EU trade chief encouraged by Obama "Buy American" move

BRUSSELS (Reuters) - The European Union's trade chief said on Wednesday she was encouraged by U.S. President Barack Obama's decision to alter "Buy American" language in an economic stimulus bill.

"I'm encouraged by the words of President Obama, he realizes -- like we do in Europe -- that we need to trade our way out of the current economic difficulties. Trade is part of the solution as it acts as a stimulus," EU Trade Commissioner Catherine Ashton told Reuters.

The U.S. Senate is debating a nearly $900 billion economic stimulus plan that would allow only U.S.-made iron, steel and manufactured goods to be used in public works projects funded by the bill.

It built on an $825 billion stimulus plan passed last week by the House of Representatives that required the use of U.S.-made iron and steel in public works projects, which angered some trading partners, notably the EU and Canada.

The governments of both the European Union and Canada, worried about lost exports to the United States, sent letters to Congress on Monday urging the provision be dropped.

Under pressure from European steel makers, Ashton -- who oversees trade policy for the 27-nation bloc -- had warned of possible action at the World Trade Organization, the global trade watchdog.

But Obama said in a television interview on Tuesday it would be a mistake when worldwide trade is declining for the United States "to start sending a message that somehow we're just looking after ourselves and not concerned with world trade."

However, a Commission spokesman said Obama's conciliatory stance would not affect Brussels' decision to offer export subsidies for EU dairy products which has also angered other trading nations.

"There is no deal. Barack Obama's decision to look at altering the Buy American clause in no way affects the EU's dairy decision," a Commission spokesman said.

WTO chief Pascal Lamy said on Sunday Brussels' move to reintroduce the subsidies did not "send the right political signal" as nations strive to avoid protectionist measures to fend off the worst economic slump since World War Two.

The Cairns Group, a coalition of 19 countries including Brazil, New Zealand, South Africa, Canada and Indonesia, have also asked the EU to reverse its decision.

(Editing by Angus MacSwan)