A senior Canadian foreign ministry official has said it will be “very difficult” to successfully modernize the North American Free Trade Agreement (NAFTA) if the US doesn’t budge on its hardline proposals.

According to Martin Moen, it is hard to see a way forward for the three-country agreement - between the US, Canada and Mexico - because of a number of “problematic” proposals by the Trump administration.

These include boosting US auto content, getting rid of a dispute settlement mechanism, and implementing a clause limiting any new deal to five years.

However, Moen said the so-called ‘Buy American’ proposal might be the most difficult to overcome.

He told an Ottawa business conference: "The US put forward a proposal that they're calling 'dollar-for-dollar' that we fundamentally disagree with.”

The US has insisted that all procurements be of an equal dollar value in each of the three countries. However, due to the size of the Canadian economy in relation to that of its neighbor, the country’s businesses would only be able to bid for “a very limited set of procurements”.

Moen did not say Canada would walk away from negotiations, but he did say Ottawa would continue talking as long as the discussions focused on how to improve and modernize the agreement.

He told the audience: "Canada is not seeking to block a meaningful negotiation. We're not seeking to be in any way slowing things down.

"But there are areas where we just don't see how an effective, rules-based agreement that's going to help our three economies can be built with these kinds of problematic approaches to the fundamental issues."

Moen acknowledged that progress had been made in a number of areas, including digital commerce and small and medium-sized businesses and competition policy. He added that Canada is prepared to continue the necessary work during the next round of talks in Mexico.