The Bush administration is asserting that the American-led Authority that runs Iraq is not bound by US free trade commitments as it defends its decision to bar France, Germany and Russia from winning reconstruction contracts in Iraq.
The administration has cast the authority as a multinational agency - not a US government entity that signed onto the World Trade Organization's (WTO) rules. But trade experts say it is unclear whether the WTO would agree since the authority's funding comes almost exclusively from the United States.
European Commission officials say they are studying the 26 contracts at stake to determine whether the restrictions violate the WTO's government procurement agreement.
"International law? I better call my lawyer," Mr Bush joked with reporters when asked about the legal merits.
Mr Bush, who ran for office as a free-trade advocate, 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."
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.
Deputy Defence Secretary Paul Wolfowitz said: "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."
Although it is run by American officials and funded by US taxpayers, experts say the US administration would assert that the authority is technically not a "US entity" but rather a multilateral organisation composed of dozens of member countries - what Mr Bush dubbed a "coalition of the willing."
Whereas the United States agreed to follow the procurement rules, the Provisional Coalition Authority never did, allowing it to ignore the agreement, which bans governments from discriminating against foreign companies based on their nationality.
If that legal avenue fails, the administration could use loopholes and exemptions in the WTO rules to classify reconstruction contracts as foreign aid. Food aid from the US Agency for International Development is already exempted.