Criticism in Europe centres around a so-called 'Buy American' clause in the stimulus package, which was approved by the US House of Representatives last week but still awaits approval by the Senate. The clause would oblige US companies to use only domestic steel and manufacturing products in projects funded by the bill.
European leaders presented a united front by rejecting the text, fearing it would encourage other countries to pursue a protectionist agenda too. They threatened to retaliate with similar steps or even bring the issue before the WTO if the Senate did not amend the text.
President Obama yesterday signalled that he was not interested in provoking his European partners. "I think we need to make sure that any provisions that are in there are not going to trigger a trade war," Obama told the US TV channel ABC. "That we can't afford at a time when trade is sinking all across the globe," he said.
However, the US president did not specify whether all rules on using public money to buy domestic goods would be deleted from the draft stimulus bill.
German Chancellor Angela Merkel yesterday strongly criticised the provision, saying "protectionism is the wrong answer" to the global economic crisis and should be avoided at all costs.
As the world's largest exporter of manufactured goods and a major iron and steel producer, Germany would likely suffer most if the provisions were to come into effect.
The European Commission has also warned that it "would not stand with its arms crossed" if the bill passed unchanged in Congress. "If that is the case, we will have to consider taking them to the [WTO]," Peter Power, spokesman for EU Trade Commissioner Catherine Ashton, said yesterday.
The European Parliament's trade committee took a similar stance, adopting a resolution on Monday that called upon the US to stay away from protectionist measures.
A source told EurActiv that some MEPs even considered retaliatory measures, such as excluding US companies from the prestigious Nabucco pipeline project.