Buy American bill can lead to 'trade wars': Obama

The controversial 'Buy American' bill, which will allow companies to buy only US-manufactured steel and iron, sends a protectionist message that the United States can't afford at this point of time, President Barack Obama has said.

Despite being promoted by several US lawmakers, the bill is being opposed by the US Chamber of Commerce -- the largest trade representative body of the country.

The Chamber, which has launched a campaign against the bill, argues that such a provision would result in retaliatory action by other countries and that such an act would be economically disadvantageous to the US economy.

'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 told Fox News in an interview.

'I think it would be a mistake... at a time when worldwide trade is declining, for us to start sending a message that somehow we're just looking after ourselves and (are) not concerned with world trade,' Obama said.

Obama has also warned the Buy American clause could ignite "trade wars" and lead to further slump in international trade. "That is a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe," Obama told ABC News in an interview. "I think we need to make sure that any provisions that are in there are not going to trigger a trade war."

The Buy American bill is part of the $819 billion mega stimulus package passed by the US House of Representatives last week. It stipulates that companies receiving federal money should not buy foreign steel and iron.

Several countries in the world have already expressed concern over the bill, including Canada, Australia and Europe. Canada, in fact, has lodged a protest with US ambassador over the legislation.

"This is obviously a serious matter and a serious concern to us," Canadian Parliamentarian Stephen Harper said. "We will be having these discussions with our friends in the United States, and we expect the United States to respect its international obligations."

The issue is expected to come up for discussion when Obama makes his first overseas trip to Canada later this month.

However, in an interview last week, Vice President Joe Biden had said: "I don't view (the Buy American provisions) as some of the pure free-traders view it, as a harbinger of protectionism."