A US Senate bid to dilute the “Buy American” provision in its $900 billion economic stimulus package was cautiously welcomed on Thursday in Europe and Canada and by the head of the World Trade Organization. But trading powers opposed to the clause favoring US-made goods remained tight-lipped on whether Wednesday's vote to soften the original language met their concerns and would be enough to avoid a threatened trade war. European steelmakers said they were not satisfied with the vote in Washington and Japan and Australia also voiced their opposition. Mexican President Felipe Calderon has vowed to fight any US move to introduce protectionist measures in the region as a way to combat the economic slowdown. The “Buy American” provision passed by the House of Representatives last week required that all public works projects funded by the stimulus package use only US-made iron, steel and manufactured goods. But under the Senate amendment, the watered-down provision must be “applied in a manner consistent with US obligations under international agreements.” The move was aimed at appeasing the EU, Canada and other trading partners fearing the loss of lucrative US exports by exempting them from the strict requirement. ‘Good signal' Canadian Trade Minister Stockwell Day told reporters it was “a great step forward” while German Chancellor Angela Merkel said it was “a good signal” by Washington. WTO chief Pascal Lamy, who previously criticized the provision, said he welcomed the latest move. “But it remains to be seen exactly what legislation comes out (in Washington),” Lamy told reporters in Berlin. In Washington, supporters of the Senate's Buy American language were confident it would remain in the final stimulus bill and not be watered down further. The Buy American plan will boost the cost of public works project, diluting the impact of the stimulus package and creating fewer jobs than otherwise, he said. It also invites other countries to adopt similar provisions in their stimulus plans to the detriment of US exports, he said. Japan and Australia warning Earlier on Thursday, Australia warned Washington that any move to protect its iron and steel makers would lead to a trade war, while Japan sent a letter to top aides of US President Barack Obama and the Senate's majority and minority leaders echoing concerns by other US trading partners.
