Obama plays down G20 rift, reassures China

WASHINGTON (Reuters) – President Barack Obama  rejected suggestions of a rift in the G20 and assured China yesterday its US investments were safe after a meeting with  Brazil’s president that also touched on relations in Latin  America.

Obama and Brazilian President Luiz Inacio Lula da Silva  discussed the economic crisis during their White House visit  and the US president said hints of a split in the G20 were  false.

“I can’t be clearer in saying that there are no sides,”  Obama told reporters about apparent tensions between European  countries and the United States over whether more emphasis  should be placed on spending versus regulatory reform to  address the global financial crisis.

Washington has pushed for increased government spending,  while countries such as France favour more emphasis on tough  market regulation.

Calling it a “phony debate,” Obama said there would be no  firmer proponent of the need for financial regulation reform  than he.

“We have to take a whole range of approaches. Financial  regulation is front and centre,” he said. “We also think we’ve  got to see worldwide concerted action to make sure that this  massive contraction in demand is dealt with.”

Obama also sought to reassure China, which expressed  concern on Friday that massive US deficit spending and  near-zero interest rates would erode the value of China’s huge  US bond holdings.

“Not just the Chinese government but every investor can have absolute confidence in the soundness of investments in the  United States,” Obama said.

“There is a reason why even in the midst of this economic  crisis, you’ve seen actual increases in investment flows here  in the United States. I think it’s a recognition that the  stability not only of our economic system but also our  political system is extraordinary.”

Lula said he told Obama they should work to reopen world trade talks known as the Doha round while acknowledging that could be difficult to achieve during the economic crisis.

“At the same time, (I) believe that to       conclude the Doha  round could be one of the components to relieve the poorest or  less developed countries of the world vis-à-vis this crisis.”

Obama said he was committed to closing “the gap” that had  blocked an agreement from being reached.

“It may be difficult for us to finalize a whole host of  trade deals in the midst of an economic crisis like this one,  although we have committed to sitting down with our Brazilian  counterparts to find ways that we can start closing the gap on  the Doha round and other potential trade agreements.”

Separately, Obama acknowledged that US tariffs on  Brazilian shipments of ethanol to the United States had been “a  source of tension” that would not change overnight.

Brazilian ethanol producers are upset the United States  still levies a 54 cent import tariff on each gallon of exported  Brazilian ethanol. American ethanol producers, who receive  government subsidies, are worried ethanol imports would flood  the US market and hurt their business.

“Over time, the source of tension can get resolved,” Obama  said, without indicating whether there would be an easing of  the US ethanol import tariff, which lasts through 2010.

Lula, a former union chief and a moderate among Latin  America’s leftist leaders, wants the United States to end the  long-standing trade embargo on Cuba and seek a rapprochement  with Venezuela’s socialist president, Hugo Chavez, one of  Washington’s fiercest critics.

“President Obama… has a unique and exceptional position  to improve the relationships with Latin America,” Lula said.

Obama, a Democrat, said he looked forward to visiting  Brazil sometime soon and joked that Republicans would support  such a trip, too, if he got lost in the Amazon.

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