An exemption for Canada from "Buy American" regulations on iron and steel products under the $787-billion economic stimulus program is far from a done deal and faces several major hurdles, according to industry sources and officials at the Office of the United States Trade Representative (USTR).

Steel industry sources said that a blanket exemption for Canada would violate World Trade Organization (WTO) rules and likely would encourage other nations, most notably fellow North American Free Trade Agreement (Nafta) member Mexico, to press the U.S. trade agency for a similar exemption.

A USTR spokeswoman denied reports from Canada that an agreement on a...