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OTTAWA (Reuters) - The Canadian government is worried that towns and cities could start introducing "Buy Canadian" policies in response to increased U.S. protectionism, Trade Minister Stockwell Day said on Wednesday.
A "Buy American" provision in the U.S. economic stimulus package passed by Congress in February says public works projects should use iron, steel and other goods made in the United States.
Ottawa says Canadian companies are being discriminated against by U.S. state and municipal governments on some water and sewage treatment projects funded by the bill.
Day said the Federation of Canadian Municipalities, which is due to hold its annual general meeting from June 5 to 8, would discuss a proposal to shut out companies from nations that impose trade restrictions on Canadian firms.
"I understand that reaction. I'm also very concerned about that reaction," Day said in a speech, adding that both countries would be hurt by increased protectionism.
Canada sends about 75 percent of all its exports to the United States and could be economically crippled by a serious wave of U.S. protectionism.
"If one country starts to build protectionist barriers that hurt businesses in another country, there will be an impulse to retaliate, and I would like to see this resolved at the executive level in the United States," Day later told reporters.
Speaking later in the day, Canadian Prime Minister Stephen Harper told reporters in Quebec that the "Buy American" policies of certain state and local governments was "really problematic (and) is part of the increasing protectionism ... that we must avoid to ensure a global recovery".
The New York Times said on Wednesday that the "Buy American" clause was "a terrible idea" that could ultimately cost U.S. jobs.
"Industries like water and waste water treatment are highly integrated with their Canadian counterparts, with exports to Canada in 2008 worth $6.2 billion and imports worth $4 billion," the newspaper noted in its lead editorial.
Reporting by David Ljunggren; editing by Peter Galloway