US Senate eases 'trade war' bill

The US Senate has voted to soften a controversial "Buy American" clause in an economic recovery package, after warnings it might spark a trade war.

The clause had sought to ensure only US iron, steel and manufactured goods were used in projects funded by the bill.

But senators approved an amendment requiring that provisions in the bill comply with international trade agreements with Canada and the EU.

Earlier President Barack Obama said the US should avoid seeming protectionist.

The BBC's Jonathan Beale in Washington says the climb-down by the US Senate follows warnings from the EU and Canada that the stimulus bill could spark a trade war.

The White House has said it supports giving preference to domestic manufacturers in public works programmes - but only if it does not violate existing trade agreements, our correspondent says.

There will be a sigh of relief from many people at the Senate's move, he adds, but it remains to be seen whether the House of Representatives will back the watered-down version of the bill.

Retaliatory moves

US senators voted overwhelmingly, late on Wednesday, to require the "Buy American" provisions "be applied in a manner consistent with US obligations under international agreements".

However, an amendment put forward by Republican Senator John McCain which would have removed the clause altogether was defeated.

Speaking before a vote on that amendment, Mr McCain warned that if the provisions were passed it would "only be a matter of time before we face an array of similar protectionism from other countries - from 'Buy European' to 'Buy Japanese' and more".

European and Canadian ambassadors to Washington had already warned that the clause could provoke protectionism and trigger retaliatory moves.

The EU had said the clause in the $800bn (£567bn) US economic recovery package would send "the worst possible signal".

A European Commission spokesman said the EU would launch a complaint with the World Trade Organization (WTO) if the clause remained.

Canada's ambassador to the US, Michael Wilson, had also urged the US Congress to drop the provision.