Reuters
By Roberta Rampton
June 11, 2009

www.reuters.com

* States, cities differ in "Buy American" rules

* U.S. companies worry about Canadian retaliation

WASHINGTON, June 11 (Reuters) – The "Buy American" provisions in the U.S. stimulus package threaten U.S. jobs, a major business group said on Thursday, urging the Obama administration to clarify how the rules will apply.

"These are American jobs that we are very concerned about," U.S. Chamber of Commerce official Myron Brilliant told a news conference. He said he did not have a forecast of how many jobs could be lost.

The chamber said there was confusion about how state and local governments should interpret the provisions for the $200 billion worth of public works projects they will oversee as part of the $787 billion economic recovery measure.

U.S. steel companies and smaller manufacturers lobbied for the measure, which requires stimulus projects to use iron, steel and other goods made in the United States, as long as that does not contravene trade commitments.

American companies that use foreign parts or materials in their goods are finding they may be excluded from bidding on projects and are also worried they could face retaliation when they bid on projects in other countries, said Brilliant, the chamber’s senior vice president for international affairs.

The telecom firms Cisco Systems Inc (CSCO.O: Quote, Profile, Research, Stock Buzz) and Alcatel (ALUA.PA: Quote, Profile, Research, Stock Buzz), which use foreign parts, have raised concerns about whether the "Buy American" measure will prevent them from bidding on broadband expansion projects funded by the stimulus, said Chris Braddock, a procurement analyst with the chamber.

Companies that make water and sewage equipment on both sides of the border have had to hire lawyers to try to figure out whether they can bid on contracts, said Dawn Kristof Champney, president of the Water and Wastewater Equipment Manufacturers Association.

"It’s a huge learning curve to understand what Buy America means," she said. "For the last two quarters, our market has been at a standstill."

Canadian businesses in the water and sewage, structural steel, alternative energy and medical devices sectors have since found themselves shut out of projects funded by U.S. stimulus money, said Jay Myers, president of the Canadian Manufacturers and Exporters group.

RETALIATION THREATENED

The United States and Canada, part of a free-trade agreement and the World Trade Organization, share close to $600 billion in bilateral trade, the world’s largest trading partnership.

But there is no formal reciprocal agreement on government procurement at the state, provincial and local levels between the two countries, although Canadian and U.S. companies have traditionally bid across the border on government contracts.

Canadian mayors have threatened to retaliate by shutting out American suppliers from the $15 billion worth of business they currently do with Canadian municipalities, Myers noted.

Canadian Prime Minister Stephen Harper is set to offer to negotiate a broader procurement arrangement, and provincial premiers are on board, Myers said.

"If the leaders of the world’s two largest trading partners cannot avoid … job losses or restrictions on trade, then heaven only help the rest of the world in trying to avoid falling into the same spiral of protectionism," Myers said. (Reporting by Roberta Rampton; Editing by Peter Cooney)

http://www.reuters.com/article/marketsNews/idUSN1151183920090611