At the start of talks in Washington, U.S. President Donald Trump's top trade adviser, Robert Lighthizer, said Trump was not interested in "a mere tweaking" of the 23-year-old pact, which Trump has threatened to scrap without major changes.

"We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement," Lighthizer, the U.S. trade representative, said at the start of the talks, which reflected Trump's relentless criticism that NAFTA has caused massive U.S. manufacturing job losses.

Lighthizer put Mexico and Canada on notice that the United States would use its clout as their biggest export customer to wring concessions, saying the United States wanted substantially tougher rules of origin, including a requirement of "substantial U.S. content" for autos.

He also signaled a fight over NAFTA's trade dispute settlement system for changes that would allow more anti-dumping duties against Canada and Mexico, saying this provision should "respect our national sovereignty."

Canadian Foreign Minister Chrystia Freeland suggested earlier this week that her country could walk away if the United States insisted on scrapping the "Chapter 19" trade dispute settlement system that requires the use of binational panels.

In her opening statement, Freeland took a swipe at the U.S. fixation on cutting its trade deficits, saying: "Canada does not view trade surpluses or deficits as a primary measure of whether a trading relationship works.

U.S.-Canada-Mexico trade has quadrupled since NAFTA took effect in 1994, surpassing $1 trillion in 2015.