Thread: Barack Obama Backs Off On 'Buy American'

Barack Obama to dilute 'Buy American' plan after Europe threatens US with trade war

Barack Obama is expected to water down "Buy American" plans in his economic stimulus package after European diplomats privately threatened to launch a trade war in retaliation.

By Tim Shipman in Washington and Philip Sherwell in New York
Last Updated: 1:06PM GMT 01 Feb 2009



Barack Obama welcomed trade union leaders into the White House Photo: AP

The White House has promised to review the protectionist proposals, passed last week by Democratic allies in the House of Representatives, which would ban the use of non-American steel in the $800 billion of construction projects.

Obama officials are under pressure from what European diplomats in Washington describe as a discreet but outspoken campaign of "quiet fury" from America's closest allies.

They regard the move as a provocative shift away from free trade and towards economic populism at a time of turmoil.

In a bid to win further favour with impoverished voters, Mr Obama announced yesterday that his Treasury team will launch a dramatic overhaul of the existing bank bailout programme this week, designed to rein in executive bonuses and ensure banks do more to help mortgage holders.

In his weekly radio address, Mr Obama promised to "help lower mortgage costs" and repeated his moral denunciation of corporate executives who ask for taxpayers money and then pay gigantic bonuses to their staff.

"We learned this week that even as they petitioned for taxpayer assistance, Wall Street firms shamefully paid out nearly $20 billion in bonuses for 2008," Mr Obama said. "The American people will not excuse or tolerate such arrogance and greed."

His Treasury team has calculated that a "big bang" announcement to overhaul the unpopular bailout programme - including new measures to reduce home repossessions - is most likely to restore public confidence. The plan will include limits on executive bonuses in firms which take public cash.

Mr Obama also called for the stimulus package to be passed quickly. But the Buy America provisions in the plan are forcing him to choose between a showdown with Congress and a collision course with other Western governments that could end in a trade war.

"The administration is reviewing that provision," said Mr Obama's spokesman Robert Gibbs. "It understands all of the concerns that have been heard."

Privately, diplomats are withering about the "excitable" US rhetoric in support of the Buy America proposals. But they are resigned to a solution that leaves Mr Obama with something he can sell as protecting American workers, so long as it does not violate the letter of the trade arrangements.

European Commission representatives and diplomats from the British, French, Canadian and Mexican embassies in Washington have all launched an intensive lobbying operation to convince senators to strike the provisions from the bill they will debate this week.

A Western diplomat in Washington made clear that otherwise a trade war was in prospect. "The EU has said it will not stand idly by and let this happen. I've not heard words that strong from Brussels in 20 years," the official said.

"This is a very serious situation and there are very strong emotions here pushing for some form of protectionism. The Americans have been made very aware of our concerns and if we need to make things very explicit about what we will do, we will spell things out in words of one syllable.

"We've got to make a clear distinction between the rhetoric, which is fairly excitable, and the wording of any legislation. But senators on the specialist committees know that America has signed obligations to the principles of free and open trade."

They are hoping that free trade sympathisers in the Senate commerce committee will strike out clauses that would violate America's obligations to EU nations under World Trade Organisation rules. America has similar obligations to Canada and Mexico as part of Nafta, the North American Free Trade Area.

Europe is being helped by lobbyists on behalf of American companies like Caterpillar and General Electric which fear being left out in the cold in retaliation when it comes to winning contracts in Europe.

British diplomats are concerned that a trade row would overshadow Gordon Brown's first meeting with Mr Obama as president, pencilled in for later this month, and wreck the G20 talks Mr Brown is hosting in London on April 2.

A Foreign Office official in London admitted that the Buy America provisions have caused irritation and gloom and said Mr Obama may not be able to resist protectionist measures. "The president spent the campaign giving Western officials nods and winks that his rhetoric was just campaign fodder for blue collar workers in the mid-West," the official said. "But the view now is that he really is a protectionist. He has to keep those rust belt people happy."

Political strategists are already predicting that the party which can best harness public anger over the scale of the bail-out and excessive Wall Street pay will emerge triumphant in the 2010 mid-term elections.

"The Obama team is trying to send out the right signals but they are still a long way from persuading most Americans that Wall Street deserves this bail-out," said Dan Gerstein, a Democratic consultant.

http://www.telegraph.co.uk/news/worldne ... e-war.html

His Treasury team has calculated that a "big bang" announcement to overhaul the unpopular bailout programme - including new measures to reduce home repossessions - is most likely to restore public confidence.

The only way to gain public confidence is to grow a pair and stand up for American citizens and what is really right for America and tell the rest of the world to kiss our collective posterior.

Hummm, Obama has only made 500 mistakes.... A clue would help....