UPDATE 4-Obama plays down G20 rift, reassures China on bonds

* Lula pushes Obama on trade, Doha

* Obama underscores support for financial reform (Adds quotes, color from meeting)

WASHINGTON, March 14 (Reuters) - President Barack Obama on Saturday denied there was any rift among the world’s 20 leading economies on how to deal with the global financial crisis and assured China its U.S. investments were safe.

Obama’s words came after a meeting with Brazilian President Luiz Inacio Lula da Silva that also touched on relations in Latin America.

“I don’t know where this notion has emerged that somehow there are sides developing with respect to the G20,” Obama said, referring to reports of disagreements between Europe and the United States among the Group of 20 established and emerging economies.

“There are no sides,” he told reporters in the Oval Office.

Washington has pushed for increased government spending, while countries such as France favor more emphasis on tough market regulation. [ID:nLD231918]

Calling it a “phony debate,” Obama said he also supported the need for financial regulation reform.

“We have to take a whole range of approaches. Financial regulation is front and center,” he said. “We also think we’ve got to see worldwide concerted action to make sure that this massive contraction in demand is dealt with.”

Obama also sought to reassure China, which expressed concern on Friday that massive U.S. deficit spending and near-zero interest rates would erode the value of China’s huge U.S. bond holdings.

“Not just the Chinese government but every investor can have absolute confidence in the soundness of investments in the United States,” Obama said, noting that his comments applied to U.S. Treasuries as well as investments in the private sector.

“There is a reason why even in the midst of this economic crisis, you’ve seen actual increases in investment flows here in the United States. I think it’s a recognition that the stability not only of our economic system but also our political system is extraordinary.”


Lula said he told Obama they should work to reopen world trade talks known as the Doha round while acknowledging that could be difficult to achieve during the economic crisis.

“At the same time, I believe that to conclude the Doha round could be one of the components to relieve the poorest or less developed countries of the world vis-a-vis this crisis.”

Obama said he was committed to closing “the gap” that had blocked an agreement from being reached.

“It may be difficult for us to finalize a whole host of trade deals in the midst of an economic crisis like this one, although we have committed to sitting down with our Brazilian counterparts to find ways that we can start closing the gap on the Doha round and other potential trade agreements,” he said.

Separately, Obama acknowledged that U.S. tariffs on Brazilian shipments of ethanol to the United States had been “a source of tension” that would not change overnight.

Brazilian ethanol producers are upset the United States still levies a 54 cent import tariff on each gallon of exported Brazilian ethanol. American ethanol producers, who receive government subsidies, are worried ethanol imports would flood the U.S. market and hurt their business.

“Over time, the source of tension can get resolved,” Obama said, without indicating whether there would be an easing of the U.S. ethanol import tariff, which lasts through 2010.

Lula, a former union chief and a moderate among Latin America’s leftist leaders, wants the United States to end the long-standing trade embargo on Cuba and mend fences with Venezuela’s socialist president, Hugo Chavez, one of Washington’s fiercest critics. He told reporters he had encouraged Obama to seek rapprochement with both countries.

“President Obama ... has a unique and exceptional position to improve the relationships with Latin America,” Lula said.

Obama, a Democrat, said he looked forward to visiting Brazil sometime soon and joked that Republicans would support such a trip, too, if he got lost in the Amazon. (Additional reporting by Paul Simao and Tom Doggett; Editing by Peter Cooney and Alan Elsner)