AP Interview: PM Harper worries over protectionism

WASHINGTON — Canadian Prime Minister Stephen Harper on Sunday portrayed his country's economy, heavily dependent on exports to the United States, as an increasingly troubled victim of the global recession.

Harper's Conservative government routinely boasts that prudent financial regulation has inoculated Canadian banks and investment houses against the near collapse that afflicted the U.S. system last year, but he acknowledged in an interview with The Associated Press that growing unemployment was a deep concern.

Harper once predicted Canada would be the first country to pull out of the recession, but the United States' northern neighbor has seen a dramatic increase in unemployment since the first of the year, much of it linked to contracting exports to the United States.

Canada and the U.S. share the largest trading relationship in the world. More than 70 percent of Canada's exports go to the U.S., where consumers have heavily cut spending — particularly for automobiles, a key sector of the Canadian economy.

"We're being dramatically affected by export markets, by precipitous decline in global output and employment, drops in commodity prices," Harper said. "These are having very real impacts on Canada, impacts that are obviously not entirely within our control."

Canada lost a worse-than-expected 83,000 jobs in February. The U.S. labor pool is 10 times the size of Canada's, meaning its downward tumble was equivalent to a one-month loss in the United States of 830,000 jobs.

As of the February report, Canadian unemployment stood at 7.7 percent, almost a full two points higher than where it was a year ago and the highest in more than five years. The jobless rate in the United States rose to 8.1 percent in February, the highest in more than 25 years.

Harper's government will begin pumping $32 billion into the Canadian economy for capital investment beginning next month, but he said that would only "mitigate short-term effects" of the recession.

As he heads to London on Tuesday for the G-20 summit of the world's largest economies, Harper said his key message, aside from fixing and regulating the global financial system, would be a plea against countries establishing trade barriers.

"The thing that keeps me up at nights the most are the risks of protectionism," he said in his suite in Washington's ornate Willard Intercontinental Hotel.

Should protectionism sweep the globe, he said, that could turn a ravaging recession into a full-blown depression.