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WASHINGTON - Lawmakers from steel-producing states insisted on Wednesday that a "Buy American" plan remain part of the huge U.S. economic stimulus bill after President Barack Obama said Congress should look at dropping or changing it to avoid starting a trade war.

"If it's not in, I'm not supporting this package and I'll bring a lot of votes with me," House of Representatives Transportation Committee Chairman James Oberstar, a Minnesota Democrat, said after a Congressional Steel Caucus hearing.

Senator John McCain, an Arizona Republican, was expected to offer an amendment to strip the Buy American provision from the Senate's stimulus bill, while other lawmakers were working on changes to make sure it was consistent with U.S. trade pacts.

Obama, in television interviews on Tuesday, said the United States had to be careful not to include any provisions in the stimulus plan that could "trigger a trade war."

"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," Obama said on the Fox network.

His comments came as the Senate debated a nearly $900 billion stimulus plan that would allow only U.S.-made iron, steel and manufactured goods to be used in public works projects funded by the bill.

That built on a $825 billion stimulus plan passed last week by the House that required the use of U.S.-made iron and steel in public works projects.

Canada and the European Union have pressed Congress this week to drop the provision, which critics say could violate the North American Free Trade Agreement and a World Trade Organization government procurement pact.

Senator Byron Dorgan, a North Dakota Democrat who crafted the Senate's Buy American provision, said he was working with the White House and his colleagues to ensure it "would not violate our international trade agreements."

Steel company executives, who saw demand plummet in the last half of 2008 as the recession deepened, argued vigorously at Wednesday's hearing for the provision, which they said opinion polls showed had widespread public support.

"The American people are with us and with you on this issue," Dan DiMicco, chief executive of Nucor Corp, told the steel caucus members.

He dismissed as "complete garbage" a study done by the Peterson Institute for International Economics that concluded the Buy American provision would create as few as 1,000 new jobs and possibly cost the United States many more if trading partners closed their public works projects to U.S. exports.

"You can get a study done on anything you want. I'll give you another statistic -- for every billion dollars in infrastructure spent in this country, studies have shown you will create between 30,00O and 40,000 new jobs," DiMicco said.

The Peterson study, noting the political difficulty of completely removing the provision, recommended it be scaled back to the original House version and lawmakers add language exempting NAFTA partners Canada and Mexico and members of the WTO procurement pact, such as the European Union and Japan.

That would still restrict steel imports from countries that are not members of the government procurement agreement -- such as China, Russia, India and Brazil -- encouraging them to discriminate against U.S. exporters, the study said.

A coalition of 100 business groups and associations released a letter on Wednesday urging Senate leaders to eliminate the Buy American provisions, which they predicted would "backfire on the United States."

Representative Pete Visclosky, chairman of the Congressional Steel Caucus, said he remained confident the Buy American provisions would be part of the final stimulus bill.

"I have no belief that it will be taken out or weakened," the Indiana Democrat told reporters.

Many of the steel-state lawmakers argued it made sense that U.S. taxpayer-funded projects give preference to U.S. steel companies and other domestic manufacturers.

"That is going to pass easily and overwhelmingly, and it's going to stay part of the package because that's the right thing to do," said Michael Doyle, a Democratic congressman from Pennsylvania.

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