By Mark Felsenthal and Lizbeth Diaz
TOLUCA, Mexico (Reuters) - U.S. President Barack Obama and his Canadian and Mexican counterparts on Wednesday discussed ways to reduce any trade frictions at summit in central Mexico of the North American leaders dubbed the "Three Amigos."
U.S. Commerce Secretary Penny Pritzker said earlier this month that the 20-year anniversary of the North American Free Trade Agreement (NAFTA) between the three nations was an appropriate moment to look at how to "upgrade" North American trade ties.
However, retooling the trade pact between Canada, Mexico and the United States is not necessary because trans-Pacific talks will cover any gaps left by NAFTA, Mexican Foreign Minister Jose Antonio Meade said this week.
"We have every incentive to make this work," Obama said in the central city of Toluca after meeting with Mexican President Enrique Pena Nieto and Canadian Prime Minister Stephen Harper.
"So a lot of our conversation has focused on how do we reduce any continuing trade frictions, how do we make sure that our borders are more efficient?"
The topic of the Keystone XL oil pipeline was discussed, with the leaders saying privately what both have already said publicly, the White House said.
The project would transport Canadian crude deep into the United States and shape the distribution of crude supplies in the region. Mexico is already beginning to diversify its oil exports away from the United States given surging production there.
Harper singled out the company behind the pipeline, TransCanada, but did not mention the project, the top bilateral economic issue between the United States and Canada.
"The kinds of Canadian firms that are seizing the opportunities ... have tremendous growth prospects in fields such as energy," Harper said, flanked by Obama and Pena Nieto.
As the leaders met, a Nebraska court on Wednesday invalidated the governor's decision to allow the Keystone XL pipeline to pass through the Midwestern state, casting new uncertainty over the controversial project to link Alberta's oil sands with refineries in Texas.
Obama will have the final say on whether to allow the more than $5 billion pipeline, a decision not expected for many months. Obama has said in the past that he believed the pipeline should go ahead "only if this project does not significantly exacerbate the problem of carbon pollution."
Mexico, the world's 10th biggest crude producer, has said it does not see the pipeline as a competitive threat.
Obama earlier praised Pena Nieto for overhauling swathes of Mexico's economy, including the key energy and telecoms sectors, in a bid to boost competition and economic growth that has long lagged that of regional peers. However, it will be years before the full economic impact of the reforms is felt.
"I want to congratulate President Pena Nieto on the outstanding efforts that he's made ... on a whole range of reforms that promise to make Mexico more competitive and increase opportunity for the people of Mexico," Obama said.
Mexico's Economy Minister Ildefonso Guajardo told Reuters on Tuesday Pena Nieto's economic reforms should help lift foreign direct investment in Mexico to between $30 billion and $40 billion a year by 2016. The United States is Mexico's top trade partner.
(Additional reporting by David Alire Garcia and Julia Symmes Cobb in Mexico City and Roberta Rampton and Steve Holland in Washington; Writing by Simon Gardner; Editing by Ken Wills and Cynthia Osterman)