TORONTO - Canada would be better off living with U.S. President Barack Obama's Buy American provisions than trying to strike a deal that gives up the autonomy provincial and municipal governments enjoy to enact their own buy-local policies, a new think-tank analysis suggests.

The briefing paper by the left-leaning Canadian Centre for Policy Alternatives - to be released Tuesday - concludes that Ottawa should focus its efforts on developing its own Buy Canada policy.

"Instead of tilting at the windmill of an unattainable exemption (from Buy American), our governments should emulate what is best in the U.S. buy-local procurement policies and employ them to benefit Canadians," the paper concludes.

"This stance would undoubtedly irk certain American interests, but they could hardly cry foul."

In an effort at reviving the flagging American economy, the U.S. federal government is pumping up to US$787 billion into the economy through infrastructure spending, but the Buy American provisions require state and municipal projects use only U.S.-made goods.

The provisions enjoy widespread support in the U.S., but have sparked angst among Canadian businesses, which have pressed Ottawa to do something.

For example, the city of Sacramento, Calif., has nixed Canadian-made pipes for its public-water system in a $1.4-million blow to an Ontario manufacturer.

"I don't think it was ever realistic to expect a genuine exemption," Scott Sinclair, author of the policy centre paper, said in an interview from Georgetown Royalty, P.E.I.

"The reasons for that are mainly political - they're long-standing."

The paper points out that many Canadian municipalities and some provinces have contracting policies that favour Canadian suppliers, whether for renewable energy projects or buying local food.

The paper argues that Ottawa appears willing to give up that autonomy in its quest to win some access to the U.S. stimulus spending, while leaving the Americans essentially free to continue their own protectionist approach.

"The U.S. has excluded a wide range of its buy-local policies from its commitments (under world trade rules)," the paper states.

"The bulk of its spending is carved out, leaving it free to continue to apply its buy-local preferences. Such a deal would provide few benefits for Canadian exporters and definitely would not be worth the price demanded by U.S. negotiators."

Given the domestic pressure, International Trade Minister Stockwell Day has made the Buy American issue a priority.

Day was on a trade mission to Thailand on Monday, but his spokeswoman, Melisa Leclerc, said "Buy Canadian" was simply not an option.

"At this time of global economic downturn, Canadians can count on our government to oppose protectionism and defend free and open trade on the world stage," Leclerc said.

Sinclair said the Buy American provisions in the stimulus bill - which build on trade policies that have been in place for years - do not pose a significant threat to Canadian businesses.

Regardless of the provisions, the huge stimulus package will benefit Canada because of the positive impact it will have on the American economy on which so much Canadian trade depends, the paper finds.

"Their economy is stronger, and that makes us stronger," Sinclair said.

"The overall benefit of the stimulus plan is greater than the marginal cost to Canada of the Buy American preferences."

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