WASHINGTON - Canadians nervous about a looming battle with their biggest trading partner heard some soothing words from U.S. President Barack Obama on Tuesday after he reassured the world that American protectionism was not on his agenda.

"We can't send a protectionist message," Obama said in an interview with Fox News, referring to the multi-billion-dollar economic stimulus package currently being debated in the U.S. Senate.

It would be a grave error to push ahead with any provisions that violate world trade agreements and signal a new era of U.S. protectionism, Obama added to ABC News.

"I think that would be a mistake right now. That is a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe," Obama said.

"We need to make sure that any provisions that are in there are not going to trigger a trade war."

Obama's long-awaited remarks came amid a growing chorus of dire warnings from Canada, the European Union and blue-chip American corporations and business associations about the controversial "Buy American" provision contained in the US$819 billion bill already passed by Congress.

Canada has complained bitterly about the provision, saying it violates international trade agreements and could stifle a global economic recovery.

One top Democrat said earlier Tuesday that Canada was right to fear the rise of American protectionism and its impact on trade between the two countries.

Steny Hoyer, the Democratic House leader, said he'd spoken with Canadian Ambassador Michael Wilson, who sent a terse letter to Senate leaders this week complaining about the provision.

Wilson is "very concerned about the flow of economic activity between our two nations," Hoyer, a Maryland Democrat, told a news briefing.

"So I think the concerns are relevant ... I think the concerns are justified."

The House bill, designed to pull the free-falling U.S. economy out of a devastating recession, contains the "Buy American" provision that requires all the steel and iron used in infrastructure projects be American-made.

The Senate's US$885-billion version of the bill goes even further, stating that all goods used for the infrastructure projects, including roads, bridges and schools, must be manufactured in the United States.

A Canadian official closely observing the Senate debate said there's a "decent chance" the provision will be watered down this week by senators.

The official also pointed out that even if it remains in the bill, the Obama administration will have some discretion and input into how the provision is implemented.

"There could be some nudging and winking going on - the language may remain, but it won't necessarily hurt trade with Canada," the official said.

There's no question that "Buy American" placed Obama in one of the toughest dilemmas of his presidency. While he campaigned on a pledge to protect American jobs, the president also promised in his inaugural address to reach out to U.S. allies and work together to stop a worldwide economic meltdown.

And yet the "Buy American" movement touched off a global uproar, with Canada and the European Union pointing out such measures would fly in the face of international trade agreements and could lead to a litany of global trade skirmishes.

Before Obama made his comments, Trade Minister Stockwell Day said that Ottawa would press forward in its efforts to convince Washington that the provisions are a bad idea.

Day added that Obama would likely have the law on his side if he opted to block the "Buy American" provision from the final stimulus package due to existing international trade agreements.

"We have no guarantee that they're going to take the measures out," Day said. "We are firing on all cylinders, we're hitting all levels and we are getting a response. We are going to keep the pressure up."

Day had no comment later Tuesday, after Obama's televised remarks.

Hoyer said he was certain that the thorny issue of protectionism would be "a matter for discussion" between the Senate and the House after senators pass the bill.

Many American observers have argued that a similar protectionist measure passed in the 1930s by President Herbert Hoover contorted a nasty recession into the Great Depression.

The U.S. Chamber of Commerce has said the measure would wipe out countless American jobs and urged lawmakers not to turn their backs on the lessons of history.

The National Association of Manufacturers, the oldest industrial trade group in the U.S., warned in a letter to senators on Tuesday that the provision spells trouble for American workers and violates the country's international trade obligations.

The organization is "very concerned that the new 'Buy American' provisions in the bill will potentially backfire on the United States and end up harming American workers and companies across the entire U.S. economy," wrote president John Engler, once the Republican governor of Michigan.

"These new rules could result in mirror-image trade restrictions abroad that would put huge amounts of American jobs and exports at risk."

The association represents blue-chip U.S. corporations that include Sony, Exxon, Mobil and Dow Chemical.

A study released just hours before Obama's remarks also painted a grim picture.

The report by the Peterson Institute for International Economics estimated that the "Buy American" provision would create only about 1,000 jobs in the steel industry, but might cost as many as 65,000 across a wide range of sectors.

"The negative job impact of foreign retaliation against 'Buy American' provisions could easily outweigh the positive effect of the measures on jobs in the U.S. iron and steel sector and other industries," the study found.

The chairman and CEO of Dell Inc., one of America's biggest technology corporations, also issued a stern warning about "Buy American" on Tuesday, saying it could start a trade war.

"Trade wars are very, very dangerous, particularly in the economic situation we find ourselves in right now," Michael Dell said at a Northern Virginia Technology Council event.

Nonetheless the author of the provision, Senator Byron Dorgan of North Dakota, is adamant that it's needed to jump-start the U.S. economy.

"If we want to stimulate the American economy and create new jobs here, we ought to be investing in American-made products with the stimulus money," the Democrat wrote in a USA Today opinion piece.

"If the goal of the economic recovery plan is to create American jobs, then it stands to reason that the 'Buy American' provision is essential."

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