In defending its decision to bar France, Germany and Russia from Iraq's reconstruction contracts, the Bush administration is asserting that the US-led and funded Coalition Provisional Authority (CPA) that runs Iraq is not bound by US free-trade commitments.
The administration has cast the CPA as a multinational agency, and not a US government entity that signed onto the WTO's rules. But trade experts say it is unclear whether the WTO would agree since the authority's funding comes almost exclusively from the US.
European Commission officials say they are studying the 26 contracts at stake to determine whether the restrictions violate the WTO's government procurement agreement.
Bush scoffed at a question seeking his reaction to German Chancellor Gerhard Schroeder's statement on Thursday that international law must apply to the awarding of the contracts.
"International law? I better call my lawyer," Bush joked.
Bush defended his decision on Thursday, saying: "It's very simple. Our people risked their lives. Friendly coalition folks risked their lives, and therefore the contracting is going to reflect that, and that's what the US taxpayers expect."
But the White House indicated some flexibility in the decision to bar opponents of the Iraq war from competing for the contracts, and one such opponent, outgoing Canadian Prime Minister Jean Chretien, said Bush told him in a farewell conversation "not to worry."
White House spokesman Scott McClellan said "lines of communications" would be open on the matter. Former Secretary of State James Baker departs on Monday on a European tour to discuss reducing Iraq's debt.
Baker is going on what the White House called an initial fact-finding mission to France, Germany and Russia as well as war backers Italy and Britain to seek a restructuring of Iraq's US$120 billion foreign debt.
"If countries want to join in our efforts in Iraq and the efforts of the Iraqi people there, then circumstances can change, and we'll make that very clear," said McClellan, when asked repeatedly whether countries that committed to help erase Iraqi debt could qualify for US-funded contracts.
"If these countries want to participate in helping the world become more secure, by enabling Iraq to emerge as a free and peaceful country, one way to contribute is through debt restructuring," Bush said.
Administration officials have yet to spell out how they would defend against a possible WTO complaint by Europe -- except to say it would not use a national security exemption.
But Deputy Defense Secretary Paul Wolfowitz said in a notice about the contracts: "It is necessary for the protection of the essential security interests of the United States to limit competition for the prime contracts of these procurements to companies from the United States, Iraq, coalition partners and force-contributing nations."
US trade officials say they would make the case that the Coalition Provisional Authority is "not covered by the WTO."
Though it is run by US officials and funded by US taxpayers, experts say the administration would assert the CPA is technically not a "US entity" but rather a multilateral organization composed of dozens of member countries -- what Bush famously dubbed a "coalition of the willing."
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