Canada's Trudeau defends dairy system after Trump blast

Canadian Prime Minister Justin Trudeau on Thursday brushed off an attack by U.S. President Donald Trump on Canada's system of dairy protections, saying every nation defended its agricultural industries.

Trudeau told Bloomberg Television that the United States in fact ran a dairy surplus with Canada. Trump took aim at Canada's dairy industry this week and said on Thursday "what they've done to our dairy farm workers is a disgrace".

Canada's dairy sector is protected by high tariffs on imported products and controls on domestic production as a means of supporting prices that farmers receive.

Trudeau said the system, known as supply management, "works very well" in Canada.

"Let's not pretend we're in a global free market when it comes to agriculture," Trudeau said. "Every country protects, for good reason, its agricultural industries."

Trump said on Thursday that the United States will report in the next two weeks what it intends to do with the North American Free Trade Agreement (NAFTA), which he has promised to renegotiate.

The threat to get rid of or alter NAFTA has clouded the economic outlook for Canada, whose biggest trade partner is the United States.

Trudeau said he was not going to "over react" and that he planned to move the trade conversation forward "in a way that both protects our consumers and our agricultural producers."

Despite the tough talk from Trump, Trudeau said he saw an opportunity to engage with the U.S. President.

"He has shown if he says one thing and actually hears good counter arguments or good reasons why he should shift his position, he will take a different position if it's a better one, if the arguments win him over," Trudeau said.

Trudeau said his government has told the new U.S. administration that Canada does not view the negotiations as a "zero-sum game" but that there are ways to improve NAFTA, which also includes Mexico, for everyone.

Trump's comments were the second time this week he has put Canada's dairy industry in his sights after earlier vowing to defend American farmers who have been hurt by Canada's protectionist trade practices.

Trump on Thursday included the lumber, timber and energy sectors in a list of what he said were problematic areas of trade with Canada, but did not give details.

Canada and the United States are embroiled in a long-standing trade dispute over exports of Canadian softwood lumber, which U.S. producers complain are unfairly subsidized.

(Reporting by Leah Schnurr and David Ljunggren in Ottowa; additional reporting by Jeff Mason in Washington; Editing by Grant McCool)