VANCOUVER - Canada's international trade minister is warning Canadian businesses not to breathe easy just yet that Buy-American provisions in the U.S. economic stimulus bill will be watered down.
Stockwell Day told the Vancouver Board of Trade that while the message from Canada and other U.S. trading partners about sparking a trade war are getting through, they must keep the pressure on.
The stimulus package containing $780 billion in federal money, mainly for infrastructure projects, requires recipients to source materials from U.S.-based companies.
A Buy-American requirement covering federally funded state and local projects has been in place since 1933 and was strengthened in 1982, Day told the business group Friday.
Canada is not expecting Washington to roll those back, he said.
"But what we are saying is, stop, it's gone far enough," Day told reporters later. "We don't want any more provisions for protectionist activity because it will trigger this (a retaliatory trade war)."
The U.S. House of Representatives inserted the Buy American provision in the stimulus bill earlier this week. The version awaiting passage in the U.S. Senate waters down the requirement, saying it must conform to the United States' international treaty obligations.
A final version that reconciles the House and Senate bills must still be worked out.
Canada mounted a vigorous diplomatic campaign to drop the provision, which Ottawa worries will trigger challenges under NAFTA and strengthen opposition calls for retaliatory measures.
Much of the stimulus money will be spent at the state and local level, which are covered by the decades-old Buy-American requirement. Despite that, Day said international protests to the bill are not an over-reaction.
"It is a very dangerous trend to see any broadening of protectionist activity with any country," he said.
He said G20 leaders were clear in a declaration from Washington in November, "that there should be a stand-still in terms of any expansion of protectionist impulses."
Day said while President Barack Obama's campaign had protectionist overtones, Ottawa is comforted by the fact he appears to have stocked his economic brain trust with Bill Clinton-era advisers "who were clear-thinking, pragmatic and tended to be what we would call small-c conservative thinkers on economic issues."
Day told the business crowd that Ottawa is trying to mitigate the effects of the international slump by aggressively pursuing free-trade agreements in Latin America and freer sectoral trade in places like China and India.
Day has a scheduled trade mission to China, where he said he will announce the opening of six new Canadian trade offices.
Canada is also working through obstacles to obtain long-delayed, potentially lucrative approved-destination status for Chinese tourists, he said.
