TORONTO (AP) — Canada, America's top trading partner, is cautiously optimistic it will be exempted from protectionist provisions in the economic stimulus bill that call on major public works projects to favour US iron, steel and manufactured goods over imports.

Canada and other US trading partners warn that favouring US companies would breach Washington's trade commitments and could set off a retaliatory trade war.

Canadian International Trade Minister Stockwell Day voiced strong objections when he met with interim US trade representative Peter Allgeier at the World Economic Forum in Davos, Switzerland, this weekend.

US President Barack Obama does not have a trade representative yet, but was represented by Allgeier, a Bush administration holdover who served as ambassador to the World Trade Organisation. Former Dallas Mayor Ron Kirk, Obama's nominee for US trade representative, is awaiting Senate confirmation.

"Following the discussions I've had, and with the interventions we've made on a number of levels I'm cautiously optimistic that something can be worked out," Day said in a conference call with reporters on Saturday.

Day said Allgeier was very much aware how big of a concern it is to Canada. He said the president has certain abilities to waive parts of the legislation if they go against the obligations of the North American Free Trade Agreement — which links the US, Canada and Mexico — and other international pacts aimed at liberalising world trade.

"They are looking for ways to handle our concerns," Day said. "The administration is very aware. There seems to be a desire to do something to mitigate the effects of the legislation going through, if it does go through."

Asked about the protectionist provisions Friday, White House press secretary Robert Gibbs would say only that the administration was reviewing them.

The provisions are likely to find support among Americans outraged that money from a stimulus package likely to top $800 billion could go to foreign competitors of US companies.

The US House of Representatives passed the $819 billion stimulus bill on Wednesday that included "buy American" provisions that would call on major public works projects to favor US steel and iron.

Canada's trade minister noted the Senate is considering expanding the measure to include manufactured goods, a more far-reaching provision. The proposed Senate provision states that none of the funds may be used for a project "unless all of the iron, steel and manufactured goods used in the projects are produced in the US".