EU attacks Obama 'buy American' plan as new Iron Curtain

The US president's plan for a "Buy American" rule in his £825billion economic stimulus package was condemned as a dangerous retreat into protectionism.

The clause decrees that only American-made iron, steel and goods can be bought for projects funded by the recovery package.

A European Commission spokesman dubbed it the "worst possible signal" that the new presidency could give to the world.

Downing Street was less outspoken but the Prime Minister's spokesman said: "Obviously we would not support protectionist measures."

Gordon Brown has made a series of speeches in recent days warning urgently that a failure to uphold free trade risks turning the world recession into a deep slump.

London Mayor Boris Johnson joined in the row, saying that Mr Obama was making a major mistake under pressure.

"Remember what happened in the Thirties, when they had exactly the same instinctive and panic-stricken reaction, and a recession was turned into a slump," the Mayor warned on his blog.

"Remember the old truth, that when goods, people and services are not allowed to cross borders, soldiers eventually force the way.

"We need Obama to drop the Buy American clauses of his package, because in the end - no matter how seductive the idea may be - a refusal to compete and a refusal to be open will be no good for America and no good for the world."

He urged a new bid to complete the Doha trade talks and release a "pent up" rush of commerce.

The EU ambassador in Washington warned that Mr Obama's clause could backfire by encouraging other countries to impose tariffs and barriers to protect their own domestic goods and jobs from US competition. In addition, the EU and Canada are to make a formal complaint to the World Trade Organisation.

British MEPs have warned of "a new economic iron curtain" being drawn across Europe. The clause "sends a terrible protectionist signal to the rest of the world, and particularly the EU", said Syed Kamall, the Conservative trade spokesman in the European Parliament.

The White House has said it is reviewing the Buy America part of the stimulus Bill, although vice-president Joe Biden said last week that it was legitimate to have some portion of it in the final measure.

Mr Obama promised to protect heavy industries during his election campaign. The pledge was popular with white working class voters who had been sceptical about him until then.