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Obama Faces Test on Trade


President Barack Obama is facing an early decision on trade policy, one that could anger key members of his Democratic Party, or spark a trade war with some of America's closest allies. In a few weeks Mr. Obama is to travel to Canada, where officials are warning of disastrous consequences if the United States embraces protectionism.

Last week, the U.S. House of Representatives passed an economic recovery plan that could signal where U.S. trade policy is headed as the Obama administration works hand-in-hand with a Democratic Party controlled Congress. Both the House and Senate versions of the bill stipulate American-made steel and other products be used for public-works projects designed to stimulate the economy.

Canada and other U.S. trading partners are crying foul.

White House Press Secretary Robert Gibbs has been non-committal on the so-called "Buy America" provision.

"The administration will review that particular provision and will make a determination on that," said Robert Gibbs.

The mandate to utilize domestic products has the backing of U.S. labor unions that vigorously supported Mr. Obama in last year's presidential election. It is also defended by Obama allies in Congress, like Ohio Senator Sherrod Brown.

"To do the stimulus package in the maximum job-creation way, we ought to be using American-made materials," said Brown. "That means Ohio steel. That means concrete, cement, and other materials that are made in this country."

But some foreign officials are warning the provision would spark complaints against the United States at the World Trade Organization - and possible retaliation against U.S. exports. Canada's Parliamentary Secretary for International Trade, Gerald Keddy, says the mandate would violate the North American Free Trade Agreement between the United States, Canada, and Mexico.

"We do expect the Americans to live up to their international trading obligations," said Keddy.

In Ontario, where much Canadian industry is based, provincial Premier Dalton McGuinty says a trade war would benefit no one, and that the only way to get through a global recession is for nations to support one another.

U.S. business groups agree. While some labor unions have called domestic opposition to the "Buy America" provision "economic treason", the U.S. Chamber of Commerce says preserving free trade is "economic patriotism". It warns against what it sees as rising protectionist sentiment in the United States and elsewhere, noting that trade barriers contributed to the Great Depression of the 1930s.

President Obama has yet to speak in detail on trade matters since assuming office.

As a candidate, he was criticized for sending mixed messages. During the hard-fought primary season, Mr. Obama pledged to renegotiate NAFTA, and often struck populist themes on the campaign trail, as he did a year ago in Wisconsin.

"I did not just start criticizing unfair trade deals like NAFTA because I started running for president," said Barack Obama. "I do it because I see what happens to communities when factories close down and the jobs move overseas."

After securing the Democratic presidential nomination, however, Mr. Obama seemed to moderate his stance.

"I believe in trade," he said. "I think trade can grow our economy and improve the lives of ordinary people."

Since becoming president, Mr. Obama has made no mention of renegotiating NAFTA, and administration officials show no appetite for a trade war with Canada, America's largest trading partner, or any other nation. Quite the contrary, Press Secretary Gibbs says the international community must work together to fix the global economy.

But Democratic congressional proponents of "Buy America" are not backing down, making for what could be delicate negotiations between the White House and Capitol Hill as the economic recovery package moves through Congress.

Canadian officials say they hope to secure a waiver for Canadian products if the provision becomes law.

President Obama travels to Ottawa February 19.

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