Harper Presses Obama to Work With Congress to Avert Cliff

Canadian Prime Minister Stephen Harper encouraged U.S. President Barack Obama to work with Congress on preventing automatic tax increases and spending cuts that would push the world’s largest economy into recession.

“We encourage President Obama to work to bring Congress together on a resolution of this issue,” Harper told reporters today in Bangalore during a six-day visit to India. The so- called fiscal cliff is $607 billion of spending reductions and expiring tax cuts scheduled to take effect beginning in January.

“The world would be immensely helped if the Americans could deal with this immediate issue, and the Europeans could accelerate progress on their debt issues,” said Harper.

Canada is preparing for the chance the U.S. doesn’t change course, Harper said. “The government, as best we can, does always look at contingency plans for these things,” he said, without giving details.

Yesterday, Finance Minister Jim Flaherty said the government would be pragmatic and respond if faced with an external economic shock, and Bank of Canada Governor Mark Carney said he would act if the failure of U.S. lawmakers to avoid the fiscal cliff damages the domestic economy.

During a telephone call to Obama today to congratulate him on his election win, Harper “used the opportunity to convey to the president the importance of the White House and Congress working together to tackle the U.S. fiscal situation,” according to an e-mailed statement from spokesman Andrew MacDougall.

Keystone Approval

Harper is trying to deepen trade and investment with emerging economies such as India to reduce Canada’s reliance on the U.S., which consumes about two-thirds of Canadian exports. He has said the U.S. rejection of TransCanada Corp. (TRP)’s Keystone XL pipeline underscores the need to seek other markets for the world’s third-largest oil reserves.

The prime minister said his Conservative Party government will be watching “with great interest” whether Obama, who was re-elected this week for another four-year term, approves the pipeline. Obama invited TransCanada to re-apply for approval after he initially blocked the project in January.

Obama has “said repeatedly to us he hasn’t made a decision,” Harper said. “Our position is extremely well known and supported by business and labor in the U.S.”

The 1,661-mile (2,673-kilometer) pipeline would carry crude from Alberta’s oil sands to refineries along the Gulf of Mexico, crossing six U.S. states. Environmentalists have said the pipeline will increase greenhouse gas emissions tied to climate change and endanger drinking water supplies in Nebraska.

Diversify Trade

While the U.S. will remain Canada’s biggest trading partner for the “foreseeable future,” that economy will probably grow slowly, the Harper said. “It is obviously critical, not just in the energy sector but across the Canadian economy, that we continue to build our trade relationships and diversify our trade and investment,” he said.

Harper this week urged India and Canada to redouble efforts to exploit the “massive” potential for trade and investment between the two countries.

Canadian officials are seeking to ease concern the government is resistant to foreign investment after it blocked Malaysia’s state-owned oil company’s bid for Progress Energy Resources Corp. (PRQ) last month. It also extended for a second time its review of Beijing-based Cnooc Ltd. (883)’s $15.1 billion takeover bid for Nexen Inc. (NXY) on Nov. 2, with a final decision now due by Dec. 10.

Extremely Open

Decisions about major investments “have to be taken looking at the evolving global economy in which we operate,” Harper told reporters this week in New Delhi before meeting Indian Prime Minister Manmohan Singh. “Canada remains, in relative terms, extremely open to foreign investment compared to a country like India.”

Harper declined to comment today when asked what he meant in citing the “evolving global economy.”

“The government of Canada has some very important decisions before it on which it will take public positions in the very near future, along with positions on some of the broader policy questions,” he said.

Canada understands that India’s political system can make it difficult to push through economic reforms needed to expand trade, Harper said.

“Although democracy can slow things down from time to time, in the long term, democracy produces more robust consensus that means better things for the long term,” he said.

To contact the reporter on this story: Andrew Mayeda in Bangalore, India at amayeda@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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