Airbus tankers deal still flying.

Byline: By DAVID JONES Business Correspondent

A POTENTIAL obstacle to Airbus winning a lucrative contract for the US Air Force has been cleared after President Barack Obama backed away from protectionist measures that could have triggered a trade war.

Fears had risen last month that Airbus could be shunted out of the race for a massive pounds 27bn contract for a fleet of 179 new air-to-air refuelling tanker aircraft for the USAF if President Obama insisted on a "Buy American" clause being inserted into his wider pounds 570bn economic stimulus package.

Airbus is battling to win the deal against American rival aircraft manufacturer Boeing - a company headquartered in the former Illinois senator's home base of Chicago.

The rivals are keen to win the military work to help keep their aircraft factories busy at a time when demand for airliners is falling sharply because of the slump in global aviation.

A deal for the tanker aircraft would bring around pounds 5bn worth of work to Airbus' Broughton wingmaking factory complex in north east Wales, helping secure the jobs of thousands of workers there.

The Obama administration now says it wants to ensure that the massive stimulus bill going through Congress does not break any trade agreements. It said the measures should not include provisions that were "going to trigger a trade war".

The so-called Buy American provisions in the spending bill are favoured by politicians inMr Obama's Democratic Party,whowant to make sure American businesses receive the maximum benefit from the stimulus package.

But there has already been a strong international backlash, with complaints from major trading partners, including the European Union, who said a Buy American clause could breach World Trade Organisation (WTO) rules. Some have threatened retaliation and say the measure could kick off a trade war - plunging the global economy further into recession.

Major exporter Boeing could itself fall victim to such a tit-for-tat trade war.

Yesterday a leading US Senate Democrat was still defending a move to dilute, but not remove, the Buy American clause.

Illinois Senator Richard Durbin said US dollars should create US jobs: "The purpose of this programme is really not to create jobs in the EU. I want to create jobs in Illinois."

Europe's trade commissioner Baroness Ashton welcomed the US climb-down on protectionism and urged President Obama to work on completing a world trade deal.

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