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.

Mortgage Rescue Eligibility Still Being Finalized

A day after President Obama unveiled his $75 billion foreclosure prevention program, administration officials yesterday said they were still determining which homeowners should qualify.

The administration is developing a standard to be used by lenders in evaluating applicants that seeks to exclude homeowners who either are not in real need or are too far behind in their payments to be saved. Officials have already set some conditions for eligibility, including requiring that borrowers’ mortgage payments consume more than 38 percent of their income and that the property be their primary residence.

Government officials are working to finalize details before a self-imposed March 4 deadline when the program will go into effect and lenders are likely to be flooded with calls for help.

The program is aimed at stemming the tide of foreclosures amid predictions that another wave of risky loans could begin defaulting later this year as a deepening recession could make it more difficult for borrowers to afford their homes.

The administration’s effort includes several elements, including a refinancing initiative for borrowers with little equity in their home. A separate loan modification program lavishes incentive payments on lenders to make it even more profitable for them to help homeowners stay in their home than to foreclose on the property.

One of the chief goals of the loan modification program is to address complaints of consumer advocates that borrowers are often turned away by lenders when they ask for help before becoming delinquent on loans. The plan includes extra incentive payments for lenders that reach “at-risk” homeowners and modify their loans before they become delinquent.

“But what counts as an at-risk homeowner?,” asked Edward R. Morrison, a professor at Columbia Law School. He said policymakers should avoid setting a standard that encourages lenders and mortgage servicers to rework sustainable loans just to get payments from the government.

Administration officials involved in developing the program said they are basing their effort on a model developed by the Federal Deposit Insurance Corp. The formula to determine at-risk borrowers will likely weigh a homeowner’s debt level and payment track record, officials said. But in setting eligibility standards, they are also trying to determine what documentation borrowers should provide to prove they could lose their job or face a reduction in income, they said.

Another key question facing the administration is how to calculate when foreclosure would be a better deal for lenders than keeping borrowers in their home, even with incentives. The administration will attempt to generalize the FDIC formula, known as the net present value test, and apply it to the entire mortgage industry, according to officials familiar with the effort.

“If a borrower has no means of repayment, even if you restructure the loan, then foreclosure may be the only option,” said Diane Casey-Landry, chief operating officer of the American Bankers Association. “We’re very interested in how they’re going to develop it.” The administration is canvassing the financial services industry and consumer advocates for input on this and other issues. “They want them as soon as possible, so we’re scrambling,” said Paul M. Leonard, vice president of government affairs at the Financial Services Roundtable’s housing policy council.

Obama has pledged to spend $75 billion on loan modifications. About $50 billion would come from federal bailout funds approved by Congress to shore up the financial system, with mortgage financing firms Fannie Mae and Freddie Mac and the Department of Housing and Urban Development also contributing, administration officials said. The HUD money will be used to help fund nonprofit housing groups, the officials said. The money from the Fannie Mae and Freddie Mac will be used pay incentive fees and rate subsidies to mortgage servicers that modify mortgages that the financing agencies own or guarantee.

Even as the administration finalizes details of the mortgage modification program, officials are getting pressure from some groups to include protection for lenders and mortgage servicers that rework a loan and worry they could face a lawsuit from investors.

The Mortgage Bankers Association is also trying to persuade the administration to expand the refinancing portion of the plan. Under that program, the administration will loosen lending standards at Fannie Mae and Freddie Mac to allow millions of homeowners to qualify for refinanced loans as long as their mortgages do not exceed 105 percent of the current value of their property. But with housing prices in a free fall in some parts of the country, including Florida, California and Arizona, that will not be enough for many homeowners.

“We think that 105 percent [loan-to-value ratio] should be revisited,” said Steve O’Connor, senior vice president for government affairs at the mortgage bankers’ group.