BRUSSELS (Reuters) - A new European Union military pact risks shutting American companies out of defense contracts and undermining NATO, the United States has told the bloc, hinting at possible retaliation.

FILE PHOTO: NATO Secretary General Jens Stoltenberg speaks to the media during an alliance foreign minister's meeting in Washington, U.S., April 4, 2019. REUTERS/Joshua Roberts/File Photo

In a May 1 letter, the U.S. government said limitations on the involvement of non-EU countries under consideration in the European pact amounted to “poison pills”.

“It is clear that similar reciprocally imposed U.S. restrictions would not be welcomed by our European partners and allies, and we would not relish having to consider them in the future,” said the letter from two U.S. Department of Defense undersecretaries, Ellen Lord and Andrea Thompson, to the EU’s foreign affairs chief, Federica Mogherini.

Any rules limiting U.S. defense contractors’ participation would also amount to “a dramatic reversal of the last three decades of increased integration of the transatlantic defense sector,” said the letter, seen by Reuters.

Mogherini said the American concerns over the EU accord - agreed in December 2017 and aiming to fund, develop and deploy armed forces together - were unfounded.

“The European Union is and remains open to U.S. companies and equipment,” she told reporters on Tuesday, adding the European procurement market is more open than that of the United States, which is already dominant in the global weapons trade.

EU defense ministers, who discussed the rules governing the pact on Tuesday, are trying to agree legislation by June on how to allow the involvement of non-EU countries, including Britain after it leaves the bloc and the United States.

Dutch Defense Minister Ank Bijleveld said the Netherlands wanted U.S. involvement and had proposed an “emergency brake” mechanism for EU governments to trigger if they felt unease about the participation of non-EU states in a defense project.

President Donald Trump’s administration told EU governments in February last year the United States should play a central role in the European pact.

However Trump’s “America First” policy, problems for European firms breaking into the U.S. weapons market and years of overlapping defense spending by individual EU members have spurred European efforts to better integrate its armed forces.

The U.S. letter, which says Brussels should not harm damaging burgeoning EU-NATO ties, was the most vocal U.S. opposition to the EU military pact.

‘RESTRICTIVE LANGUAGE’

As France and Germany seek to develop a next-generation European fighter jet, Washington said it noticed “restrictive language” in draft texts that failed to reciprocate U.S. openness to involving European companies in its contracts.

U.S. concerns about being frozen out of the European pact, known formally as Permanent Structured Cooperation (PESCO) and its multi-billion euro defense fund, have sown confusion in Brussels, which is also the headquarters of U.S.-led NATO.

One European government official said the letter showed a “misunderstanding of how the European Union works” because the defense pact and fund were only one way to coordinate with the United States.

“They are reading language into it (the pact) that fences the European continent off from American cooperation, and that is not true,” the official said.

Unlike past attempts at European defense integration that NATO took a dim view of, NATO Secretary-General Jens Stoltenberg has publicly backed the defense pact as long as it does not lead to duplication.

Caught off guard by Russia’s 2014 annexation of Crimea and facing threats ranging from state-sponsored computer hackers to militant attacks, EU governments say the pact is justified by EU surveys that show most citizens want the bloc to provide security.

A Franco-British air campaign ran out of munitions and equipment in Libya in 2011 and Europe was again forced to turn to the United States. That was considered an enduring embarrassment for the EU, a global economic power.