Prime Minister Stephen Harper plans to lobby the U.S. over protectionist legislation which calls for a "Buy America" policy as the country prepares for a series of sweeping infrastructure projects.
The U.S. bill, which Congress appended Wednesday onto President Barack Obama's US$819 billion stimulus plan, has sparked fears that Canada's steel exports could be shut out of the U.S. recovery plan.
Canada's steel industry exports about $7 billion every year, with a large chunk of that heading to the U.S.
The bill essentially aims to ban foreign iron and steel used in any building projects attached to the massive stimulus plan.
Harper told the House of Commons Thursday that the protectionist legislation could contravene the North American Free Trade Agreement and that it backtracks on America's "international obligations" to break down global trade barriers.
"I spoke to our ambassador about it yesterday and I know that countries around the world are expressing grave concern about some of these measures that go against not just the obligations of the United States, but frankly the spirit of our G20 discussions," Harper said Thursday in Parliament.
"We will be having these discussions with our friends in the United States and we expect the United States to respect its international obligations."
Harper was responding to a question from Liberal Leader Michael Igantieff, who said in the House of Commons that Canada was in danger of losing jobs to U.S. protectionist policies.
Ignatieff focused on language in the legislation that stipulated iron and steel used for U.S. projects must be made in America.
The trade barriers, if passed with the stimulus bill, could become a major bone of contention between the Harper government and the new Obama administration. Obama will make his first foreign visit as president when he comes to Ottawa on Feb. 19.
International Trade Minister Stockwell Day said the bill has the power to "shut out" Canada and other countries from the U.S. market and echoes the economically destructive policies enacted by the U.S. during the Great Depression.
Day told CTV's On The Hill that the Canadian government will be "vigorous" in lobbying the U.S. to change the policy and he added that U.S. lawmakers should give it a "sober, second thought.
"Protectionist measures wind up hurting economies," said Day.
Joseph D'Cruz, an expert at the University of Toronto's Rothman School of Business, said the protectionist rhetoric is "very worrying" since so much of Canada's exports head south to the U.S.
D'Cruz told CTV Newsnet that it's up to Ottawa to remind the U.S. that free trade is the best policy for both countries.
"This is what Mr. Harper has to do: he has to ensure that Obama continues to believe that Canada is a good friend, and we need to be treated differently than the rest of the world."
Still, Canada was exempted from the previous U.S. restrictions on foreign-forged steel and some analysts have said the proposed U.S. measures would take aim at emerging markets like China rather than close allies like Canada.
'Thin edge of the wedge'
Perrin Beatty, chief executive of the Canadian Chamber of Commerce, said that the U.S. language sets a dangerous precedent for trade relations at exactly the wrong time.
While the NDP has said that Canada should hit back with its own "Canada first" policy, Beatty said that retaliating would be a destructive choice of action.
"It would be impossible to think of a more foolish and damaging thing to do than to provoke a trade war when we're in a major recession," said Beatty.
Though NAFTA has a legal apparatus to resolve such trade disputes, settling them is often a lengthy process and the iron and steel provisions could spread to other industries.
"Steel is the thin edge of the wedge," said Beatty.
With a report from CTV's Roger Smith
