The Buy American provision was among the topics discussed when Prime Minister Stephen Harper met with President Barack Obama in Washington last Wednesday. (Charles Dharapak/Associated Press)

A deal may be imminent that will exempt Canada from the controversial Buy American provision included in the U.S. stimulus package, CBC News has learned.

According to Canadian government sources, Ottawa expects that the White House will use its discretionary power to exempt Canada from the clause very soon. In return, Canada would simultaneously announce that its provincial and municipal doors are now wide open to U.S. companies.

Sources say the announcement could be made when the two countries' trade negotiators, Don Stephenson, assistant deputy minister, trade policy and negotiations, and Everett Eissenstat, office of the United States trade representative, hold their first formal meeting.

"I think that is going to occur over the next couple of weeks," said Jayson Myers, chief executive of the Canadian Manufacturers and Exporters. "I hope it will. Otherwise, we may see retaliatory action taking place here in Canada."

The provision gives priority to U.S. iron, steel and other manufactured goods for use in state-level and municipal public works and building projects funded with taxpayer stimulus money. Canadian governments and businesses have railed against the policy.

During Prime Minister Stephen Harper’s visit with U.S. President Barack Obama last week, Harper again made a pitch for an exclusion for Canada from "Buy American" provisions.

Harper and Obama said the two sides were looking into ways of addressing the issue, including the possibility of including the provinces in a multilateral deal.

Offering guaranteed access

Obama has said the clause conforms with all World Trade Organization and NAFTA regulations because it deals with what's called sub-national governments — such as states and municipalities — which aren't included in trade treaties.

Last week, Obama suggested that Canada's provinces must open their local markets to American companies. Canadian officials say the White House first stated its terms last spring, after Obama's visit to Ottawa.

In August, it was revealed that Canada and the provinces were offering U.S. firms guaranteed access to procurement contracts, as long as Canada gets a waiver of the "Buy American" provision.

American business have also been calling for the exemption, saying the clause has been killing American jobs, particularly at U.S. companies with Canadian suppliers.

"You need to understand our supply chain and how we make money and not limit us in the way that Buy American does," said Maryscott Greenwood, of the Canadian American Business Council. "It doesn’t make any sense. Particularly when you’re talking about Canada."

Neither Canadian or U.S. officials would comment on the negotiations.