Negotiations between the United States and Canada moved ahead in grinding talks to rescue the North American Free Trade Agreement (NAFTA) yesterday.   However, a few stubborn issues stood in the way of a deal, including dairy quotas and how to resolve future trade disputes.

The United States and Mexico reached an agreement on overhauling NAFTA early last week, turning up the pressure on Canada to agree to new terms.  President Trump has notified Congress he intends to sign the trade deal reached last week with Mexico by the end of November, and officials said the text would be published by October 1.  President Trump has threatened to push ahead with the bilateral deal with Mexico, effectively killing the three-country NAFTA pact, which covers $1.2 trillion in trade.

A U.S. source familiar with the discussions in Washington said it was still unclear whether the two sides could bridge the gaps or whether President Trump will opt for a Mexico-only bilateral trade deal. As the process grinds on, some in Washington maintain that President Trump cannot pull out of NAFTA without the approval on Congress.

The Republican chairman of the U.S. House of Representatives Ways and Means Committee, Kevin Brady, a powerful voice in Congress on trade, told reporters that differences remained between the two sides over Canada’s dairy quota regime, a trade dispute resolution settlement procedure and “other longstanding issues.”

Trump set a deadline for a deal this week, prompting aides to U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland to work well into the evening yesterday to find ways to move forward.  “We are making good progress,” Freeland told reporters yesterday following a meeting with Lighthizer at the USTR offices last night. Freeland declined to discuss specific issues under negotiations but said talks would resume today.

A Canadian government official has said that a deal was not expected to be reached this week.

The Trump administration charges that Canada discriminates against U.S. dairy exports.  It also wants to end the Chapter 19 arbitration panels for resolving disputes over anti-dumping tariffs, something Canada has used to defend its lumber exports to the United States, despite U.S. charges that Canadian lumber is unfairly subsidized.

Canada insists that previous NAFTA cultural exemptions protecting its publishing and media companies from being acquired by American companies be preserved.  Prime Minister Justin Trudeau this week said that was important to Canada’s national sovereignty and identity.  USTR Lighthizer has referred to the exemptions as “cultural protectionism” as Canadian companies are free to buy U.S. media outlets.

Canada also wants a permanent exemption from President Trump’s steel and aluminum tariffs and for Washington to eliminate the threat of U.S. auto tariffs.



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