Obama dilutes 'Buy American' rules for Canada

Prime Minister Stephen Harper is greeted by U.S. President Barack Obama as the G20 leaders arrive to a working dinner reception at the Phipps Conservatory on the opening day of the G20 Summit in Pittsburgh, Thursday, Sept. 24, 2009. (Sean Kilpatrick / THE CANADIAN PRESS)

Canada and the United States have reached a breakthrough on averting protectionist "Buy American" trade policies, CTV News has learned.

According to sources, U.S. President Barack Obama has used his executive powers to bypass Congressional rules that block Canadian firms from tapping in to U.S. stimulus money.

CTV's Ottawa Bureau Chief Robert Fife said the deal will be announced Friday at 8:00 a.m. EST. It will allow Canadian firms a chance at what's left of the $900 billion in stimulus spending that Washington announced last year.

Canadian firms will be exempted from "Buy American" restrictions under seven of the stimulus programs, in 37 U.S. states that signed on to the World Trade Organization. Those states will be able to use American stimulus money to buy Canadian manufactured goods.

However, most of the American stimulus money has been spent, and the deal doesn't pertain to future stimulus programs.

In return, U.S. firms in the 37 states will be able to bid on infrastructure projects in Canada.

The new provisions were made by U.S. Senators on Wednesday night, Fife said, by attaching a clause to Washington's massive stimulus program.

The policy shift was due to complaints from trading partners like Canada, the European Union and 50 other countries who were concerned that protectionist measures would cripple global trade, Fife reported.

Indications of the deal came as U.S. officials announced plans to double exports by 2015, a plan seemingly at odds with erecting trade barriers against imports.

"The United States is committed to a rules-based trading system where the American people -- and the Congress -- can feel confident that when we sign an agreement that gives foreign countries the privilege of free and fair access to our domestic market, we are treated the same," U.S. Commerce Secretary Gary Locke said in a statement Thursday.

"Buy American" has become a huge issue between the U.S. and Canada, as it would have kept Canadian-made components out of the U.S. economy.

Canadian politicians and officials in the U.S. have undertaken a diplomatic full-court press to loosen any potential trade barriers, arguing that the two nations' economies are too closely linked to be separated by policy.

While some quarters in the U.S. hoped that "Buy American" clauses would make domestic economic recovery a priority, the U.S. Chamber of Commerce and other key players have raised issue with the plan, saying it could further damage the economy.

Fife said that the delayed announcement may be due to a different approach in Canada and the U.S.

While Canadian politicians will likely want to trumpet the deal, some U.S. Democrats –- particularly those with union support -- could be hurt by the announcement, said Fife.

He added that the agreement is a precedent-setting for Ottawa, as it will prevent Canadian industry from being lumped in with other trading countries like China in the future.

China and the U.S. have been locked in disagreements over a burgeoning trade surplus which favours the rising Asian power.

Fife noted that the protectionist policies were initially intended to block China from benefiting from federal projects, but Canada was also caught up.

However, Liberal MP Dominic Leblanc said that any agreement will have to be looked at closely to ensure that it will deliver at the local level.

Leblanc used the example of a company in his New Brunswick riding trying to bid on a public works project in Maine, which would be administered by the local government and not by Washington.

"The American government machinery is so amorphous, that a deal signed with the administration in Washington is a long way away from applying to the municipal government in Cleveland, or in Bangor, Maine," he said.