U.S., Canada reach deal in "Buy American" spat

Thu Feb 4, 2010 8:00pm EST
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By Doug Palmer

WASHINGTON (Reuters) - The United States and Canada have reached a tentative deal on "Buy American" provisions that strained U.S. ties with its northern neighbor and largest trade partner, a U.S. trade official told Reuters.

The two countries are expected to formally announce the agreement on Friday. It must be cleared with stakeholders on both sides before it is signed.

Congress included a "Buy American" mandate in last year's $787 billion economic stimulus act that required public works projects to use only U.S.-made products such as steel.

The measure was touted as a way to ensure funds spent under the stimulus package would create jobs in the United States.

But critics -- including many of the largest U.S. business groups -- say it threatens jobs at U.S. companies that rely on global supply chains to manufacture goods, boosts stimulus costs and creates project delays.

At President Barack Obama's request, U.S. legislators exempted countries, including Canada, that have opened their own government procurement markets to the United States from the "Buy American" provision.

But that did not spare Canadian provinces and cities, which are not party to a government procurement pact with the United States, even though Canada's federal government is.

After Canadian companies were shut out of initial U.S. stimulus contracts, Canadian cities threatened last June to retaliate by banning U.S. companies from their projects.   Continued...