The U.S. Senate voted to tone down a controversial "Buy American" provision in its huge stimulus bill Wednesday night, following international outrage over what was assailed as a policy of protectionism.
Now included in the US$819-billion stimulus package is a requirement that prevents the U.S. from violating any international trade agreements.
The vote came hours after Prime Minister Stephen Harper said he was encouraged by U.S. President Barack Obama's comments that the "Buy American" proposal was a bad idea.
Obama gave two nationally televised interviews Tuesday, where he said the protectionist measure was "a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe."
Harper read back some of Obama comments during question period in the House of Commons Wednesday.
"We are encouraged, all Canadians are encouraged, by Mr. Obama's comments," Harper said.
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.
The move could in part ban Canadian steel and iron ore imports from crossing U.S. borders.
International Trade Minister Stockwell Day said Wednesday that he also welcomed Obama's comments, but said Canada isn't in the clear until Congress officially drops the provision.
"I'm encouraged to hear what the president had to say related to his concerns about protectionism and their legislation," Day told reporters Wednesday.
"It doesn't mean we're necessarily out of the woods yet in terms of making sure we're going to be absolved of any negative effects of this legislation."
Day said his government will continue to lobby against the provisions.
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.
Liberal MPs said that the government can't stop lobbying just because of one positive statement from Obama.
"We need to know where the beef is in the president's comments. We can't stop keeping up the pressure because of one statement from the president," Liberal MP, and foreign affairs critic, Bob Rae told reporters.
Liberal finance critic John McCallum echoed his colleague's comments, but said that Obama has enough "political capital" in Washington to believe that the protectionist measure should be dropped.
"We can be very happy about that," he said.
Former U.S. ambassador to Canada David Wilkins spoke to CTV's Power Play with Tom Clark and said that the protectionist measure was added to the bills by Democrats and that Obama could use his significant influence to get his party to back down.
"Hopefully, the Democrats will see the light and see that it sends a terrible message to the rest of the world," he said.
Many analysts say the protectionist move would violate both the spirit and the law of the North America Free Trade Agreement.
Stimulus package grows
Earlier Wednesday Obama's massive stimulus package grew after money was added for medical research and car-purchase tax breaks.
In what was seen as a win for the struggling U.S. auto industry, a vote passed 71-26 Tuesday to allow most car buyers to collect an income tax deduction for sales tax paid on new cars, as well as interest on car payments.
The provision would cost $11 billion over the next 10 years and would amount to savings of roughly $1,500 on a $25,000 vehicle.
"Just as we need to get the housing market going, we need to get auto sales going," said Sen. Debbie Stabenow, a Democrat from Michigan.
The stimulus package could balloon even larger on Wednesday if a tax break for homebuyers is increased. That could happen even as both Democrats and Republicans try to remove provisions in the bill that won't stimulate economic growth.
Proposals on Wednesday, if passed, could provide some buoyancy to the floundering real-estate market.
Republican Sen. Johnny Isakson is pushing for a tax credit of up to $15,000 for everyone who purchases a home this year. The measure would also offer a $7,500 tax credit to first-time buyers.
The move would cost $18.5 billion.
The economic stimulus plan was passed by the House of Representatives last Wednesday and is currently being debated by the U.S. Senate.
With files from The Canadian Press
