Canadian envoy downplaying talk of potential trade rift with the US

Dykstra said the US has increased its dairy exports to Canada by 17 per cent over the last few years.

The claims echo sentiments Mr Trump expressed this week in Wisconsin, addressing employees of Snap-on Tools at a signing for the "Buy American and Hire American" Executive order.

Relations with the USA are crucial as more than 75 percent of Canada's exports go to the US, while 18 percent of US exports go to Canada.

The pricing agreement was a response to growing US exports of milk proteins that were not subject to Canada's high tariffs.

In Canada, through supply management, quotas for milk are set for producers and demand is met with little surplus.

He says the dairy industry in Canada is doing well.

The National Milk Producers Federation said losses for the dairy industries in Wisconsin and NY alone could run into hundreds of millions of dollars.

The governors of Wisconsin and NY sent Trump a letter Tuesday urging him to take action.

At issue is a new pricing agreement struck last spring by Canada's dairy farmers and processors that industry groups in Australia, New Zealand, the European Union, Mexico and the United States say would price domestic milk ingredients, used for making cheese and yoghurt, below cost.

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The state Department of Agriculture, Trade and Consumer Protection (DATCP) is working with dairy farmers and processors on a daily basis. Canadians have rebuked those claims, arguing the United States produces too much milk in a global market already saturated with it.

MacNaughton said his intent with the letter was to correct the record following a letter critical of Canada's supply-management dairy system from the governors of Wisconsin and NY. "As made clear in the report, Canada is not a contributor to the overproduction problem".

As it prepares to enter continental trade negotiations this fall, the U.S.is weighing other actions that affect Canada.

The ambassador also noted that the current dairy trade balance favours the USA five to one - a point he underscored again during a news conference on Wednesday.

MacNaughton called Canada-U.S. relations a "model" for the world, "but it is important that we work together to grow middle-class jobs and not lay blame where is does not belong". "Because in Canada some very unfair things have happened to our dairy farmers and others". Walker said he also planned to talk privately with Trump about the issue during his stop in Wisconsin on Tuesday.

If just 1, 2 or 3 percent of the exports were to come back to the United States, "we would see a significant drop on overall prices", he said. "And it's not going to be happening for long". Trump has said NAFTA puts US workers at a disadvantage.

"Can we renegotiate and get a better NAFTA deal?"

"The whole thing is ridiculous. NAFTA has been very, very bad for our country", Trump said.

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