UPDATE 1-NAFTA talks face big challenges over U.S. demands - Canada

(Adds comments by foreign minister, background)

OTTAWA, Feb 8 (Reuters) - Serious challenges remain to be solved at talks to modernize the NAFTA trade accord, in particular over hardline U.S. demands for major reforms, Canadian Foreign Minister Chrystia Freeland said on Thursday.

Freeland told the House of Commons foreign affairs committee that Canada would only accept a deal that was in its national interest.

Talks to modernize the 1994 North American Free Trade Agreement (NAFTA) have slowed down as Canada and Mexico struggle to address the proposed changes.

"Serious challenges remain, particularly in regard to the U.S. unconventional proposals," said Freeland. "Canada will only accept an agreement that is in our national interest and respects Canadian values."

Canadian Prime Minister Justin Trudeau said on Wednesday that Canada "might very well be better off" not signing up to an updated version of NAFTA rather than accepting a bad deal.

The administration of U.S. President Donald Trump, which has repeatedly threatened to walk away from the trade pact, wants more North American content in autos and is pressing for a sunset clause that would allow one party to pull out of the treaty after five years. (Reporting by David Ljunggren; Editing by Sandra Maler)