EU encouraged by Obama's new stance

The European Union's trade chief said today she was 'encouraged' by US President Barack Obama's recognition that 'Buy America' clauses in a stimulus bill could fuel protectionist tensions.

'I'm encouraged by the words of President Obama,' EU Trade Commissioner Catherine Ashton.

'He realises, like we do in Europe, that we need to trade our way out of the current economic difficulties. Trade is part of the solution as it acts as a stimulus,' she added.

Obama had warned that provisions in Congress's version of his economic stimulus bill could ignite 'trade wars', describing the clauses as a mistake in the current economic environment.

'We are very pleased by what President Obama has said on the 'Buy America' clause,' Ashton said. 'He is standing up for what is right for trade, right for America and right for the global economy,' she said.

The EU and Canada have fiercely attacked the clause, warning it could start a global round of tit-for-tat trade reprisals akin to the tariff wars of the 1930s Great Depression.

The Buy America clause in the nearly $900 billion bill being debated in the Senate bars the use of any stimulus funds to buy steel, iron or other manufactured goods for infrastructure construction projects from abroad.

Meanwhile, the European Union and Canada ratcheted up pressure against US President Barack Obama's Buy American stimulus plan, sending letters to the White House and Congress in protest.

The EU ambassador to Washington, John Bruton, said he had written to the leaders of Congress and the Obama administration expressing concerns about government legislation to restrict procurement to American goods, including steel and textiles.

'We regard this legislation as setting a very dangerous precedent at a time when the world is facing a global economic crisis,' Mr Bruton said.