The EU threatened legal action and retaliatory measures against the US if the Obama administration enshrines a “Buy American” clause in its multibillion-dollar economic stimulus package.
India, Russia and other countries also threatened that they could take the US to the World Trade Organization for breaching treaty rules on government procurement.
The warning came just a day after Joaquín Almunia, EU economic and monetary affairs commissioner, pointed to “clearly protectionist measures” emanating from Washington. The EU ambassador to Washington has expressed similar concerns.
The European auto industry is demanding the right to join in the American loan guarantee scheme for General Motors and Chrysler and is requesting a €40bn (£36bn)EU scheme – in which GM and Ford, with European plants, would participate.
The most concerning clause of the stimulus package to the EU would require US firms to use local steel and other components in state-funded projects. Similar national measures have been adopted or considered in Argentina, China, Indonesia, Ecuador, India, Russia and Vietnam, putting them on a WTO surveillance list.
The German chancellor, Angela Merkel, told the World Economic Forum in Davos last week: “We must not allow market forces to be completely distorted. I’m wary of seeing subsidies injected into the US auto industry. That could lead to distortion and protectionism.”