LOS ANGELES: Incensed that foreign countries were playing favourites in doling out billions of dollars to build airports, roads and dams, the United States became a prime cheerleader for a global agreement on government procurement.

Now, the United States stands accused of violating the very pact it worked so hard to create.

The Pentagon said last week that companies from France, Canada and other countries that did not contribute militarily to the Iraq war would be barred from bidding on $18.6 billion in US- funded reconstruction contracts. That sent officials from excluded countries to their lawbooks, looking for ways to strike back.

The European Commission, which called the Iraq-bid decision “ill-thought-out,” is considering filing a complaint with the World Trade Organization in Geneva. Under the WTO procurement pact for which the US heavily lobbied, governments in most cases must open their purchasing processes to international competition and treat domestic and foreign businesses equally.

Considering that, “I don’t think the US position is sustainable,” said Swedish Prime Minister Goran Persson.

The contrast between the Bush administration’s free-trade rhetoric and its Iraq bid policy is fueling perceptions that the US is an unreliable partner willing to undermine its international obligations. And the mushrooming ill will could lead to retaliation against US firms abroad and make it tougher to resolve thorny trade disputes.

“This could become very contentious,” said James Steinberg, a Clinton administration security official and vice-president at the Brookings Institution.

Even as foreign leaders congratulated the US for its weekend capture of Saddam Hussein, they made it clear that they remained unhappy with the policy, which freezes out longtime European allies from bidding on the Iraq contracts while allowing such nations as Tonga, Iceland and Eritrea to go after the work.

In an interview on CNN, Germany’s ambassador to the United States, Wolfgang Ischinger, said Washington was reopening old wounds.

“We want to move ahead together,” he said. “We have a stake in the ability and success of the mission in Iraq. We don’t want to sit on the fence, which is why many Germans, many Europeans are puzzled.”

On Monday, the Pentagon said it would reschedule for January a conference for companies that want to bid on 26 major contracts for rebuilding Iraq’s roads, ports and phone networks. That meeting — initially set for last week — was cancelled after the bid dispute turned ugly.

After learning of the Iraq bid decision, the Russian defence minister said that Moscow, Baghdad’s leading creditor, didn’t plan to participate in the US-led effort to erase Iraq’s $125 billion debt. France, however, said on Monday that it would work to restructure what Iraq owes it.

For his part, President Bush belittled the idea that his policy to limit bidding to 61 coalition supporters might violate America’s international obligations.

“International law? I better call my lawyer,” the president said last week. “I don’t know what you’re talking about.”

Prime Minister Tony Blair of Britain, which is a beneficiary of the US policy, defended the right of Americans to “decide how to spend their own money.”

Not everyone sees it that way. Even if Bush’s decision doesn’t breach WTO rules, it “clearly violates the spirit and the intent of our world trade commitments,” said Steven Schooner, co- director of the Government Procurement Law Programme at George Washington University.

Transatlantic trade ties were already strained. Two weeks ago, the Bush administration was forced to end steel tariffs that had triggered threats of billions of dollars in retaliatory tariffs. Last week, the European Commission approved a law to impose $4 billion in punitive tariffs on US goods if Congress doesn’t rescind a special tax break given to US exporters by March 1. A WTO panel declared the tax break illegal in 1999.

The Europeans are also gearing up to ask the WTO for permission to impose retaliatory tariffs against the United States on an anti-dumping law the WTO has said is illegal.—Dawn/The LAT-WP News Service (c) The Los Angeles Times.