By Randall Palmer and Matt Spetalnick
WASHINGTON (Reuters) - U.S. President Barack Obama assured Canadian Prime Minister Stephen Harper on Wednesday he wanted to resolve a dispute over "Buy American" provisions that has dogged ties between the world's top trading partners.
Obama sought to strike a positive note on free trade before next week's Group of 20 summit in Pittsburgh, which has been clouded by protectionist concerns after his administration last Friday imposed higher duties on Chinese tire imports.
"There is no prospect of any budding trade wars between our two countries," Obama said about U.S.-Canada relations after holding White House talks with Harper.
The Canadian leader said he and Obama had instructed negotiators to look at a range of options to bridge differences over "Buy American" provisions in a U.S. stimulus package, the centerpiece of Obama's economic recovery effort.
Canadian companies have complained the provisions are protectionist and shut them out from large U.S. contracts. Canada is proposing a reciprocal deal that would allow companies from both countries to bid for contracts at the state and provincial level.
"These are important irritants," Harper said.
While both leaders sought to play down the trade spat within the overall context of U.S.-Canada ties, Harper's message to the Obama administration was that failure to resolve the trade matter would send the wrong signal to the world.
"It is critical at a time where we are trying to see a recovery in the global economy, where forces of protectionism are a very significant threat, that we continue to demonstrate to the world that Canada and the United States can manage their trade relations in a way that's extremely positive and a model for other countries," Harper said.
Obama agreed the problem could be solved. "It appears that there may be ways to deal with this bilaterally, but also potentially multilaterally," he said.
BIGGEST ENERGY SUPPLIER
Another potential point of friction is Canada's oil sands, whose imports into the United States environmental activists say should be restricted because of the high carbon emitted in producing the oil.
Obama and Harper showed no sign of public disagreement on the issue. They reiterated "the urgency of taking aggressive action to combat climate change" and Harper spokesman Dimitri Soudas said the two countries were trying to present a common front at global climate talks.
Trying to head off any possible challenge on the oil sands issue, Harper made a pointed comment about how much the United States needed Canadian energy.
"I remind all our American friends that Canada is by far the largest supplier of energy to the United States, and we are determined to be a continental partner in dealing with the joint, with the very linked problems of climate change and energy security," he said as Obama listened.
Commenting on the global economy, Obama said, "We both agree that although we are not out of the woods yet, that we've seen signs of stability and that both Canada and the United States are on the path to positive economic growth."
"We both agree that coordination still needs to continue at the international level," Obama said as he prepared to host the G20 summit of major industrial and developing economies expected to review global economic revival plans.
The leaders, in a joint statement, agreed that stimulus packages implemented in both countries had averted deeper downturns but that "it is important to remain vigilant."
They agreed to work with other countries at the Pittsburgh summit to "lay the foundation for balanced and sustainable growth and to further the reform of financial regulations and international institutions."
(Additional reporting by Caren Bohan; Editing by Peter Cooney)