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Ambassador Says Canada Is Open to Renegotiating NAFTA with Trump

But analysts have long warned that opening the trade agreement up would be a disaster.

Photo by Gage Skidmore / Creative Commons.

David McNaughton, Canada's Ambassador to the United States, says the Trudeau administration is open to renegotiating the North American Free Trade Agreement, which US president-elect Donald Trump called a "disaster" during his campaign and threatened to scrap.

As fall-out from Trump's extraordinary win continues, Mexico President Peña Nieto also came out to say that he would work with Trump's administration, tweeting that "Mexico and the United States are friends, partners and allies and we should keep collaborating for the competitiveness and development of North America."

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But Canada took it a step further and agreed that aspects of the deal could be re-written.

"I think any agreement can be improved," said McNaughton in a conference call with reporters, although he wouldn't go into details on Canada's position. "The worst thing we could do right now is negotiate in public."

Trump would need to convince two-thirds of the Senate to go along with his plan in order to launch new rounds of negotiations, something that may prove difficult, even in a Republican-majority Senate — but not impossible.

An overhaul, however, has been lambasted by analysts. Jorge Mariscal, an analyst with investment giant UBS Wealth Management, said re-opening the deal "would be a disaster."

"In the 23 years since the creation of NAFTA there has been a remarkable process of rational economic integration among member countries, allowing them to benefit from their relative comparative advantages and resource endowments," Mariscal wrote in a CNBC op-ed in August. "A sudden breakup of such symbiotic relationship would inflict pain on all countries involved."

McNaughton did say the issue of softwood lumber, which has been a strain on US-Canada relations for years and was not part of the original agreement, would be a priority.

Round-after-round of lawsuits have dragged the softwood lumber dispute through NAFTA's trade tribunal.

McNaughton said the government has been in negotiations on the softwood lumber issue for months, and hopes to have a deal finalized by the time the Obama administration leaves power.

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"The only people that will benefit from litigation on this file are lawyers, and frankly I'd rather have our people who work in the forests and work in the mills, both sides of the border, benefit—not lawyers," he said. "I'm hoping within the next month or so, we can come to sort of sensible agreement with the … current administration that could be supported by the industry and by congress."

During his campaign, Trump said he would renegotiate the agreement—or, failing that, rip it up. It was established in 1994 between Canada, the United States, and Mexico, and eliminated most tariffs on trade flowing across the continent. Trump has promised to re-implement many of those tariffs to, for example, prevent car companies from building products in Canada or Mexico that are meant for American consumption.

Trump said in a campaign speech that if Canada and Mexico didn't agree to renegotiate, he'd submit notice that the US intends to withdraw from the deal.

He reiterated this statement on Twitter on election day, writing, "After visiting the rust belt the last week I have seen the terrible side effects of NAFTA. We must renegotiate our failed trade deals!"

NAFTA replaced the Canada-US Free Trade Agreement, which had been in place since 1987. This is the agreement that could come back into effect if a satisfactory deal isn't reached and the US invokes a clause to get out of it.

"We'll go into any discussions on NAFTA with an open mind, but at the end of the day, I can't imagine them wanting to re-open the Canada-US Free Trade Agreement," said McNaughto.

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