UPDATE 1-World Bank's Zoellick slams trade retaliation

* Says tit-for-tat retaliation serves nobody's interests

* Says China 2009 economic growth may surpass 6.5 pct (Adds quotes, China details)

OTTAWA June 9 (Reuters) - World Bank President Robert Zoellick criticized U.S. "Buy American" policies on Tuesday and said tit-for-tat trade battles serve nobody's interest.

"(The) danger in this environment is that you start to get tit-for-tat retaliation and it serves nobody's interests," Zoellick told reporters.

Canadian mayors have threatened to retaliate against the "Buy American" movement -- a provision in the U.S. economic stimulus package that says public works projects should use iron, steel and other goods made in the United States.

Zoellick said he supported the Canadian government's approach of lobbying U.S. lawmakers to open up other regional markets, rather than hitting back with restrictions of its own.

On the global economy, Zoellick said it was in everyone's interest to promote global trade financing and boost capital flows because recovery is dependent on increased demand across the developing world, particularly China.

But he said China's growth outlook was uncertain. The country's massive stimulus plan has given the economy a surprising lift in the first quarter and Zoellick said he "would not be surprised" if growth surpassed the World Bank's 2009 growth projection of 6.5 percent.

"It's still not clear whether the private sector in China will also be able to re-engage to the same degree, so there are question marks in the case of China about the growth," he said. (Reporting by Louise Egan and Randall Palmer; editing by Rob Wilson)