Oil Report

Obama wants to reopen NAFTA but keep trade flowing

(In U.S. dollars unless noted)

OTTAWA, Feb 17 (Reuters) - U.S. President Barack Obama said on Tuesday he still wants to reopen the North American Free Trade Agreement, despite a warning from Canada that this would be a mistake, but he said he did not want to end up curbing trade.

In an interview with the Canadian Broadcasting Corp, shortly before his visit to Ottawa on Thursday, Obama also declined to characterize oil from Canada’s vast oil sands region as “dirty oil” which should somehow be curtailed.

Obama had alarmed Canada during the Democratic primaries last year when he advocated renegotiating NAFTA, and he reiterated this goal on Tuesday while recognizing these were sensitive economic times.

“As I’ve said before, NAFTA, the basic framework of the agreement, has environmental and labor protections as side agreements. My argument has always been that we might as well incorporate them into the full agreement so that they’re fully enforceable,” he said in the interview with CBC television.

However, he also said: “I think there are a lot of sensitivities right now because of the huge decline in world trade.”

Obama noted there was $1.5 billion in trade between Canada and the United States every day, adding: “It is not in anybody’s interest to see that trade diminish.”

When Obama raised the issue of toughening up NAFTA on the campaign trail a year ago, Canadian Prime Minister Stephen Harper said if Washington “made the mistake” of opening the agreement, Ottawa would bring other issues to the table for renegotiation.

Later in the year Harper said Canada’s energy exports to the United States would enable it to negotiate from a position of strength.

The energy industry and environmentalists are watching Obama carefully for any moves that might damage Canada’s oil sands sector, which offers huge reserves of secure crude but produces high emissions of greenhouse gases.

Obama acknowledged that oil sands create “a big carbon footprint” but he said the United States and Canada should collaborate on ways to sequester carbon, preventing it from being emitted into the atmosphere.

“Ultimately, I think this can be solved by technology. I think that it is possible for us to create a set of clean energy mechanisms that allow us to use things not just like oil sands, but also coal,” he said.

“The United States is the Saudi Arabia of coal, but we have our own home-grown problems in terms of dealing with a cheap energy source that creates a big carbon footprint.”

A Canadian official indicated to Reuters that it was possible that an agreement between Harper and Obama to present a common front on pursuing clean energy could emerge from Thursday’s meeting.

A U.S. environmentalist, reacting on Tuesday to Obama’s comparison of coal and the oil sands, said a key difference was that development of the oil sands was growing.

“It’s really that expansion that’s of great concern,” said Susan Casey-Lefkowitz of Natural Resources Defense Council.

“Any kind of special exemption or protection that would be given under greenhouse gas regulations for especially the expanding tar sands industry just seems to be totally at odds with the commitment that both of our countries have made to fight global warming.”

In his interview, Obama also praised Canada’s management of its financial system in contrast to the United States.

“I think that’s important for us to take note of, that it’s possible for us to have a vibrant banking sector, for example, without taking some of the wild risks that have resulted in so much trouble on Wall Street,” he said.

And he said Canadians should not be too concerned by the “buy American” clause in the stimulus bill he just signed. (Additional reporting by Jeffrey Jones in Calgary; editing by Rob Wilson)