As clock ticks, Canada and U.S seek ways to salvage NAFTA

[August 30, 2018]  By Julie Gordon and Sharay Angulo

WASHINGTON (Reuters) - Talks between Canada and the United States are intensifying as the two countries push to hammer out a deal on a revamped North American Free Trade Agreement by a Friday deadline, with both sides upbeat about the progress made so far.

Despite some contentious issues still on the table, the increasingly positive tone contrasted with U.S. President Donald Trump's harsh criticism of Canada in recent weeks, raising hopes that the year-long talks will conclude soon with a trilateral agreement.

Negotiations entered a crucial phase this week after the United States and Mexico announced a bilateral deal on Monday, paving the way for Canada to rejoin talks to salvage the 24-year-old accord that accounts for over $1 trillion in annual trade.

Trump has set a Friday deadline for the three countries to reach an agreement, which would allow Mexican President Enrique Pena Nieto to sign it before he leaves office at the end of November. Under U.S. law, Trump must wait 90 days before signing the pact.

The U.S. president has warned he could try to proceed with a deal with Mexico alone and levy tariffs on Canadian-made cars if Ottawa does not come on board, although U.S. lawmakers have said ratifying a bilateral deal would not be easy.

Negotiators were expected to work through the night ahead of more talks on Thursday morning between Canada's lead negotiator, Foreign Minister Chrystia Freeland, and U.S. Trade Representative Robert Lighthizer.

Trump and Canadian Prime Minister Justin Trudeau expressed optimism on Wednesday about reaching an agreement by Friday, although much work remains on specific issues.

One sticking point for Canada is the U.S. effort to dump the Chapter 19 dispute-resolution mechanism that hinders the United States from pursuing anti-dumping and anti-subsidy cases. Lighthizer said on Monday that Mexico had agreed to eliminate the mechanism.

Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan, U.S. August 29, 2018. REUTERS/Rebecca Cook

"I think the Canadian view on Chapter 19 is well known," Freeland told reporters late on Wednesday after a day of talks. "This is a very intense moment in the negotiations. We're trying to get a lot of things done really quickly. I think it will be most effective if we keep our negotiations on specific issues to the negotiating table."

Ottawa is also ready to make concessions on Canada's protected dairy market in a bid to save the dispute-settlement system, the Globe and Mail reported on Tuesday. The dairy sector has repeatedly attracted Trump's fury.

That compromise is likely to upset Canadian dairy farmers, who have an outsized influence in Canadian politics, with their concentration in the vote-rich provinces of Ontario and Quebec.

"Ultimately, we've got huge issues that are still to be resolved," said Jerry Dias, head of Canada's influential Unifor labor union. "Either we're going to be trading partners or we're going to fight."

(Reporting by Julie Gordon and Sharay Angulo; Writing by Denny Thomas; Editing by Peter Cooney)

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