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Canada braces for possible US exit from NAFTA trade pact

US Trade Representative Robert Lighthizer (C), Canadian Foreign Affairs minister Chrystia Freeland (L), and Mexican Secretary of Economy Ildefonso Guajardo Villarreal at the conclusion of the fourth round of NAFTA negotiations
ANDREW CABALLERO-REYNOLDS (AFP)
Since coming to office,Trump has taken an increasingly protectionist stance in dealings with Canada and Mexico

Canada is bracing for a possible US withdrawal from the tripartite North American Free Trade Agreement, a source said Wednesday, ahead of the next round of negotiations due to start in Montreal later this month.

"The Canadian government is aware of the possibility that President Trump may announce the United States' withdrawal from NAFTA," a senior government official told AFP on condition of anonymity.

"We're prepared for that possibility."

In the meantime, the official said, the government is moving ahead with plans to host US and Mexican trade negotiators in Montreal January 23-28.

The US, Canada and Mexico previously gave themselves a March deadline to finish talks.

Canadian Foreign Affairs Minister Chrystia Freeland was in Washington to meet with senior US lawmakers and Secretary of Commerce Wilbur Ross on Tuesday. Her office was not immediately available for comment.

ANDREW CABALLERO-REYNOLDS (AFP/File)

Reports of NAFTA's possible demise, meanwhile, sent the Canadian and Mexican currencies tumbling, and the US dollar rising from Can$1.2432 at 1200 GMT to Can$1.2554 at around 2030 GMT.

In keeping with his campaign promise, Trump forced Canada and Mexico to sit down and renegotiate the 1994 trade pact, and said if a deal could not be reached he would withdraw the United States from NAFTA.

Since coming to office, the Trump administration has taken an increasingly protectionist stance in dealings with Canada and Mexico, for example, applying anti-dumping duties on imports of Canadian aircraft, softwood lumber and most recently newsprint.

Canada in response has filed a complaint to the WTO accusing Washington of breaching dozens of international trade rules.

The Canadian complaint pointed to a slew of US "measures relating to anti-dumping or countervailing duty investigations, reviews or other proceedings, which are inconsistent with its WTO obligations."

Avery Shenfeld, an economist at CIBC said Wednesday a US withdrawal from NAFTA was a downside for Canada's central bank, which had in its forecasts assumed a status quo in trade relations.

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