I don't see that.
He says God's command wasn't to kill them all, but then goes on to justify killing them all.
“I would say that God has the right to give and take life as He sees fit. Children die all the time! If you believe in the salvation, as I do, of children, who die, what that meant is that the death of these children meant their salvation. People look at this [genocide] and think life ends at the grave but in fact this was the salvation of these children, who were far better dead … than being raised in this Canaanite culture."
Is the argument that it wasn't genocide because it wasn't racial?
The whole issue here in the definition of ‘genocide’ which isn’t stated. Craig notes that the intent of God’s edict is for the Israelites to gain sole occupancy of the land God gave to them. This involved both killing the present occupants and driving them out. The goal is not to rid the earth of Canaanites but to claim that particular land for the Israelites.