Obama administration reviewing 'Buy American' clause

U.S. President Barack Obama's administration is hinting that it may push Congress to reconsider its controversial "Buy American" clause in its $819-billion financial stimulus package.

"The administration will review that particular provision and will make a determination of it," White House Press Secretary Robert Gibbs told reporters in Washington on Friday.

The provision, which has quickly become known as the "Buy American" rule, would require all public works projects funded by the stimulus package to use only U.S.-made iron and steel. It is part of an economic stimulus package currently before the U.S. Congress and approved by the House of Representatives on Wednesday.

The Senate, which will begin debating the legislation on Monday, could add that all stimulus-funded projects use only U.S.-made equipment and manufactured goods.

The measure is meant to help stimulate the U.S. economy and create jobs but it's raising concerns about protectionism.

Gibbs said the administration is looking into whether the measure would violate U.S. trade obligations.

"The administration … understands all of the concerns that have been heard not only in this room but in newspapers produced both up north and down south," he said.

Trade on the agenda

Gibbs said he expects the provision to be discussed in bilateral meetings between Canada and the United States.

Obama will be making his first international trip to Canada on Feb. 19. He has said he wants to have the stimulus package signed into law by mid-February.

"I don't think there is any doubt that trade will be on the agenda," Gibbs said.

Canadian steel plants produced almost 16 million tonnes of steel in 2007, employing about 32,000 people, along with an estimated 140,000 indirect jobs.

American trading partners have joined with Canada to denounce the measure that would exclude Canadian steel and foreign manufactured goods from the spending plan.

European steelmakers have also objected to the provision, saying it violates U.S. commitments under the World Trade Organization's procurement pact.

European Union officials have confirmed they are also examining the issue to decide if grounds exist to file a WTO complaint.

'Every shovel, every crane'

U.S. businesses have also gotten involved and expressed concerns about retaliation from overseas if the protectionist measure is allowed to pass.

The U.S. Chamber of Commerce is among the business groups pushing to have the provision removed or modified.

"When you include all manufactured goods in these projects, you're talking about every shovel, every crane," Chris Braddock, a policy director with the chamber, told Reuters. "It's not just the steel going into bridges. Now it's the truck that is involved in building the bridge or the road."

The provision could end up costing American jobs and trigger international retaliation, said Thomas Donohue, chamber president.

"Such provisions would … cede our leadership role as a longstanding proponent of free and fair trade," Donohue said.

The "Buy American" clause is bad politics and bad economics, said Ontario Premier Dalton McGuinty.

"This is a global recession. The only way that we're going to emerge from this is by acting in concert and finding ways to support one another," McGuinty said.

Canadian officials lobbying

But Vice-President Joe Biden told CNBC on Thursday he believed it was legitimate to have some portions of "Buy American" in the stimulus plan.

"I don't think there is anything anti-competitive or anti-trade in saying, 'We are stimulating the U.S. economy.' The purpose is to create U.S. jobs," Biden said.

At the World Economic Forum in Davos, Switzerland, Canada's Finance Minister Jim Flaherty warned against protectionism in an interview with BNN.

"One of the strong messages … is that the last thing the world needs now is protectionism," Flaherty said. "That was the mistake that was made in the 1930s. We don't want to go there."

Canada's ambassador to the United States, Michael Wilson, is also personally lobbying the White House and presenting arguments that the plan violates the North American Free Trade Agreement.

Canadian officials are hoping that by the time the legislation reaches Obama's desk, it will have enough waivers inserted into it that there will be a loophole for Canadian businesses.