China commentary blasts "Buy American" plan

BEIJING (Reuters) - China's official Xinhua news agency slammed the "Buy American" requirement of the U.S. economic stimulus package, saying in a commentary that trade protectionism is a "poison" that will harm poor countries.

The remarks are the first indication of the reaction in Beijing to the U.S. measure, which has been criticized by U.S. business groups that fear it could invite other countries to keep American goods out of their own stimulus programs.

"History and economic theory show that in facing a financial crisis, trade protectionism is not a way out, but rather could become just the poison that worsens global economic hardships," Xinhua said in the overnight commentary, issued in response to the passing of the U.S. plan.

The U.S. Congress approved the $787 billion plan to jump-start the world's biggest economy on Friday, stipulating that public works and building projects funded by the stimulus use only U.S.-made goods, including iron and steel.

The plan does require that procurement be carried out in a manner consistent with U.S. obligations under multilateral and bilateral trade pacts -- potentially giving Canada, the European Union, Japan and some other countries the chance to benefit from the additional spending.

But countries such as China, India, Brazil and Russia, which are not members of an international government procurement agreement, would be shut out.

Xinhua cited the example of the Great Depression of the 1930s as showing that moves to protect domestic markets, and ensuing trade wars, could have only negative effects on the global economy.

"Trade protectionism will also cause catastrophic effects to some poor countries, making the current financial crisis one of a humanitarian crisis as well," it said.

(Reporting by Jason Subler, Editing by Dean Yates)