AUSTRALIA has reacted with alarm to unprecedented and unexpected "buy American steel" provisions of the new Obama Government's US stimulus package.
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International anxiety that the financial crisis was poised to spark a trade war grew when it was revealed that Barack Obama's $US819 billion package to stimulate the US economy included protection mechanisms for its steel industry.
The Trade Minister, Simon Crean, last night described the "buy American" provisions of the stimulus package as "very worrying" and said he would raise his concerns with the acting US Trade representative, Peter Allgeier, in Davos.
"On the face of it, it looks like it contravenes commitments made to the World Trade Organisation," Mr Crean said last night. "We are examining the decision very closely in the light of our own US-Australia free trade agreement."
Fears of protectionism have been a theme of the World Economic Forum in Switzerland after the US Treasury Secretary, Timothy Geithner, accused China of manipulating its currency by artificially holding down its value against the US dollar.
The Chinese Premier, Wen Jiabao, delivered an upbeat message to the forum on its first day, saying China and the US had to maintain strong links and that both would lose through confrontation. Mr Wen, who said China was already seeing signs of an economic recovery at the end of last year, argued that winter was gone and "spring is around the corner".
Mr Crean said yesterday the US needed to keep in mind its international obligations, including bilateral trade agreements.
Government leaders, including the British Prime Minister, Gordon Brown, the United Nations Secretary-General, Ban Ki-moon, and corporate leaders have argued strongly that protectionism is dangerous and that the US committed to the agreements at the G20 nations meeting in Washington in November.
At the time the US said it would not introduce protectionist policies because this would counter the spirit of global unity.
Trade analysts attacked the US steel measure, saying it would be illegal under commitments to the World Trade Organisation by the US. The plan in effect demands that US steel is used in major building projects under the stimulus package.
US business groups have also attacked the measure, arguing it could result in US companies being shut out of stimulus programs in Australia, China, Germany, Britain and France.
The stimulus package was passed by the House of Representatives by 244 votes to 188.
