Canadians Politely Annoyed by Obama's 'Buy American' Plan

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Trucks cross the U.S. and Canadian border.

Canada is preparing to launch its toughest offensive to date against the Buy-American provision in President Barrack Obama's $787-billion stimulus package. But protectionist sentiment in the U.S. will make it difficult for Prime Minister Stephen Harper to make much headway when the two leaders meet next week at a North-American summit in Guadalajara, Mexico, even with the help of a new bargaining chip.

Harper and his Trade Minister Stockwell Day scored an important victory Friday when provincial premiers finally agreed not to retaliate. "We've made it clear we won't ask the U.S. for anything we are not willing to give the U.S.," said British Columbia Premier Gordon Campbell, who attended a meeting of premiers held in Regina, Sask. this week.

For months Canada's premiers, who are that country's equivalent of state governors, have spoken out forcefully against the Buy-American clause, which requires that stimulus-financed public works projects use American materials. But until now they have been unable to agree on reciprocity. Since most government procurement happens at the provincial and municipal levels, this lack of consensus has allowed Washington to easily deflect Ottawa's efforts to secure an exemption from its Buy-American position.

Failure to make a deal on procurement has already cost Canadian companies billions of dollars, and spread pain far beyond the stimulus business. "Buy American has created a trade chill," says Jayson Myers, president of Canadian Manufacturers & Exporters, the country's largest trade and industry association, noting some U.S. companies are dropping Canadian suppliers to avoid filing waivers that prove they are playing by the new rules.

Last year Canada exported $4 billion worth of pipes, pumps and filters used in U.S. municipal water systems. This year a big chunk of that business is at risk of being lost, says Myers. Further, with tightly integrated supply chains that cross borders, any impediment to free trade is likely to do more harm than good to the U.S.-Canada partnership. "Millions of jobs are at stake on both sides of the border," says B.C. Premier Campbell.

Harper is sure to do his best to leverage warm personal relations with Obama, established in Ottawa earlier this year on the president's first official state visit, when the pair sit down in Mexico in a few days. Personal chemistry is unlikely to be enough to overcome protectionist feelings in Congress, but that goodwill gesture from Canada's premiers may help pave the way for a procurement agreement down the road.