January 30, 2009 / 7:25 PM / 9 years ago

U.S. business group opposes "Buy American" plan

<p>A street sign is seen in front of an American flag hanging on the front of the New York Stock Exchange August 9, 2007.Lucas Jackson</p>

WASHINGTON (Reuters) - A top U.S. business group stepped up efforts on Friday to kill a "Buy American" provision that has angered U.S. trading partners, and the White House said it was reviewing its position on the measure.

"Some have slammed the U.S. Chamber for opposing 'Buy American' provisions, calling our position 'economic treason,'" Thomas Donohue, president of the U.S. Chamber of Commerce said in a statement. "Try 'economic patriotism'," he said.

"Such provisions would cost American jobs, trigger retaliation from our trading partners, slow economic recovery by delaying shovel-ready infrastructure projects and cede our leadership role as a long-standing proponent of free and fair trade and global engagement."

The House of Representatives approved the measure this week as part of an $825 billion bill to kick-start the U.S. economy. In the House bill, the "Buy American" measure would require all public works projects funded by the stimulus package to use only U.S.-made iron and steel.

European steelmakers object, saying that would violate U.S. commitments under the World Trade Organization's government procurement pact. Other critics say that is less than clear cut and could depend on how the measure was implemented.

Several leaders at the World Economic Forum in Davos, Switzerland this week warned that national moves to counter the economic crisis might lead to protectionism.

British Prime Minister Gordon Brown, Canadian Finance Minister Jim Flaherty and Indian Trade Minister Kamal Nath all warned of the risks of protectionism during this week's World Economic Forum in Davos, Switzerland.

U.S. Vice President Joe Biden told CNBC on Thursday he believed it was "legitimate to have some portions of Buy American" in the stimulus plan and disagreed with those who said it was a harbinger of protectionism.

But White House spokesman Robert Gibbs said on Friday the Obama administration was examining the measure to see if it violated U.S. trade obligations. "The administration will review that particular provision and will make a determination of it ... It understands all of the concerns," Gibbs said.

'NOT A GOOD WAY TO BEGIN'

Early in his first term, former President George W. Bush angered trading partners by imposing steep "safeguard" tariffs on steel imports to help U.S. producers climb out of a slump.

The Senate is expected to begin debate on its version of the stimulus bill next week. It includes a provision passed by the Senate Appropriations Committee that expands the House language of "Buy American" to include all manufactured goods.

"When you include all manufactured goods in these projects, you're talking about every shovel, every crane," said Chris Braddock, the U.S. Chamber of Commerce director of procurement policy.

"It's not just the steel going into bridges. Now it's the truck that is involved in building the bridge or the road."

Senator Charles Grassley, an Iowa Republican, "is looking into this situation to ensure that any 'Buy American' provisions in the stimulus bill are administered in a manner consistent with U.S. trade obligations," a spokeswoman said.

That might not offer much comfort to major U.S. trading partners such as China, which have not yet joined the WTO's government procurement accord.

Additional reporting by Randall Palmer in Ottawa; Editing by David Storey

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