Obama sought to strike a positive note on free trade ahead of 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 now 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.
Harper also said the two countries were close to resolving another source of friction, a ban on Canadian airlines carrying Canadian professional sports teams from one U.S. city to another. Canada had retaliated by banning U.S. charter flights carrying American teams.
Global Economy
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 a G20 summit 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."
