By David Ljunggren
OTTAWA (Reuters) - Prime Minister Justin Trudeau said on Wednesday he was optimistic Canada would get a good deal at talks to modernize NAFTA amid signs negotiators could be closer to settling one of the trade pact's most contentious issues.
Officials are due to meet next month for the eighth round of talks, which have bogged down as Canada and Mexico try to digest far-reaching U.S. demands for changes to the $1.2 trillion North American Free Trade Agreement.
People close to the process say the U.S. side, citing the need to finish before Mexican presidential elections in July, is now showing more flexibility.
"We continue to be optimistic about our capacity to get to a good win-win-win (deal)," Trudeau told reporters.
Toronto's Globe and Mail newspaper said the U.S. side had dropped its insistence that all autos made in NAFTA nations should have 50 percent U.S. content. Canada and Mexico had rejected the demand.
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The news helped boost the Canadian dollar to a six-day high against its U.S. counterpart while Mexico's peso firmed more than 1 percent.
A spokesman for Canadian Foreign Minister Chrystia Freeland said he could not comment.
A Canadian source familiar with the talks said the United States was now willing to discuss some of its positions on autos. The source, who declined to be identified given the sensitivity of the situation, said it was unclear whether Washington had withdrawn the 50 percent U.S. content demand.
U.S. President Donald Trump has repeatedly threatened to abandon NAFTA unless major changes are made and a senior legislator from Trudeau's ruling Liberal Party told reporters nothing could be taken for granted.
"There are good signs ... (regarding) automobiles but it's too soon to declare any sort of progress that's definitive," said Andrew Leslie, parliamentary secretary to Freeland.
Mexico's economy minister last week said that if the three nations did not finish the talks by the end of April, the process would drag on at least until December 2018.
Mexico's presidential vote is on July 1 while U.S. congressional elections are set for November.
U.S. Trade Representative Robert Lighthizer on Wednesday said a great deal of progress had been made at the talks, adding that the administration was working closely with the auto industry on content requirements.
Flavio Volpe, president of the Toronto-based Automotive Parts Manufacturers' Association, said the U.S. side had shown more willingness to compromise on content over the last month.
"Everything I hear and see supports the notion that we are collectively working towards a completion" of NAFTA rather than preparing for a U.S. withdrawal, he said by phone.
David MacNaughton, Canada's ambassador to the United States, on Tuesday cited movement on autos but stopped short of saying Washington had dropped its content demand.
"They came back with some ideas that - if you take them to their logical conclusion - would mean that you wouldn't need that requirement," he said.
"Did we get to somewhere where you could shake hands and say 'We've got a deal?' Absolutely not."
(Additional reporting by David Chance and Steve Holland in Washington; Editing by Bernadette Baum, Paul Simao and Susan Thomas)