NAFTA uncertainty could be pausing business investment in Canada, Morneau says

Bill Morneau says he understands the uncertainty surrounding NAFTA might be causing some companies to hesitate in making investment decisions.

The federal finance minister made the comments today when asked about the Bank of Canada's warning this week that elevated uncertainty over the future of the North American Free Trade Agreement would drive down investment in Canada.

Central bank governor Stephen Poloz says companies are becoming increasingly concerned about the unknowns of the ongoing NAFTA talks.

Poloz says the uncertainty means firms may decide to redirect their investments south of the border especially after the U.S. announced major, business-friendly tax reforms.

He estimates the trade-policy uncertainty will lower investment by about two per cent by the end of 2019.

Speaking in Toronto, Morneau says the concerns reinforce the argument NAFTA has been a big positive for the economy and that the deal's benefits are well understood by investors.

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NAFTA council member and former cabinet minister James Moore on the latest trade talks.

"Any level of perspective change is something that causes people some pause," Morneau said following a meeting with Mexican counterpart Jose Antonio Gonzalez Anaya.

Negotiators from Canada, Mexico and the U.S. are scheduled to meet next week in Montreal for the sixth round of negotiations.

Despite its concerns about NAFTA uncertainty, the Bank of Canada raised its trend-setting interest rate Wednesday for the third time since July following months of healthier-than-expected economic data.

Morneau said the rate increase was a reflection of the economy's strong run.