Sarkozy's Buy European Act may be problematic, warn economists

Economists are warning that a call by French President Nicolas Sarkozy for a "Buy European Act" based on a US law that obliges use of domestically-made products in public contracts, could face legal and political challengers. 

Reuters

Sarkozy said European companies should have priority when European states award contracts, but say the measures would be difficult to sustain against countries like China, especially when Europe want China join World Trade Organisation agreements on attributing public contracts.

Measures boosting investment should be "non-protectionist", the EU Financial Services Commissioner Michel Barnier said, while adding that the European Union was working on achieving better reciprocity on investment from trading partners.

Economist Alexandre Delaigue told Liberation newspaper that the Buy American Act, created in the 1930's at the height of the Great Depression, triggered a wave of trade reprisals.

The current dust-up between the EU and China over a Brussels carbon emission tax could be a sign of problems to come.

The EU carbon tax imposed on airlines came into effect on 1 January 1, but more than two dozen countries, including China, Russia and the United States, have opposed the EU move, saying it violates international law.

Airbus parent company Eads alleged that China has blocked plane purchases by Chinese companies in reaction to a disputed European carbon tax.