Canada will be watching how the United States implements the "Buy American" clause in its stimulus package, because it could quickly send the world economy from recession into depression, Prime Minister Stephen Harper said on Wednesday.

"This is a huge risk to the world right now," Harper told CNN on the eve of President Barack Obama's visit to Ottawa. "There is one thing that could turn a recession into a depression — it is protectionist measures across the world."

The final version of the $787 billion US economic recovery plan that Obama signed into law on Tuesday requires that only U.S.-made iron, steel and manufactured goods be used for public works projects receiving money from the package.

"These provisions have been a concern worldwide," Harper said.

Harper will be meeting with Obama on Parliament Hill on Thursday. It is the new president's first official foreign visit. Economic and trade issues are expected to be the top items of discussion.

Harper said Canada believes the caveat that the "Buy American" clause won't be allowed to violate any of the U.S.'s international trade obligations — but he added that the world will be watching the implementation of the clause.

During an interview with CBC's chief correspondent Peter Mansbridge on Tuesday, Obama said that Canadians shouldn't be "too concerned" about the "Buy American" clause.

"My administration is committed to making sure that even as we take steps to strengthen the U.S. economy, that we are doing so in a way that actually over time will enhance the ability of trading partners, like Canada, to work within our boundaries," Obama said.

If the United States does violate its trade agreements, Canada will take action under international trade law, Harper warned.

"I think this is a debate we would rather avoid," he said.

Committed to stimulus

All major economies are committed to stimulus, the prime minister said.

"Part of the reason we're committed to co-ordinated stimulus is because we want to stimulate the global economy," he said.

"If we start thinking simply nationally and start having policies that try and restrict the benefits only within our borders and try and implement protectionist measures, this will not have the effect we need to have on the global economy, and it's the global economy that's pulling most of us down."

Harper said he believes Obama is aware of that risk and is also concerned about the possibilities.

The prime minister also reminded Americans during the Situation Room interview with Wolf Blitzer that Canada didn't impose "Buy Canada" provisions in its stimulus package.

"We actually removed duties on some important imports partly for our own interest and to stimulate trade," he said.

Willing to discuss NAFTA

During the interview, Harper also discussed the North American Free Trade Agreement.

Obama had caused a stir in Canada during his campaign when he suggested NAFTA should be reopened to protect American jobs.

Obama told CBC on Tuesday there are "a lot of sensitivities right now" about renegotiating trade pacts because of the huge decline in world trade.

Still, he said he has always wanted side agreements on environmental and labour protections to be incorporated into the full NAFTA text "so that they're enforceable."

"We're the biggest trade relationship in the world," Harper said. "We're always willing to look at ways it could work better, but it's a fine line .… If you open the agreement, I think you could get into a negotiation that would never terminate."