Stephen Harper in the Situation Room

Video of this historic meeting, does not yet seem to be available, but  Here’s the text of the Prime Minister’s interview with Wolf Blitzer today—noteworthy, if nothing else, for the fact that CNN feels the need to capitalize THE SITUATION ROOM in its transcripts. (Video is now here. Note that the Canadian flag is not positioned directly behind Mr. Harper.)

Blitzer promises more tomorrow. 

One can only hope it turns out to be as exciting as Lou Dobbs v. Jack Layton.

I’m Wolf Blitzer. You’re in THE SITUATION ROOM. .

President Obama’s getting ready for his first foreign trip as president. Destination: Canada. It’s a trip to a warm American ally, but there are some serious issues to discuss between the U.S. and Canada.

Just a short while ago, I spoke with the prime minister of Canada, Stephen Harper, in an exclusive interview.


BLITZER: Prime Minister, let’s talk about some of the economic issues…


BLITZER: … the U.S. and Canada right now.

In the economic stimulus package that President Obama signed into law — and I’ll quote from an editorial in the “Los Angeles Times” — “The final version signed Tuesday states that only U.S. steel and other materials will be used in the public works projects funded under the $787 billion measure, unless doing so would violate existing trade agreements.” The editorial was entitled “Obama to Canada: Sorry.”

What do you say about that? How is that going to play in Canada?

HARPER: Well, look, this is a — as you know, these provisions in the stimulus package have been a concern worldwide. That said, the package was modified to say that the U.S. would respect its international trade obligations. Obviously, we’ll be watching the implementation of that.

In Canada, we’ve just proceeded with our own stimulus package. It’s not quite as big as the United States, because obviously our economic difficulties at this point are not nearly as deep. But nevertheless, we have a stimulus package ourselves. We didn’t impose “Buy Canada” provisions. In fact, on the contrary, we actually removed duties on some important imports, partly for our own interests, and partly to stimulate trade.

I do think, Wolf, this is a huge risk to the world right now. If there is one thing that could turn a recession into a depression, it is protectionist measures across the world.

I’m very encouraged by the fact that President Obama said that he was concerned about that as well. And I’m confident with the modifications that are made, that the administration will implement this in a responsible way that won’t cause protectionist actions across the globe, because that would truly plunge us into a very long and deep economic…


BLITZER: Because the devil is in the details, as they say. If you don’t like the way they implement this provision, would Canada retaliate?

HARPER: Well, look, if any country doesn’t respect its obligations, Canada and other countries have recourse under international trade law. That said, Wolf, I think this is a debate we would rather avoid.

What we said at the G-20 last year, in November, was that all major economies would be committed to stimulus and would be committed to avoiding protectionist measures. I — and part of the reason we’re all committed to coordinated stimulus is we want to stimulate the global economy. We’re in a global economy, not just our national economies.

If we start thinking simply nationally, and we start having policies that try and restrict the benefits only within our borders, and try and implement protectionist measures as a consequence, this will not have the effect we need to have on the global economy. And that’s ultimately the global economy that’s pulling most of us down, particularly countries like Canada, that aren’t the source of these current economic troubles.

BLITZER: As you know, another potential thorn out there in U.S.- Canadian relations involves NAFTA, the North American Free Trade Agreement. You remember what President Obama said during the campaign about reopening perhaps some of the provisions of NAFTA.

Here is what he told the CBC this week.


OBAMA: As I’ve said before, NAFTA, the basic framework of the agreement, has environment 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.

(END VIDEO CLIP) BLITZER: Are you open to reopening NAFTA, if you will?

STEPHEN HARPER, CANADIAN PRIME MINISTER: Well, I think we have to be careful what we’re talking about.

Obviously, we’re always prepared to look at ways to make NAFTA work better. I think, quite frankly, NAFTA and the predecessor, Canada-U.S. Free Trade Agreement, have been very good for both countries. I don’t think, in any way, we’re each other’s trading problems. We’re the biggest trade relationship in the world. It has grown exponentially on both sides under this agreement. So, I think it’s all very positive.

We’re always willing to look at ways it can work better. But it’s a fine line between looking at ways to make it work better and actually starting to open the agreement. I think, if you actually opened the agreement, I think you would get into a negotiation that — that would never terminate.

I’m — I don’t think that’s what President Obama is looking for, but, obviously, I’m looking forward to having a discussion on — on these kinds of trade and economic matters with him.

BLITZER: The president was complimentary to Canada on how it’s been dealing with its economic crisis, especially in the banking sector.

Listen to this excerpt of what he told the CBC.


OBAMA: In the midst of this enormous economic crisis, I think Canada has shown itself to be a pretty good manager of the financial system and the economy in ways that we always — haven’t always been here in the United States.


BLITZER: All right, now, we know the Canadian economy is obviously a lot smaller than the U.S. economy.

But what have you done? What advice would you have for the U.S. in how to deal with this banking sector? Correct me if I’m wrong, has the Canadian federal government been forced to bank out the — the major Canadian banks?

HARPER: No, we have been in — we have gone into the financial sector, and we have done some market transactions to improve liquidity.

But the fact of the matter is, we have the strongest banking system in the world. That’s what the — I think it was the IMF that said that. We haven’t had to bail out our financial institutions. But the fact is, because we’re in a global financial market, their ability to lend and to lend at competitive prices has been impacted by all of this. Look, you know, it’s — it’s — it’s hard for me to give advice to the United States. I would just say the — there are some big differences here. I look at President Obama in the last few days as trying to deal with three major issues. He’s got the financial sector package. He’s got the housing package. And he’s got the — the economic stimulus.

In Canada, we have a — a strong and stable banking sector, as I said, the strongest in the world. In housing, Wolf, we have, you know, a cyclical downturn, along with everybody else, but we don’t have anywhere near the subprime or structural problems that you have in the United States. That’s been through, quite frankly, better and more accurate regulations, and also, I think, a more conservative financial sector.

We’re doing stimulus as well, but we’re also doing that from a position — a position of financial strength. Our — our government is in a — has been in a surplus position up until this year. We should be able to recover to a surplus position shortly, as — as quickly as the economy recovers.

So, we’re able to do the kind of stimulus that you see in the United States without — without deteriorating our — our debt position in the long-term.


BLITZER: We’re going to have more of our exclusive interview with the prime minister of Canada coming up tomorrow right here in THE SITUATION ROOM.