WASHINGTON (Reuters) - President Barack Obama's ability to lead and help restore the global economy will be damaged if the United States includes restrictive "Buy American" provisions in its economic stimulus plan, Canadian and European Union officials said on Monday.
"President Obama has a major opportunity to give leadership to the world ... that few American presidents have had for generations," John Bruton, the European Union's ambassador to the United States, told Reuters in an interview.
"If the first major piece of legislation that he signs is one that is seen as damaging the economic interests of other countries in a way that is unnecessary and wasteful, then his capacity to give the sort of leadership the world needs at this time is considerably and unnecessarily reduced."
Last week, the House of Representative aroused global concerns that the United States was moving toward increased trade protectionism when it required that only U.S.-made iron and steel be used in any public works projects funded by an $825 billion economic stimulus bill.
The Senate began debate on Monday on its $900 billion version of the stimulus plan, which expands the House provision to require that any manufactured goods purchased under the public works projects also be made in the United States.
The Obama administration has not taken a formal position on the provision, although Vice President Joe Biden said last week he believed it was "legitimate to have some portion of Buy American" in the stimulus bill.
Senate Republican Leader Mitch McConnell told reporters on Monday he opposed the Buy American plan.
"I don't think we ought to use a measure that is supposed to be timely, temporary and targeted to set off trade wars, when the entire world is experiencing a downturn in the economy," McConnell said. "I think it's a very bad idea."
Major U.S. trading partners such as Canada and the European Union say they are worried not just about lost exports to the United States but the greater damage that could be done if other countries pursue trade policies that restrict imports.
"If Buy America becomes part of the stimulus legislation, the United States will lose the moral authority to pressure others not to introduce protectionist policies," Canada's Ambassador to the United States, Michael Wilson, said in a letter to Senate leaders.
"A negative precedent set here in the United States can have repercussions around the globe and could provoke debilitating beggar-thy-neighbor policies," Wilson said, adding that Canada deliberately avoided including any new protectionist measures in its own stimulus plan.
European steelmakers have urged the European Commission to file a World Trade Organization case against the United States if the Buy American provision becomes law.
Bruton, who sent a letter to congressional leaders and the Obama administration on the Buy American measure, acknowledged there was some argument about whether it violates U.S. commitments under the WTO's government procurement pact.
Whether it does or not, he said, it is still bad policy.
"Countries under the existing world trade agreement could legally increase tariffs on a whole lot of items and plunge the world into a far deeper recession than it already is in the name of protecting their own workers," Bruton said.
"They would be acting perfectly legally, but that doesn't mean they would be acting sensibly."
Additional reporting by Susan Cornwell; Editing by John O'Callaghan