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CBC chief correspondent Peter Mansbridge interviews U.S. President Barack Obama at the White House on Tuesday. ((CBC))

Washington's mammoth economic stimulus package will "enhance" the ability of trading partners such as Canada to work within U.S. borders over time, U.S. President Barack Obama told CBC News on Tuesday in an exclusive interview from Washington.

The interview with the CBC's chief correspondent Peter Mansbridge took place in the White House on Tuesday morning ahead of Obama's first official foreign visit as president with Prime Minister Stephen Harper in Ottawa on Thursday.

During the interview, Obama said Canadians should not be "too concerned" that a "Buy American" clause is still included in the $787-billion US recovery plan that he signed into law later in the day.

The president, who has previously spoken about the dangers of sparking trade wars, said history shows "beggar thy neighbour" protectionist policies can actually end up further contracting world trade during global recessions.

"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," he said.

The "Buy American" provision requires public works projects receiving money from the federal stimulus package to use U.S.-made iron, steel and manufactured goods.

After hard lobbying from Canada, the European Union and several prominent U.S. corporations, lawmakers in Washington added a caveat to the provision to clarify "Buy American" must not violate international trade agreements.

Obama said he expects "a lot of governors and mayors" will demand the stimulus projects buy products and services from U.S. companies, instead of foreign competitors.

"But … we are going to abide by our World Trade Organization and NAFTA obligations just as we always have," Obama said.

Canada's financial system a 'good manager'

The president also offered high praise for Canada's financial system, which has been credited with avoiding deregulation that got banks into trouble in other countries, especially his own.

"One of the things that I think has been striking about Canada is that in the midst of this enormous economic crisis, I think Canada has shown itself to be a pretty good manager of the financial system in the economy in ways that we haven't always been here in the United States," he said.

"And I think that's important for us to take note of, that it's possible for us to have a vibrant banking sector, for example, without taking some of the wild risks that have resulted in so much trouble on Wall Street."

When asked about the future of the North American Free Trade Agreement, Obama said there are "a lot of sensitivities right now" about renegotiating trade pacts because of the huge decline in world trade.

But 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."

"But what I've also said is that Canada is one of our most important trading partners, we rely on them heavily, there's $1.5 billion worth of trade going back and forth every day between the two countries and that it is not in anybody's interest to see that trade diminish," he added.

Afghan problems won't be solved 'solely by military means'

Speaking on the Afghanistan mission, Obama said his administration is conducting a strategic review of its Afghan strategy and will release its initial plans for the military component "very soon."

But the president said he did not have a specific request he planned to make at Thursday's meeting for Harper to reconsider the decision to end Canada's military mission in the country's volatile south in February 2011.

"We've got until 2011, according to the Canadian legislature, and I think it's important for the Canadian legislature and the people of Canada to get a sense that what they're doing is productive," he said.

He said he would continue to ask other countries, including Canada, to help build a "comprehensive strategy" using diplomacy and development to counter the growing Taliban insurgency in Afghanistan.

"I am absolutely convinced that you cannot solve the problem of Afghanistan, the Taliban, the spread of extremism in that region solely through military means," he said.

"We're going to have to use diplomacy. We're going to have to use development and my hope is that in conversations I have with Prime Minister Harper, that he and I end up seeing the importance of a comprehensive strategy, and one that ultimately the people of Canada can support, as well as that the American people can support."

Speaking Tuesday, Liberal leader Michael Ignatieff said Canada shouldn't extend its military mission in Afghanistan even if Obama requests it.

Ignatieff said he would press his opposition when he meets with Obama during the visit.

'Heartfelt thanks' to Canada's military families

The president also hailed the contribution of Canadian soldiers and their families, including the loss of 108 troops and one diplomat during the NATO-led mission, as "extraordinary."

"For all the families that have borne the burden in Canada, we all have a heartfelt thanks," he said.

Obama added he understood the frustration some Canadians feel over the direction of the Afghanistan mission amid growing casualties and increased militant attacks.

"Obviously here as well, there are a lot of concerns about a conflict that has lasted quite a long time now and actually appears to be deteriorating at this point," Obama said.

Obama said despite the challenges and setbacks in Afghanistan, he believes the conflict is "still winnable."

"I think it's still possible for us to stamp out al-Qaeda to make sure that extremism is not expanding but rather is contracting," he said.

"I think all those goals are still possible, but I think that as a consequence to the war on Iraq, we took our eye off the ball.  We have not been as focused as we need to be on all the various steps that are needed in order to deal with Afghanistan."

U.S., Canada face energy, carbon emissions challenges together

When Mansbridge asked whether Obama considered energy emerging from Canada's oil sands "dirty oil," Obama said his administration understands the oil sands "creates a big carbon footprint," as does coal, the cheap energy source abundant in the United States.

"I think that it is possible for us to create a set of clean energy mechanisms that allow us to use things not just like oil sands, but also coal," he said.

"The United States is the Saudi Arabia of coal, but we have our own homegrown problems in terms of dealing with a cheap energy source that creates a big carbon footprint."

Obama also spoke of the "possibility of a template" regarding a continental energy policy among Canada, the United States and Mexico.

But "no country in isolation is going to be able to solve this problem," he added.

"The dilemma that Canada faces, the United States faces, and China and the entire world faces is how do we obtain the energy that we need to grow our economies in a way that is not rapidly accelerating climate change?" he said.

Obama, who said he has visited Canada a couple of times before becoming president, spoke of the "enormous kinship" between the United States and Canada.

"I think that Canada is one of the most impressive countries in the world, the way it has managed a diverse population, a migrant economy," he said. "You know, the natural beauty of Canada is extraordinary."

"The ties that bind our two countries together are things that are very important to us."