By Ross Colvin and Jeff Mason

OTTAWA (Reuters) – U.S. President Barack Obama on Thursday assured Canada, his country’s biggest trading partner, that he would not pursue protectionist policies, and the two neighbours agreed to cooperate on cleaner energy technology.

Obama, on his first trip abroad as president, sought in talks with Prime Minister Stephen Harper to allay Canadian concerns raised by a “Buy American” clause in a $787 billion (550 billion pounds) U.S. economic recovery plan he signed this week.

“Now is a time where we have to be very careful about any signals of protectionism,” Obama told a joint news conference after several hours of talks with Harper on his one-day visit to Ottawa.

“And as obviously one of the largest economies in the world, it’s important for us to make sure that we are showing leadership in the belief that trade ultimately is beneficial to all countries,” he said.

He stressed the United States would meet its international trade obligations and told Harper he wanted to “grow trade not contract it.”

“I’m quite confident that the United States will respect those obligations and continue to be a leader on the need for globalised trade,” Harper said afterward.

Harper said he was willing to look at strengthening the environmental and labour provisions of the North American Free Trade Agreement, something Obama has said he wants. But the Canadian leader said he did not support renegotiating the agreement, which has boosted trade between the two countries.

The two sides announced they would collaborate on environmentally friendly technologies that would help them develop an electricity grid fuelled by clean, renewable energy and to tap their vast fossil fuel resources with less pollution. The technology is not cost-effective now.

“How we produce and use energy is fundamental to our economic recovery, but also our security and our planet. And we know that we can’t afford to tackle these issues in isolation,” Obama said, adding there was “no silver bullet” solution.

GOING FURTHER ON CLIMATE

Environmentalists want Obama to go further and pressure Canada to clean up its oil sands in the western province of Alberta, from which oil is extracted in a process that spews out large amounts of greenhouse gases.

“Tar sands create three times the global warming pollution as conventional oil and are not a viable alternative, no matter how the Canadian government and oil industry portray it,” said Susan Casey-Lefkowitz of the International Program Natural Resources Defence Council.

But with his country facing its worst economic crisis in decades, Obama stressed the importance of Canada as the United States’ largest energy provider. Most of the output of the oil sands is destined for U.S. markets.

Despite the agreement to stimulate the development of green energy, Harper said it was too early for the countries to talk about a shared strategy for reducing greenhouse gas emissions.

Obama, who took office last month, campaigned on a pledge to reduce U.S. emissions by 80 percent of 1990 levels by 2050.

In contrast to a passive approach by his predecessor, George W. Bush, Obama is committed to tackling global warming, but he said climate change initiatives must be balanced against economic considerations in the midst of a worldwide recession.

A White House official said the joint U.S.-Canadian green energy initiative would work on “elements like carbon capture and sequestration and the smart grid.”

Carbon dioxide is the main greenhouse gas blamed by scientists for warming the Earth. Carbon sequestration, which is not yet commercially viable, involves capturing the gas and storing it underground before it enters the atmosphere.

On Afghanistan, where Canada has 2,700 troops as part of a NATO-led force fighting a growing insurgency, Obama said he had not asked for more military help. Obama ordered 17,000 new U.S. troops there this week to battle the insurgency.

Harper said Ottawa, which plans to withdraw its troops in 2011, would expand economic aid to Afghanistan, already Canada’s biggest foreign recipient of aid.

(Additional reporting by Doug Palmer in Washington and Randall Palmer and Frank McGurty in Ottawa; Editing by David Storey and Peter Cooney)

Tags: barack, canada, harper, obama, protectionist