Canada interested in new US free trade deal

[June 06, 2009]  TORONTO (AP) -- Canada is interested in a free trade deal with the United States that would open up local government procurements to both countries.

The interest comes as Canadian companies continue to report difficulties in winning government contracts in U.S states and cities because of "Buy American" provisions in President Barack Obama's stimulus bill.

Kory Teneycke, a spokesman for Prime Minister Stephen Harper, said Friday that Canada is interested in ending the practice of national preference at the local level in the U.S. and Canada.

Teneycke said it's premature to say if Canada would seek to open the North American Free Trade Agreement because they would need the support of all 10 Canadian provinces.

But some Canadian provinces are expressing support and Teneycke doesn't expect it to be a problem.

"Then there has to be a process of talking to the United States and then talking to their state-level governments," Teneycke said. "That's not something that's instantaneous by any means and I think it would be premature to talk about particular mechanisms vis-a-vis NAFTA."

Canada is already in free-trade talks with the European Union and local procurements are one of the major items being looked at, he said. NAFTA does not include spending by local governments.

The "Buy American" provisions are a source of tension between Canada and the U.S.

Canada's Industry Minister Tony Clement was in Washington recently to complain about Canadian companies being shut out of the U.S. marketplace

Buy American supporters in the U.S. want to make sure that the billions of U.S. taxpayer dollars being spent to revive the economy create jobs at home.

Canadian mayors are threatening retaliation and are set to vote Saturday at the Federation of Canadian Municipalities conference in Whistler, British Columbia, on a resolution that would encourage protectionist measures.

Stockwell Day, Canada's trade minister, said he spoke with Rep. Charles Rangel, chairman of the House Ways and Means Committee, on Friday and told him that's one of the consequences.

"This resolution, the very fact that it's here, is definitely serving notice to the United States that their reactions are causing great concern," Day said. "That's the message that I'm taking to the United States."

Day said much of the $789 billion stimulus is available to Canadians to bid on but the $280 billion allocated to states and municipalities is becoming a problem.

"We want to see it fixed," Day said.

Canada and the U.S. share the largest trading relationship in the world. More than 70 percent of Canada's exports go to the United States. Canada has warned that the spread of protectionism is the single largest risk to the global economy going forward.

Jayson Myers, president of the Canadian Manufacturers and Exporters, said about 250 Canadian companies have lost contracts because of the "Buy American" provisions.

Myers said it is spreading to other U.S. bills. He cited bills being considered on improving water quality and improving environmental efficiency in public schools that also favor U.S. companies.

"What we're seeing is the tip of the problem," Myers said.

Myers said a new free trade deal would benefit both Canada and the U.S. by preventing a trade war.

"There is a growing backlash in Canada," Myers said. "I guarantee that if Buy America restrictions continue to lock Canadian suppliers out of the U.S. market, municipalities, in particular, will say 'Well, why are we allowing American exporters unfettered access into our markets.' There's a real danger that we'll get into some retaliatory trade war around procurement."

[Associated Press; By ROB GILLIES]

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