By Jason Lange and David Ljunggren
WASHINGTON/OTTAWA (Reuters) - Canada insisted there was still room to salvage the North American Free Trade Agreement as its officials met U.S. negotiators for a second round of talks on Wednesday.
Yet there were few signs that a deal was near, and comments by Canadian Prime Minister Justin Trudeau on Tuesday indicated there would be little compromise from Ottawa on its red-line issues.
President Donald Trump warned on Wednesday that Canada would be the loser from any failure to strike a deal and said that "over the next day or two we'll see what happens".
Last week Trump inked a deal with Mexico and said he was ready to press ahead with a bilateral deal without Canada, effectively killing the three-country pact that has been in existence since 1994 and accounts for $1.2 trillion in trade.
Canada wants a permanent exemption from Trump's steel and aluminium tariffs and the threat of auto tariffs to be removed. It also wants to continue protections for its dairy industry and defend lumber exports to the United States, which have been hit with duties.
Toting popsicles for the waiting press in a sweltering Washington, Canadian Foreign Minister Chrystia Freeland repeated earlier remarks about the negotiations making progress as she entered the U.S. Trade Representative offices in the capital to meet with Robert Lighthizer, Trump's top trade official.
As the two sides met for talks, new economic data showed that the U.S. trade deficit with Canada grew to $3.1 billion in July. This could provide ammunition to Trump who has accused Canada of "cheating" Americans.
Trump nearly tore up the NAFTA pact last year after visiting farmers in Wisconsin, a major U.S. producer of dairy products that Washington says has been hurt by Canadian protectionism.
Trump charges that the 1994 pact, which underpins $1.2 trillion in trade between the three countries, has caused the loss of hundreds of thousands of U.S. jobs, a statement most economists dispute.
Data released on Wednesday showed the U.S. trade deficit hit a five-month high of $50 billion. The shortfall with Canada shot up 57.6 percent.
Trump has notified Congress that he intends to sign a trade deal reached last week with Mexico by the end of November and officials said the text would be published by around Oct. 1.
But Canadian officials, who note increasing political pressure on Trump from U.S. business and labour circles to keep NAFTA as a trilateral arrangement, said they were in no hurry.
"We're not saying we don't want to move swiftly to try and get a deal. But I think certainly we were always intending to take as long as it was going to take," said a government source who declined to be identified given the sensitivity of the situation.
"We're seeing goodwill on all sides and if we see some more flexibility, then I think we can start to see things moving in a good direction," added the source.
Negotiators have blown through several deadlines since the talks started in August 2017. As the process grinds on, some in Washington insist Trump cannot pull out of NAFTA without the approval of Congress.
"Trump is relying on bluster and bullying in a desperate attempt to get Congress to swallow his half-baked deal. You can't fix NAFTA without fixing issues with Canada," said Senator Ron Wyden, the top Democrat on the Senate Finance Committee, which oversees trade.
(Writing by David Ljunggren and David Chance; Editing by Paul Simao, James Dalgleish and David Gregorio)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
