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Canada 'optimistic' as NAFTA talks with US enter crucial phase

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Washington (AFP)

Canadian trade officials are "optimistic" they can make progress this week as they began a crucial phase of talks with the United States on Wednesday to try to bridge their differences and agree on a rewrite of the North American Free Trade Agreement.

After Mexico paved the way by agreeing to a NAFTA 2.0 with the United States, Canada's Foreign Minister Chrystia Freeland said officials on Tuesday had worked late into the night on outstanding issues.

She told reporters she already had spoken with US Trade Representative Robert Lighthizer by telephone early Wednesday before arriving for the second day of in-person meetings.

While she acknowledged the issues were "complicated" she said the concessions made by Mexico in talks over the last few weeks would ease the final negotiations.

"Mexico has made some significant concessions, which will be really good for Canadian workers," she said on the steps of the US Trade Representative's office. "On that basis, we are optimistic about having some very good productive conversations this week."

She did not directly respond to a question about whether the sides would meet a Friday deadline to commit to the new NAFTA -- the day Lighthizer said he will officially notify the US Congress of the intention to enter into a new trade agreement in 90 days.

After months of intense talks, the United States and Mexico announced an agreement on Monday to overhaul the 25-year-old free trade pact.

President Donald Trump said he could leave Canada out and press ahead with a two-party deal, but Mexican and Canadian officials have insisted it must remain a trilateral agreement.

The sticking points between Ottawa and Washington likely will center on Canada's managed dairy market and how to handle some disputes among NAFTA partners.

And Canadian Prime Minister Justin Trudeau has made it clear he would only sign a new trade pact he considered good for his country.

- 'High-level' agreement -

Negotiators have worked for a year to update and rewrite NAFTA.

But in the last five weeks, Washington and Mexico City held talks to resolve their bilateral issues, especially on the auto industry rules, without Ottawa.

While critics said Canada had been frozen out, Freeland said she has been in close touch with her US and Mexican counterparts throughout the summer and had already achieved "a high-level agreement with the US" on the pending issues.

Freeland told reporters on Tuesday that Canada would stand firm "while looking for areas where we can find a compromise."

She met late Tuesday night with her Mexican counterparts, who had remained in Washington after announcing the breakthrough with the United States.

The outlines of the new NAFTA include a higher percentage of locally-produced components in autos, tougher worker protections and a provision to review the 16-year deal every six years.

Still, Trump said he would take a tough line with Canada on dairy trade -- long a source of tension between the neighboring countries.

Trudeau has nevertheless vowed not to give in to Washington's demands to alter the system under which Ottawa sets dairy production quotas and prices, with steep tariffs on imports.

"My position on defending supply management has not changed. We will defend supply management," Trudeau said.

The system has been in place since the 1970s and has survived several attempts to undo it.

Trudeau faces political pressure with elections due in a year, which could make him wary of being seen as capitulating to Trump, especially on dairy.

- Time pressure -

Canada also objects to the US call to eliminate bi-national panels to resolve trade disputes among NAFTA partners under Chapter 19, which appears to have been dropped in the deal with Mexico. Canada has used the provision to challenge US anti-dumping and countervailing duties.

But Washington backed away from a strenuously-opposed provision to require the three nations to renegotiate the trade pact after five years. Instead, the agreement with Mexico extends NAFTA for 16 years but with a review every six years.

The White House is pushing to finalize things quickly so that Outgoing Mexican President Enrique Pena Nieto can sign the treaty before handing the reins over to President-elect Andres Manuel Lopez Obrador on December 1.

Pena Nieto said the deal with the United States means the sides are now "in the final stretch of a trilateral deal."

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