It is a few thousand dollars worth of Canadian steel installed on a small bridge in a sleepy Colorado town.

But this summer's rebuilding of the South Park Street Bridge in Morrison, Colo., 20 minutes west of Denver, is also an absurd tale of what happens when two massive integrated economies erect protectionist walls.

Everything was going according to plan when a contractor installed new steel beams on the aging bridge, the main link across a creek that cuts through town.

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Then, soon after the bridge reopened, a city engineer spotted an invoice showing the beams were fabricated by Atlas Tube in Harrow, Ont. It was U.S.-cast steel, but rolled into beams across the border in Canada.

And that, under Buy America legislation, automatically disqualified the entire $144,000 (U.S.) project from getting federal funds.

The provisions, which affect transportation projects, were born from a law passed during the Great Depression of the 1930s, a desperate effort to save jobs in tough times by mandating U.S.-only material in federally financed projects. The protectionist rules have endured and proliferated, particularly since the most recent recession, even as the two NAFTA partners have aggressively pursued free-trade deals elsewhere in the world. U.S.-only content rules now cover everything from subway cars to sewer projects.

Morrison (population: 430) is faced with the expensive choice of ripping up the bridge and removing the beams at a cost of about $30,000, or losing tens of thousands of dollars in badly needed federal cash.

"It's pretty much a real big mess," acknowledged Kara Zabilansky, Morrison's town administrator.

Morrison's nightmare on the South Park Street Bridge has grown into a minor international incident.

Marcy Grossman, Canada's consul-general in Denver, complained in an op-ed piece in the Denver Post that U.S. taxpayers are the real losers.

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"While the intent of Buy America may sound reasonable, they do not provide the best results for the public taxpayers," she wrote. "Local content requirements increase costs because there is less competition from which to source products and more money has to be spent to administer and review such requirements."

U.S. legislators insist they are primarily targeting cheap imports from countries such as China, India and Brazil, not Canada. But because of the highly integrated nature of the North American economy, Canadian manufacturers are often caught in the crossfire.

"Unfortunately, there is probably some collateral damage between the two countries in the short-term," conceded Barry Zekelman, the Canadian chief executive of Atlas Pipe parent JMC Steel Group, which supplied the beams used in the Morrison bridge.

But Mr. Zekelman, whose Chicago-based company makes steel products on both sides of the border, said he supports Buy America, and would happily endorse similar legislation in Canada if it protects him from "illegally traded" offshore imports.

"In the end, it is a bit foolish," he said of the protectionist measures. "What we would like to see is some leniency between Canada and the U.S. We're so close, we're tied at the hip and so interchangeable."

The situation could get worse if Canada retaliates in the face of proliferating U.S.-only content rules.

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The Canadian Manufacturers and Exporters has been lobbying Ottawa to do just that on major infrastructure projects, such as the $5-billion (Canadian) replacement of Montreal's Champlain Bridge.

"The kind of situation happening in Colorado should be a wake-up call for the Canadian government to start using their own purchasing power to provide a level playing field for Canadian steel manufacturers," said Jayson Myers, the CME's chief executive officer.

Mr. Myers said it is "shocking" that the federal government imposes no restrictions on U.S. steel used in bridges and other large infrastructure projects in this country when Canadian manufacturers are being treated so unfairly by Washington.

At least two Ontario municipalities – Kingston and Halton Hills – passed motions recently calling on governments in Canada to fight back against the spread of Buy America rules. And Mr. Myers said many similar resolutions are expected to follow suit in the coming months.

Back in Morrison, Ms. Zabilansky is dismayed that her bridge is at the centre of a cross-border backlash. "There should be some other type of clause in the Buy America Act to allow Canada and America to work together," she said.

Ms. Zabilansky still cannot believe the fiasco all stems from the fact that the Canadian value of the steel overshot the $2,500 foreign content exemption allowed in U.S.-funded highway projects by $770 (U.S.) – just enough to make it illegal.