European Union 1, Obama 0

Barack Obama is backing off a "Buy American" provision in the economic stimulus Democratic frivolous spending bill in a bid to avert a trade war threatened by European Union leaders.

Barack Obama is expected to water down "Buy American" plans in his economic stimulus package after European diplomats privately threatened to launch a trade war in retaliation.

The White House has promised to review the protectionist proposals, passed last week by Democratic allies in the House of Representatives, which would ban the use of non-American steel in the $800 billion of construction projects.

Obama officials are under pressure from what European diplomats in Washington describe as a discreet but outspoken campaign of "quiet fury" from America's closest allies.

The Smoot-Hawley Act of 1930 deepened and lengthened a global recession into a world-wide depression. The act raised tariffs on some 20,000 imported goods and touched off retaliatory tariffs on American goods in other countries. While the "Buy American" provisions in the spendig bill fall short of Smoot-Hawley, the Senate version goes further than just the steel and iron mentioned in the Telegraph article. From the Washington Post (may require login):

The provision, passed by the House on Wednesday, would mostly bar foreign steel and iron from the infrastructure projects laid out in the stimulus package. A Senate version still being considered goes further, requiring, with few exceptions, that all stimulus-funded projects use only American-made equipment and goods.

This spending bill is truly a dangerous piece of legislation. If passed, it's a massive steaming pile of crap which won't be cleaned up any time soon.