The federal government will not introduce "Buy Canadian" legislation to help spur Canada's recovery from the recession, says International Trade Minister Stockwell Day.

"We would be encouraged as a government, of course, if everybody bought Canadian," Day told a recent Vancouver Board of Trade luncheon. "But we're not going to legislate that."

South of the border, the "Buy American" bill has already received Senate approval. U.S. President Barack Obama's stimulus package, containing $780 billion in federal money primarily for infrastructure, requires recipients to purchase materials from U.S. companies.

However, the rules apply only to U.S. federal government projects, not private ventures.

Day noted Washington has had a Buy American stipulation for federally funded state and local projects since 1933, and it was toughened in 1982.

Ottawa does not expect those provisions to be rolled back, said Day.

"But what we are saying is, 'Stop, it's gone far enough,' " he added. "We don't want any more provisions for protectionist activity because it will trigger (a retaliatory trade war)."

Jayson Myers, president of the Ottawa-based Canadian Manufacturers and Exporters, said Day is taking the right approach by trying to prevent the U.S. government from increasing protectionism.

"But, at the same time, we should be looking at providing some consideration in procurement for products that are made in Canada," he added.

Many local and provincial jurisdictions have no provisions for ensuring Canadian content. Such rules, he said, would provide more opportunities for domestic suppliers without making the procurement process restrictive. At the same time, a Buy Canadian program would make the procurement process more transparent.

"The process has to be fixed so that Canadian suppliers are not excluded from our own contracts," said Myers.

Scott Sinclair, director of a trade and investment research project with the Ottawa-based Canadian Centre for Policy Alternatives, says Canadian suppliers have long been disadvantaged by Buy American provisions.

Day has misinterpreted Canada-U.S. trade rules, he added, because the action within the U.S. stimulus package "is no different from what they've been doing for decades and doesn't violate NAFTA or other international agreements covering procurement."

"(Day) is creating a sense of hysteria that is totally divorced from the practical realities of Canada-U.S. trade relations," he said.

Sinclair added it would make more sense for Canada to look at its own procurement practices and find ways for under-utilized Canadian workers and facilities - even those owned by U.S. firms - to meet domestic needs.

"That would be a lot more practical approach and Canada, again, would be acting consistently with its obligations under its international agreements.

"For example, in Canada, under its own stimulus package, the federal government could attach a condition that provinces and municipalities should consider locally based manufacturers that have the capacity to fulfil these needs. They could go to those first to maximize the economic impacts within Canada" without violating NAFTA, he added.

Canada, like other countries, already has Buy Canadian rules when it comes to defence procurements. But Day said the Harper government will not legislate beyond those limits.

However, he noted Ottawa will be very vigilant in protecting businesses if it feels they are subject to unfair business practices.

"We don't want to see this protectionist trend continue any further," Day said.

The United Steelworkers (USW) and Canadian Auto Workers (CAW) unions are also calling on the Harper government to adopt a Buy Canadian procurement law to ensure that the majority of public funds are spent on goods and services made in Canada.

Such a policy, the unions say, would allow Canadians to receive the lion's share of government-spending benefits, create and protect jobs, and boost economic development.

Bob Chernecki, assistant to CAW president Ken Lewenza, said Ottawa should enact laws to ensure that federal, provincial and local government contracts are awarded domestically.

He noted a contract Ottawa awarded to a Texas firm for the assembly of military trucks could easily have been given to a truck plant in Chatham, Ont., that has experienced hundreds of layoffs and shift closures despite millions of dollars worth of CAW contract concessions and provincial and federal financial assistance.

"If Stockwell Day and the government of the day really do care about the Canadian economy, they should be looking at lot closer at some of these issues," said Chernecki.

Meanwhile, in a joint statement, Lewenza and USW national director Ken Neumann said they are "deeply disappointed" to hear government officials publicly criticize the inclusion of a buy-domestic provision in the American Recovery and Reinvestment Act.

"The criticism levied by the Harper government exaggerated the impact that such provisions would have on Canada's economy," they added.

Looking forward, the CME's Myers predicts there will be more job losses, manufacturing plant closures and declines in exports in the spring.

But there is a bright spot. Despite many postponements, he predicted, Alberta oilsands construction projects will help offset declines in manufacturing and exports elsewhere.

"It's an area where I think we'll see lots of activity going forward," said Myers. "It's not as busy (in the oilsands) and a lot of our members saw their business falling off ... But there's still going to be $30 billion of investment and operations procurements going on in Alberta, so $30 billion - this year - ain't bad. It's still a very strong market."

But there is little that Canadian government can do to re-inflate the U.S. economy, he added.

"We're just going to have to keep our fingers crossed that the Obama stimulus package works," said Myers.

"We need to make sure that companies don't go under and they're still around to take advantage of the recovery."

(Monte Stewart can be reached at monte@businessedge.ca)