U.S. senators went home Thursday evening with no deal on the massive US$819 billion stimulus bill as pleas from trading partners to strike down the controversial "Buy American" provision went unheard.
Canada and other global trading partners were worried the controversial "Buy American" portion bill would cripple cross-border trade, especially Canadian iron ore and steel exports.
The bill now includes a requirement that international trade agreements not be violated by the provision.
U.S. politicians, who want the full economic impact of the package to land in their backyards, have remained unmoved by global pleas to completely remove the controversial provision.
"The purpose of this program, asking taxpayers to sacrifice, is really not to create jobs in the European Union," Senator Richard Durbin (D-Ill.), the No. 2 ranking Democrat in the Senate, said.
"I want to create jobs in Illinois."
Moderates in the Senate worked on removing tens of billions of dollars out of the bill Thursday, as the price of the bill has ballooned to over $900 billion at some points in the day.
President Barack Obama is encouraging senators to work past the rising partisan tensions and get the bill down to a more manageable $800 billion as soon as possible.
"This is the moment for leadership that matches the great test of our time," Obama said Thursday night.
Day encouraged
International Trade Minister Stockwell Day says the U.S. senate decision to soften a controversial trade provision is good news -- but Canada is not out of the woods yet.
Day said the worrisome measure "still has a pulse" because it must still be sent back for reconciliation between the senate and Congress, which already passed the bill last week.
Though the senate voted to tone down the provision, it didn't go as far as Republican Sen. John McCain wanted. He was pushing for a full withdrawal of the proposal.
As a result, McCain found himself allied with his formal opponent in the presidential race.
Day said the federal government has been waging a 24-hour "full court press" to try to ensure the all-important Canada-U.S. trade relationship is protected.
Obama warned senators earlier this week that protectionist measures could spark a trade war and would be a mistake at a time when much of the world is suffering from the recession.
Canada had complained bitterly that the measure violated both the spirit and the law of the North American Free Trade Agreement.
McCain wanted the provision removed from the bill entirely, telling Fox News that passing such a measure would be akin to "ignoring the lessons of history ... we can't have this kind of protectionism. It hasn't worked in the past. It won't work now."
It is unclear how the new requirement will play out once the stimulus package is passed, however, since some U.S. lawmakers who backed the original Buy American measure felt it was in keeping with NAFTA's trade regulations.
The Conservatives were taken aback when the protectionist measure was announced, and have been put of the defensive by opposition parties. Since then, Tories have done their best to maintain hopes that the bill would be altered before being passed.
Obama and Harper are to meet in person on Feb. 19 in Ottawa. The trade provision, along with the economy, is expected to be at the top of the agenda.
"We're actually hoping, and I hope not unrealistically, to have this resolved before he gets here," Day said in regards to Obama's visit.
Day added that while Prime Minister Stephen Harper's instructions to ministry officials are: "Free trade deals are us," Canada must still protect its own interests.
"We try and stay away from retaliatory trade practice and building trade walls, but we do have mechanisms in place if we feel that Canadian product is facing an unfair or subsidized disadvantage," Day said. "We are free traders, but we believe in referees."
On Wednesday, Harper and Mexican President Felipe Calderon spoke over the phone about the "Buy American" clause -- and agreed to work together to fend off U.S. protectionism.
