The federal government is asking Canada's premiers to sign a declaration that their provinces won't discriminate against American suppliers to convince the U.S. to drop protectionist measures.

Trade Minister Stockwell Day said in an interview Thursday that federal and provincial officials discussed the issue on Monday and that the premiers have been given a draft procurement agreement that would act as an adjunct to the North American Free Trade Agreement (NAFTA).

The draft would tie the provinces to the same rules as the federal government on government-let contracts.

In recent months, Canadian companies have been hurt by Buy America measures passed in Congress that compel states and municipalities receiving billions of federal infrastructure dollars to buy exclusively from domestic suppliers of steel and many manufactured goods.

Several Canadian firms have complained they have been shut out of municipal infrastructure contracts.

Congress blames provinces

The issue has the potential to escalate into a low-level trade war because Canadian municipalities have threatened to retaliate in their procurement spending by keeping American suppliers out.

Day said the provinces' reluctance to sign on to NAFTA provisions for procurement when the treaty was signed by the United States, Canada and Mexico is now being used as a stick in Congress to beat Canadian suppliers.

"What they've done in Congress, they say [foreign countries] will be allowed to bid, except Canada because provinces did not sign on to the procurement agreement in NAFTA. Some in Congress have used that as an excuse to shut out Canadian procurement," he explained.

Day said the measure has general support from provinces, particularly Quebec Premier Jean Charest, but that some premiers have asked for time to review the draft.

The trade minister made the comment in a telephone interview from Paris, where he was attending meetings with the Organization for Economic Co-operation and Development and the World Trade Organization.

Day said he talked to U.S. Trade Representative Ron Kirk, who was receptive to the action.

But he conceded there is no certainty the initiative, which amounts to a unilateral declaration of non-retaliation against Buy America provisions, will convince the U.S. to stand down on its protectionist measures.

"Hopefully this will go a long way to overcome this present difficulty," he said. "Congress cannot use the excuse that we are not being bound to procurement agreements to shut us out."

Unilateral move to be followed by formal agreement

If it works, Canada would attempt to negotiate a more formal agreement tying provinces and states to free trade in procurement spending, he said.

Even though provinces did not sign on to NAFTA, Day said in practice they generally accept bids from U.S. suppliers.

Canada has waged a full-court press in Washington in an effort to dissuade Congress from routinely injecting Buy America clauses on billions of dollars of stimulus spending.

Since most of the money is spent at the state and municipal level, it is not subject to NAFTA and other trade agreements.

Recently, trade officials from Canadian consulates throughout the U.S. descended on Congress armed with statistics on how dependent some American jurisdictions are on trade with Canada.

On Wednesday, Finance Minister Jim Flaherty travelled to Washington to meet with several senators and the House chair of the budget committee on the issue.

Concern, but not panic

On related matters, Day said the vast majority of trade ministers he talked to at the Paris meetings were concerned with rising protectionism in the world as countries try to protect domestic industries during the recession.

"It's not at a panic stage, but the level of concern is very high," he said.

In bilateral meetings, he said he pressed his counterpart in Russia about discrimination over Canadian exports of pork and agricultural machinery, and with South Korea over Canadian beef.

Despite that, however, Day said he is hopeful that a Canada-South Korea trade agreement can be negotiated soon.