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Canadian mayor warns small town America against protectionism

His small town paid millions for two shiny, red, American-built fire trucks, but now a local Canadian firm is being excluded from bidding on lucrative bridge building projects in the United States.

world Updated: Oct 15, 2009 08:00 IST

His small town paid millions for two shiny, red, American-built fire trucks, but now a local Canadian firm is being excluded from bidding on lucrative bridge building projects in the United States.

So Victor Fedeli of North Bay, Ontario went "mayor to mayor" to try to drum up support to end a Buy American provision of the US federal stimulus package responsible for the trade lopsidedness between the world's two largest trading partners.

Three US mayors agreed to help.

The Federation of Canadian Municipalities on Wednesday asked its 1,775 members to write to mayors across the United States asking the same.

Fedeli wrote to the mayors of DeKalb, Illinois, Cortland, New York, and Brandon, South Dakota urging them not to support the Buy American provision.

The measure, he said, risked hurting their local economies and his own community of 54,000 on the shores of Lake Nippising, 350 kilometers (220 miles) north of Toronto.

All three US mayors agreed to lobby US federal and state lawmakers to exclude "their friends in Canada" from the act, said Fedeli.

The Buy American clause, included by US President Barack Obama's administration in a nearly 800-billion-dollar economic recovery package adopted earlier this year, originally required projects funded with stimulus money to use only US-made steel, iron and manufactured goods.

But it was later watered down to say that such procurement could only take place in a manner consistent with Washington's international treaty obligations.

In his letters, Fedeli says North Bay recently bought a water reservoir and a membrane filtration system manufactured in DeKalb, Illinois and Cortland, New York, respectively. The fire trucks were built in Brandon, South Dakota.

The town spent eight million dollars on the purchases and is planning another five-million-dollar buy of water meters from one of five US bidders.

Meanwhile, "we have a company that builds bridges all over North America, except now in the United States," he lamented.

"Does that sound right," he asked in his letters.

The mayor said he takes into consideration that "Not everything is made in Canada," adding: "We want the best price and the best value for our taxpayers."

"And if we had a Buy Canadian policy to match the Buy American policy and all countries decided to retaliate with similar protectionist measures, we would have a lot of job losses in North Bay because almost all of our manufacturers export."

He urged his American counterparts to behave likewise.

Canada exports 22 billion dollars worth of goods to the United States and imports 20 billion dollars worth of US merchandise each month, according to Statistics Canada's latest figures.

For months, Canadian manufacturers have complained their goods were being shut out of contracts funded by the stimulus even though the North American Free Trade Agreement (NAFTA) prohibits discrimination.

Partly to blame is the fact that more than a third of the US stimulus money is being disbursed by states and local authorities not bound by NAFTA.

Over the summer, heated bilateral talks reached a climax and the Buy American clause became the subject of discussions between Obama and Canada's Prime Minister Stephen Harper.

Washington "risks growing retaliation and protectionist measures across the board," Harper told ABC News on the sidelines of a summit of North American leaders in Mexico in August.

"One of the things that we absolutely must do in this recession is to make sure that we don't start cutting trade and we don't see a rise in protectionism across the world," he said.

Obama noted that the measure is permitted under World Trade Organization rules, but also suggested that US states and local jurisdictions could work with Canadian provinces on cross-border procurement practices that expand trade.

Last week, the Federation of Canadian Municipalities suspended its October 4 deadline for a resolution to the trade irritant, saying it was "encouraged" by talks now underway.

But its president Basil Stewart also warned, "if progress stalls, we will revisit our deadline and how best to protect the interests of Canadians and their communities."