Canadian officials are lobbying 'non-stop, 24/7' against incipient U.S. protectionism, International Trade Minister Stockwell Day told the Toronto Board of Trade on Thursday. (Chris Young/Canadian Press)

Canada will continue to put diplomatic pressure on the United States to avoid protectionism that could trigger trade wars despite a softening of the language of the "Buy American" clause in the country's $819-billion US stimulus package.

Speaking in Toronto on Thursday, International Trade Minister Stockwell Day said that Canada is not out of the woods yet when it comes to being exempt from the U.S. legislation that currently requires that public works projects receiving money from the stimulus package must use U.S.-made iron, steel and manufactured goods.

Canada, the European Union and several prominent U.S. corporations have complained the provision will violate world trade agreements and could spark trade wars.

Day said officials have been pressing Canada's interests "non-stop, 24/7, full-court press" and will continue to work diplomatic channels to ensure protectionist measures don't creep into the bill during the approval process.

"We feel very good about the progress," he said. "I'm not saying it's over."

Canada, Mexico join forces

The comments come as Prime Minister Stephen Harper and Mexican President Felipe Calderon spoke on the phone on Wednesday to discuss the "Buy American" clause, which is currently before the U.S. Senate.

The conversation between the leaders stressed the importance of resisting protectionist efforts, and the two leaders agreed to work closely on the issue ahead of the G-20 leaders' summit in London in April, the Prime Minister's Office said.

Analysts said the statement from the two leaders is a public signal that the countries are prepared to vigorously defend the North American Free Trade Agreement.

The U.S. Senate agreed to water down the "Buy American" measure a bit in a vote on Wednesday night so that it indicates that measures must not contravene international trade agreements.

The change is directed at calming countries that are members of NAFTA and the World Trade Organization.

The United States has made deals under NAFTA and the WTO to give trading partners such as Canada, Mexico, Japan and the European Union access to its government procurement market. In exchange, it's received similar commitments from those countries. But other countries such as China, Russia, India and Brazil are not party to those agreements and won't benefit from the changed wording.

There's a danger that the "Buy American" language, if passed, will spur other countries to implement protectionist strategies, said Lawrence Herman, a Canadian international trade lawyer.

"This isn't helpful in the current global context," he said.

Bill won't be perfect: Obama

The U.S. Senate concluded its fourth day of debate on the package late Thursday night and was expected to vote on its final version on Friday.

Senators have been negotiating a series of amendments to get the bill through and reduce the package's price tag, which has been estimated to reach up to $937 billion. It was at $819 billion when it passed through the House of Representatives last week.

If the Senate approves the legislation, the two bills must then go back for reconciliation by both the upper chamber and U.S. House of Representatives.

Speaking in Williamsburg, Va., on Thursday night, Obama urged legislators to "rise to the moment" and get the package passed as soon as possible. Obama wants to have the bill signed into law by mid-February.

Obama warned the package "is not going to be absolutely perfect" and that not everyone is going to get what they want out of it. But inaction could result in catastrophe for the already sliding U.S. economy, the president said.

Earlier in the week, Obama had said it would be a mistake for Congress to include protectionist measures.

Some senators unmoved

Many U.S. senators have been unmoved by the ongoing objections of America's trading partners.

"The purpose of this program, asking taxpayers to sacrifice, is really not to create jobs in the European Union," said Illinois Democrat Senator Richard Durbin. "I want to create jobs in Illinois."

Herman said even the current language only represents a partial victory for Canada.

"The fact that the ['Buy American'] provision is still there,… that means that is the law of the land," Herman said.

Herman said that international trade agreements have loopholes, and they don't usually apply to money spent on state or municipal projects, which is where part of the stimulus package money will be headed.

Canada will have to continue to make the argument that the money comes from a federal program and falls under international trade agreements, he said.

"In these things, the devil is always in the details and whether or not Canada's ox is gored will depend on how this provision is implemented," Herman said.

The true test of the implications for Canada may not come until after the legislation is passed into law, international trade lawyer Christopher Kent said.

What's on paper "may differ dramatically from what happens in reality," Kent said, and will be dependent on how the law is interpreted in the United States.

With files from the Associated Press and the Canadian Press