The top Senate proponent of "Buy American" requirements in the stimulus package said today he is willing to rework the provision, following concerns expressed Tuesday by President Obama. "I have said all along that I am not interested in starting a trade war, and the Buy American provisions in the economic recovery bill would not do that," Sen. Byron Dorgan, D-N.D., said in a statement. "I am working with the White House and other Senate colleagues to ensure the Buy American provision is crafted in a way that would not violate our international trade agreements."

Canadian and European Union officials in recent days have said retaliation may be possible. In interviews on ABC and Fox News Tuesday, Obama appeared to hedge support for language requiring that U.S.-made materials are used in infrastructure projects. "I agree that we can't send a protectionist message. I want to see what kind of language we can work on this issue," Obama said on Fox. "I think it would be a mistake, though, at a time when worldwide trade is declining for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade." On ABC, Obama added, "I think we need to make sure that any provisions that are in there are not going to trigger a trade war." The comments cheered opponents of the stimulus provisions, particularly the more expansive Senate language that would apply to all manufactured goods. One hundred trade associations and companies, including heavy-hitters like General Electric Co., Lockheed Martin Corp. and Microsoft Corp., wrote to Senate leaders Tuesday urging the provision be stripped. Sen. John McCain, R-Ariz., has an amendment to strike it.

Domestic steel and specility metals manufactures support the "Buy American" language. Scott Paul, executive director of the Alliance for American Manufacturing, in a conference call today said Obama's comments were not inconsistent with prior statements on trade policy. Obama "wants to make sure the economic recovery legislation is consistant with our international obligations and is not a new form of protectionism," Paul said. But Paul argued similar restrictions have been on the books for 70 years and never subjected to international challenge. "Our hope is that they accept the Senate language, but if there's clarifying language that needs to be added, I think that's fine," Paul said. "In terms of retaliation, there's been a lot of hot air that's been blowing around. I think at the end of the day you will not see any retaliation." According to a memo sent to House and Senate staffers by a trade law firm, "there is no basis for claiming" the provisions would violate international trade rules. The president could waive "Buy American" language for imported materials from 39 countries that are signatories to the World Trade Organization government procurement agreement; 16 countries with bilateral or multilateral free trade pacts with the United States; and well as Caribbean Basin countries and the 33 least-developed nations as determined by USTR, the memo states.