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Israeli Prime Minister Benjamin Netanyahu and U.S. President Barack Obama meet in the Oval Office on May 20, 2011.

Charles Dharapak/The Associated Press/Charles Dharapak/The Associated Press

The Harper government is refusing to join the United States in calling for a return to 1967 borders as a starting point for Mideast peace, a position that has drawn sharp criticism from Canada's staunch ally Israel.

At a briefing ahead of the upcoming G8 summit in France, federal officials said the basis for the negotiations must be mutually agreed upon.

Israel quickly rejected U.S. President Barack Obama's proposal for the talks to be guided by the 1967 borders, with mutually agreed land swaps.

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"What the government of Canada supports is basically a two-state solution that is negotiated," a senior federal official said. "If it's border, if it's others issues, it has to be negotiated, it cannot be unilateral action."

Pressed by reporters, federal officials said both the Israelis and the Palestinians have to decide on their bottom lines, which the Israelis have said will not include a return to the 1967 border.

"If the two parties are of the view that this is a starting point, that is fine for them," said the federal official, who spoke on the condition of anonymity.

The Prime Minister's director of communications, Dimitri Soudas, added that Canada's position continues to be the search for a two-state solution.

"No solution, ultimately, is possible without both parties sitting down, negotiating and agreeing on what that final outcome will look like," he said.

Mr. Obama boosted Palestinian hopes for an independent state during a speech by pointedly calling on Israel to regard its 1967 borders as the basis for a neighbouring Palestinian state in Gaza and the West Bank.

"The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognized borders are established for both states," Mr. Obama said Thursday - apparently the first time a U.S. president has drawn a line in the sand by publicly using the "1967 lines" phrase.

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Mr. Obama's deliberate use of the phrase touched off a furor, even if the basic outlines of a peace settlement remain unchanged.

It came in a wide-ranging speech that staked out American support for democratic reform in the Middle East that served notice on Arab dictators - allies as well as adversaries - that they need to heed the call for change or face ouster.

"At a time when the people of the Middle East and North Africa are casting off the burdens of the past, the drive for a lasting peace that ends the [Arab-Israeli]conflict and resolves all claims is more urgent than ever," the President said in a speech timed for evening television audiences throughout the Middle East.

Infuriated, Israeli Prime Minister Benjamin Netanyahu rejected any "full and complete return" to the pre-1967 frontiers, citing "new realities on the ground," by which he means the sprawling Jewish suburbs ranging east of Jerusalem and scattered settlements occupying strategic points throughout the West Bank. Israel defeated Arab nations in 1967, seizing Gaza, Old Jerusalem, the West Bank and the Golan Heights.

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