Canada says NAFTA agreement possible by Friday, but…

By Julie Gordon and Sharay Angulo

WASHINGTON, Aug 29 (Reuters) – Canada said an agreement to salvage the trilateral North American Free Trade Agreement (NAFTA) is possible by a Friday deadline, but it will be hard work to resolve specific issues as talks with the United States entered a second day.

After more than a year of talks, Mexico and the United States announced a bilateral deal on Monday, clearing the way for Canada to rejoin talks to update 24-year-old NAFTA which accounts for over $1 trillion in annual trade between the three nations.

U.S. President Donald Trump set a Friday deadline for the three countries to reach an in-principle agreement, and warned he could proceed with a deal with Mexico alone and levy tariffs on Canada if it does not come on board with revised trade terms.

Canadian Prime Minister Justin Trudeau said meeting the Friday deadline is a possibility and Foreign Minister and lead negotiator Chrystia Freeland said she was encouraged by the talks and progress so far.

“We recognize that there is a possibility of getting there by Friday, but it is only a possibility, because it will hinge on whether or not there is ultimately a good deal for Canada,” he said at a press conference in northern Ontario on Wednesday. “No NAFTA deal is better than a bad NAFTA deal.”

Freeland said she was optimistic that progress can be made this week, but she added: “When it comes to specific issues, we have a huge amount of work to do.”

She declined to name the specific issues, but said on Tuesday that Mexico’s concessions on auto rules of origin and labor rights was a breakthrough.

Ottawa is also ready to make concessions on Canada’s protected dairy market in a bid to save a dispute-settlement system, The Globe and Mail reported late on Tuesday.

After being sidelined from the talks for more than two months, Freeland will be under pressure to accept terms the United States and Mexico worked out. The U.S. Congress also wants a deal that includes Canada.

The three countries are aiming to seal a trade pact by Friday to allow Mexican President Enrique Pena Nieto to sign it before he leaves office at the end of November. The timeline accommodates a 90-day waiting period under U.S. trade law before Trump can sign the pact.

The political implications are big for the other two countries too. Republicans face mid-term elections in November and Trudeau a national one expected by October 2019.

“The strategy is to get a better deal,” White House spokeswoman Sarah Sanders said on Wednesday.

STICKING POINTS

One of the issues for Canada in the revised deal 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.

To save that mechanism, Ottawa plans to change one rule that effectively blocked American farmers from exporting ultrafiltered milk, an ingredient in cheesemaking, to Canada, the Globe and Mail reported, citing sources.

Trudeau repeated on Wednesday that he will defend Canada’s dairy industry.

Other hurdles include intellectual property rights and extensions of copyright protections to 75 years from 50, a higher threshold than Canada has previously supported.

“I think that what they probably need by Friday is some indication from Canada to the Americans that it’s ready to play ball, that they’re ready to negotiate in good faith,” said Mark Warner, a trade lawyer with MAAW Law, which specializes in Canadian and U.S. law.

“If Chrystia Freeland goes down there and she starts going on and on about red lines again, then I think it’s all over,” he added.

(Reporting by Julie Gordon and Sharay Angulo Additional reporting by Susan Harvey, Donia Chiacu, David Lawder, Makini Brice and Jeff Mason; Allison Martell and Anna Mehler Paperny in TORONTO Writing by Denny Thomas Editing by Lisa Shumaker and Susan Thomas)