WASHINGTON, DC: The controversial 'Buy American' clause in the US government's economic recovery package has been toned-down by the Senate after the European Commission stressed it would not stand idly by if protectionist measures were introduced by the US. 

However, the issue appears to have been defused after the US Senate voted Wednesday to soften stipulations that only US iron, steel and manufactured goods could be used in projects funded by the bill.

The legislation  has now been amended to comply with international trade agreements with Canada and the European Union.

Meantime, the White House line is that it supports giving preference to domestic manufacturers in public works programmes - but only if it does not violate existing trade agreements.

"I think we need to make sure that any provisions that are in there are not going to trigger a trade war," President Obama told TV network ABC.

Data sourced from BBC Online (UK); additional content by WARC staff