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Canadian Ambassador to the United States David MacNaughton prepares to appear before Senate Committee on Foreign Affairs and International Trade, on Parliament Hill, in Ottawa, Wednesday, June 14, 2017.

Fred Chartrand/The Canadian Press

The renegotiation of the North American free-trade agreement must focus on finding changes to the deal that U.S. President Donald Trump can claim as victories, but that won't be harmful to Canada or Mexico, says David MacNaughton, Canada's envoy to Washington.

In a sneak preview of Ottawa's strategy for the high-stakes trade talks, Mr. MacNaughton told a forum in the U.S. capital on Thursday that NAFTA's supporters cannot simply defend the trade deal in its current form. Instead, he suggested, the game will be to propose improvements to the pact that will benefit everyone, but that Mr. Trump can also sell to his base as fulfillment of his campaign promise to overhaul the deal.

"This was such a big part of the President's campaign last year, and for any of us to think that we could sort of just ignore that would be crazy. We have to find ways where he can declare victory without it being seen in either Mexico or Canada as being a loss," Mr. MacNaughton said at the Washington International Trade Association panel, where he appeared alongside his Mexican counterpart Geronimo Gutierrez.

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Mr. MacNaughton cited incorporating e-commerce provisions into NAFTA as one possible example of an improvement all three parties could agree on.

"We have to think about being a little inspirational. Because if all we're doing is defending the status quo, I'll tell you, I think we're going to lose," he said.

Preparations for the renegotiations have kicked into high gear this week, with the United States releasing a list of negotiating objectives and announcing the first round of talks for Aug. 16 to 20 in Washington. The Trump administration has signalled it wants a swift negotiation that wraps up late this year or early next. Mr. MacNaughton and Mr. Gutierrez said it would be difficult but not impossible to work through Washington's gargantuan list of negotiating subjects – there are more than 100 – in such a short time.

"While all of those who have been involved in trade negotiations will tell you it's not possible to do it in the next four months, I don't believe it. If there's goodwill and you really work hard, anything is possible," Mr. MacNaughton said.

Mr. Gutierrez said Mexico is motivated to get the talks done well ahead of its July 1, 2018, presidential election. He said an open trade deal during the campaign would be "a Christmas tree" on which everyone "wants to hang something."

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Despite Mr. Trump's protectionist rhetoric and some of the White House's tough demands – including slashing the trade deficit and scrapping trade arbitration panels – both ambassadors said they were optimistic the administration could be persuaded to cut a deal that benefits all three countries. Mr. MacNaughton pointed to Vice-President Mike Pence's comments at a governors' meeting in Rhode Island last week, in which he said a renegotiated NAFTA would be a "win-win-win" for all three countries.

"I know that people seize on some of the words that the President uses every once in a while, and everybody focuses in on that, but the reality is, in terms of our discussions with the administration, the White House … that's what the United States is focused in on too. 'How do we make this a win-win-win?'" he said.

Mr. Gutierrez said preparatory talks between the three sides have done much to build goodwill. "I think that each side believes that the other guy is trying honestly to reach a deal, and that's very important. We were not there in January of this year," he said. Mr. Gutierrez also denied that Ottawa and Mexico City are teaming up to present a united front against the United States. "There's no need to team up. We are working to achieve common ground among the three partners."

In perhaps a sign of Canada's optimism about the talks, Mr. MacNaughton even felt comfortable cracking a few Trump-themed jokes. Pointing to the United States' trade surplus with Canada in steel and the services industry, he quipped that slashing the trade deficit may not be such a bad idea.

At another point, he exhorted NAFTA's advocates to adopt the slogan "better is always possible," which Justin Trudeau successfully employed in the 2015 election campaign. "I thought about 'Make North America Great Again,'" Mr. MacNaughton deadpanned, "but that's already been used by somebody."

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