Canada is launching a full court press in the U.S. Congress on Tuesday against the Buy American provisions in the federal stimulus spending law.
Trade Minister Stockwell Day says the government has called in its trade commissioners from across the United States to lobby congressmen and Senators personally on Capitol Hill.
The action is part of the ongoing campaign by the government to get the U.S. government to drop Buy America provisions that prompt U.S. municipalities and states to use U.S. steel and manufacturing exclusively for projects paid by U.S. taxpayers.
The provisions are believed not to contravene international trade agreements because states and municipalities are sub-national jurisdictions and not subject to trade deals.
Mr. Day says the lobbying campaign aims to show that the U.S. economy will be hurt by the Buy America provisions.
About seven million U.S. jobs are tied to two-way trade between the U.S. and Canada.
Earlier on Monday, Finance Minister Jim Flaherty warned that fighting protectionist Buy American measures with similar actions in Canada is counterproductive.
"This is not the kind of action that helps industry in Canada," he said at an appearance in Montreal Monday morning. "We need to talk to the Americans. We need to have a discussion with the Americans."
Mr. Flaherty was responding to a vote over the weekend by delegates at the Federation of Canadian Municipalities, narrowly passing a resolution that would potentially shut out U.S. bidders from city contracts.
"Protectionism is bad for Canada and bad for the United States. It's bad for cities. It's bad for provinces. It's bad for American states," he told reporters.
Referring to the G20 discussions last November about the dangers of protectionism, as well as talks in London in April among finance ministers, he said: "We are all against protectionism. If you start taking protectionist steps, then you spiral down into a depression, as happened in the 1930s, so this is to be avoided."
He added it's crucial that Canada follow through on top-level talks with U.S. government and White House officials to ensure that "middle echelon people are not creating protectionist barriers in the United States."
Asked what the Canadian municipalities' resolution indicates about the gravity of the situation, he replied: "I think it's a genuine concern on the part of the mayors that they want to avoid protectionism."
Free trade applies to Canada and the U.S., but "you can get issues" at the municipal and state levels, he said.
Asked whether he feels the move by the Canadian mayors is dangerous, he said: "I don't think it's dangerous. It expresses a concern that is felt by many of the mayors."
Mr. Flaherty also expressed "cautious optimism that a global economic recovery may not be far behind" emerging signs that the credit crunch is easing.
There are positive signs that Canadians are spending again, he said, after announcing at the head office of the Business Development Bank that all of the measures in the federal government's economic action plan to improve access to financing are in place and operational.
With files from Globe and Mail reporter Bertrand Marotte in Montreal