WASHINGTON - THE US Congress approved protectionist measures in a US$$789 billion (S$1.19 trillion) stimulus bill on Friday that US trading partners have warned could spark a trade war.
The bill, however, left the Obama administration some room to maneuver to appease other countries who say it will benefit US companies unfairly.
The stimulus bill was approved by the House on Friday afternoon and by the Senate later in the evening. It now goes to President Barack Obama who is expected to sign into law quickly.
Major partners, including the European Union and Canada, say the legislation favoring US steel, iron and manufactured goods for government projects could undermine pledges by the leaders of major economies not to resort to perfectionism during the world economic downturn.
Requirements known as 'Buy American' were softened as the bill progressed through Congress and after strong criticism from abroad.
Senate and House negotiators agreed to a version that would require the government not to violate trade agreements when implementing the law.
The bill also allows the Obama administration and state governments to waive requirements to favor US companies if they deem it in the US public interest and if they publish a justification.
The dispute has put Obama in a difficult position. While campaigning last year, he raised questions whether US trade agreements contained sufficient protection for labor and environmental standards. He has warned recently, however, about antagonising trading partners and has made clear that passage of the overall stimulus bill is needed urgently to mend the U.S. economy.
In several television interviews last week, he said the stimulus package should not include protectionist language that could trigger a trade war. But now that it does, he is likely to sign it anyway.
The measures appear, however, to give the administration discretion about how to implement spending decisions, given the requirement of meeting trade obligations.
US labour groups that pushed hard for inclusion of the measure have argued that its main purpose is to ensure that U.S. Treasury dollars are used to the fullest extent to support domestic job creation.
But industry groups see the provision in a different light. One hundred business groups and companies, including major construction, defense and high-tech companies, wrote Senate leaders last week with the dire warning that the provision 'will harm American workers and companies across the entire US economy, undermine US global engagement and result in mirror-image trade restrictions abroad that would put at risk huge amounts of American exports'. -- AP