NAFTA ministers meet to work on possible deal, focus on autos

By David Lawder and David Ljunggren

WASHINGTON/OTTAWA (Reuters) - Top U.S., Mexican and Canadian trade officials met on Friday to discuss prospects for updating the North American Free Trade Agreement amid pressure from Washington to strike a quick deal despite several unresolved issues.

No time limit has been set for the Washington talks between U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland, a Canadian government source said.

Lighthizer, citing the need to avoid clashing with a Mexican presidential election on July 1, says he wants a deal in principle to update the regional trade pact.

U.S. President Donald Trump, who has repeatedly threatened to walk away from the $1.2 trillion pact unless major changes are made, on Thursday said the three nations should have something to announce fairly soon.

Mexican and Canadian officials say some kind of an announcement could be made at a regional summit in Lima, Peru at the end of next week.

"We are going to have good conversations ... I am looking forward to productive meetings today," Freeland told reporters on her way into the talks.

Rogelio Garza, Mexico's deputy minister for industry and commerce, told a food industry event that "I'm very convinced and have a good expectation that we will reach an agreement on the free trade agreement very, very soon".

Unveiling the outlines of a deal would allow leaders to claim a political victory while leaving officials to work out the precise details in the months to come.

It would also enable Trump and his trade team to focus on a widening trade dispute with China that could hurt the world's two biggest economies.

Yet major challenges remain, including a U.S. demand that the North American content of vehicles made in NAFTA countries be increased to 85 percent from 62.5 percent.

A Mexican source said U.S. negotiators had shown "some flexibility" on the so-called rules of origin issue, adding that the three nations were now looking at alternatives.

Insiders say, however, that the question of automotive content has to be nailed down quickly.

"We are dealing in black and white. You can't leave things gray," said one source with direct knowledge of the talks, citing the huge complexity of the industry.

"The last thing you want to do is to be making something that isn't compliant and to be told in an audit 'You're not NAFTA compliant and you owe duties,'" said the source, who requested anonymity given the sensitivity of the situation.

Canada's chief negotiator last week said there were still major differences over government procurement and dispute resolution.

The lack of clarity over the pact's future has hit the Canadian and Mexican currencies in recent months as well as worrying financial markets which are also on edge about possible damage to the highly integrated North American market.

Royal Bank of Canada Chief Executive Dave McKay on Friday said uncertainty over the pact was concern for the bank's customers, but he remained hopeful a deal would be reached.

A dispute between Washington and Mexico City over Trump's plan to send National Guard troops to the border is also hanging over the talks. Mexican President Enrique Pena Nieto on Thursday sharply rebuked Trump.

(Additional reporting by Lizbeth Diaz and Anthony Esposito in Mexico City and Matt Scuffham in Toronto; editing by Susan Thomas and G Crosse)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)