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MPs have voted down a bill that would have made it illegal for some of Canada's biggest companies to hire so-called scab workers during labour disputes.

The private member's bill by Richard Nadeau of the Bloc Quebecois was defeated 177-122 on Wednesday.

The Conservatives and a majority of Liberal MPs opposed the bill - which would only have affected federally regulated employers - while the Bloc and the NDP supported it.

Most Liberals backed the bill when it passed second reading last fall, but that changed when Liberal Leader Stephane Dion spoke out against it in caucus Wednesday.

Mr. Dion said he supported the bill in principle but that it was too flawed, although he freed his MPs to vote their conscience.

"The bill does not clarify enough the situation of the essential workers," he said. "If there is a strike in a port, an airport, bank, the effect on the Canadian economy would be very huge."

That's the message Canada's business community had been proclaiming for several months against what they called the "dangerous legislation."

Over the last four months, business groups placed ads in newspapers and launched a letter-writing campaign to MPs warning about the ramifications of the bill, saying it would shut down federally regulated industries like railroads, banks, and communications firms during a strike or lockout.

Labour unions were just as vociferous. At a press conference before the vote, Canadian Labour Congress president Ken Georgetti urged MPs to "bring balance and fairness in labour relations," scoffing at the "campaign of fear" waged by business.

"It's a shame, it's a shame," said Bloc Leader Gilles Duceppe, anticipating a negative vote. "We were going to win for the first time, but Dion was influenced by big business."

Mr. Dion said his party would bring forward its own bill that would make provisions for essential services.

But Mike Murphy, vice-president of policy for the Canadian Chamber of Commerce, said it would almost be impossible to draft a bill that would not leave the Canadian economy vulnerable to major disruptions.

"Federally regulated companies do tend to be larger institutions, but these are enablers for all the rest of the economic activity in the country, so it doesn't matter what size of company you are, you're going to be affected," he said.

Small businesses lost millions of dollars during the two-week CN strike this winter because they could not get the supplies they needed or ship goods, said Garth Whyte of the Canadian Federation of Independent Business.

"And what message will Canada be sending out internationally if we can't guarantee surety of supply or transportation of goods?" he asked.

But labour dismissed "apocalyptic predictions" by business, noting that Quebec and British Columbia have had similar legislation in place for years without major disruptions.

Henri Masse, president of the Quebec Federation of Labour, said no business ever closed down because of a strike in the province.

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