International Trade Minister Stockwell Day says he has repeated to U.S. officials that Canada is concerned the United States could lapse into protectionist measures that would trigger retaliatory action. ((Adrian Wyld/Canadian Press))

Canada's international trade minister warned that products other than steel and iron could be swept into the "Buy American" clause of the U.S. stimulus bill, but he's hopeful U.S. legislators will retreat from the controversial policy.

Meanwhile, in a letter to senior U.S. Senate leaders, Michael Wilson, the Canadian ambassador to Washington, says the clause could spark protectionist measures in other countries.

"If 'Buy America' becomes part of the stimulus legislation, the United States will lose the moral authority to pressure others not to introduce protectionist policies," Wilson writes in the letter, a copy of which was obtained by CBC News.

The letter is addressed to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell.

Introducing new trade barriers would decrease North American competitiveness, "thereby killing jobs rather than creating them," Wilson writes.  

The controversial provision, part of the $819-billion US financial stimulus package before Congress, would require all public works projects funded by the stimulus package to use only U.S.-made iron and steel. The Democratic-controlled U.S. House of Representatives approved the package in a vote last week and the Senate began debating it on Monday.

The Canadian government is very concerned the Buy American clause "takes it further than just steel and just iron products, but it could go across the board to many other products," Stockwell Day told the House of Commons during question period Monday.

Liberal Leader Michael Ignatieff accused the governing Conservatives of waiting too long to intervene, acting only after the legislation passed the House of Representatives.

But Day shot back that Canada cannot get involved in drafting U.S. legislation.

Earlier, in an interview with CBC News, Day said he's encouraged that concerns over the clause are being heard by American officials.

Day, who just returned from Davos, Switzerland, where he was attending the World Economic Forum, said he spoke with the acting U.S. trade representative.

"The part I was encouraged about was when he told me that he had been following our prime minister’s remarks in the House of Commons, [and] he had heard what I had said in the House of Commons," Day told CBC News.

Day said he repeated Canada's concerns that the U.S. could lapse into protectionist measures that would only trigger retaliatory action.

"We don’t want to go there and we do not want to see that happen," Day said.

"I'm hoping and I do believe that President Obama is enough of a student of history to know that these protectionist measures, in a time of recession, only make things worse," Day said.

The U.S. administration has hinted it may push Congress to reconsider its controversial Buy American clause.

"We believe that with our input on this and constant involvement with the administration, that something is going to come of this that will be better than what's being proposed right now in the U.S. Senate," Day said.

Quebec effect

Steel exporters in Quebec are worried about the potential impact the Buy American clause could have on them. Half of all Canadian-made steel structures exported to the U.S. come from Quebec.

Sylvie Boulanger, Quebec director of the Canadian Institute of Steel Construction, said 2,000 jobs in the province could be at risk.

"There's an expertise in Quebec that's the envy of North America. It would be very, very sad to see that expertise threatened and with time disappear because of this limitation," Boulanger said.

She estimated Quebec exports $500 million worth of steel products across the border each year.

"There is a direct threat to the industry," she said.