TORONTO - Prime Minister Stephen Harper says a protectionist bill that could hurt U.S. imports of Canadian steel goes against the spirit of free trade and the United States shouldn't forget its "international obligations" to liberalize global commerce.

'I spoke to our ambassador about it yesterday and I know that countries around the world are expressing grave concern about some of these measures that go against not just the obligations of the United States, but frankly the spirit of our G20 discussions," Harper said Thursday in the House of Commons on Thursday.

'We will be having these discussions with our friends in the United States and we expect the United States to respect its international obligations."

The so-called "Buy America" provision, attached to the massive economic stimulus package working its way through the U.S. Congress, would call on major public works projects to favour U.S. steel over imported metal.

Mike Gilmor, president of the Canadian Institute of Steel Construction, said he has "grave concerns" about the measure.

'There's no question about it that some of our members and even non-members export work to the U.S. and it's a substantial part of their business," Gilmor said.

The provision seems to be modelled on a 1987 U.S. law that already restricts Canadian companies from bidding on federally funded bridge projects in the U.S., he added.

'We have been effectively shut out of the bridge market since '87 by that act, and this (provision) would expand it to gas and oil pipelines, to airports, to schools and a broad range of structures that our members participate in building," Gilmor said.

If the provision is passed, it may be possible for the Canadian steel industry to challenge the measure under the North American Free Trade Agreement.

International Trade Minister Stockwell Day said the United States has "very clear legal obligations" under both NAFTA and the World Trade Organization, and Canada expects the U.S. to live up to them.

'It's just a bit premature to talk about launching a formal complaint," said Day, adding he'll be discussing the matter with his American counterparts this weekend at a economic meeting in Davos, Switzerland.

Liberal foreign affairs critic Bob Rae said the U.S. Congress must be made to understand that it's illegal to impose domestic procurement requirements.

But NDP Leader Jack Layton said it's "normal" for countries to impose protectionist trade policies and Canada should follow suit.

If Canada were to challenge the buy-America provision under NAFTA, it could result in a long fight as the decades-long dispute over softwood lumber trade suggests.

'As you know, the softwood lumber industry has never really been successful in getting a good resolution," Gilmor said. "It takes a lot of money, a lot of government time and it's rarely successful."

Canadian lumber shipments to the U.S. are restricted under a 2006 agreement between the two countries, the latest in a series of trade-curtailing deals that go back to the 1980s in which the U.S. softwood lumber industry managed to get a curb on imports from Canada.

The U.S. forestry lobby threatened to use American trade law to fight what the U.S. industry said were illegally-subsidized Canadian wood shipments to the American market.

Ken Neumann, Canadian national director of the United Steelworkers union, said precedent could dictate that Canada is exempt from the Buy America provision under NAFTA. He said that when the U.S. launched trade actions against overseas steel companies in 2002, Canadian and Mexican imports were excluded because of their special trade relationship with the U.S.

He added that he's confident the integration of the North American steel industry will protect Canada's interests.

'What (this provision) is truly designed to do is protect the North American market from dumped steel that comes from low-wage economies and economies where there's no environmental regulation," Neumann said.

He said many steel products cross the border more than once during the manufacturing process, which means those products could be waived from the Buy America provision.

And two of Canada's biggest steelmakers, the former Dofasco and Ipsco, have long had major mills in the United States and operate in a continental marketplace, meaning a boost to the U.S. steel market could end up being a boon to Canadian mills.

'Because we've had that history, we have the integration and our union has fought for a good North American steel industry, I am confident we'll be able to prevail again," he said.

'At the end, I do see it as something that we can work our way through and the net result could be a benefit to our workers in Canada" if the stimulus package increases North American demand for steel, he added.

Canada's big steelmakers, the former Dofasco, Stelco, Ipsco and Algoma Steel, which have all been bought by foreign buyers, sell to the energy, auto, appliance, construction and energy pipe markets on both sides of the border.