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Canada was late Sunday to join the trade agreement announced last month by the United States and Mexico, while the negotiators presented themselves to meet the deadline set at midnight to allow the current Mexican president to sign this agreement.
Diplomats from the three countries conducted a series of telephone consultations over the weekend, reviving hopes of preserving the three-nation format of the North American Free Trade Agreement favored by business groups and Republicans Congress.
"Close, not yet done," said a Canadian senior official at the talks who requested anonymity to discuss confidential deliberations.
Assuming Canada adheres, the new treaty is expected to be signed by President Trump and his Canadian and Mexican counterparts within 60 days, and Congress should act on it next year.
Administration officials anticipate a fierce political battle to get congressional approval, especially if Democrats take control of the House of Representatives in November.
"We will enter in October with a trilateral North American trade agreement," said Dan Ujczo, Dickinson Wright's trade lawyer. "It was the least difficult part. The heavyweight will be the subject of a trade agreement at the next Congress in 2019, as well as the ratification by the new Mexican Congress and Canada during a federal election year. "
The replacement of NAFTA, which is almost 25 years old, would be a major achievement for President Trump and his chief negotiator, Robert E. Lighthizer. The long-time NAFTA president complains that the original treaty cost millions of jobs in the United States and resulted in persistent trade deficits in the United States with its southern neighbor.
Last year, US imports of goods from Mexico exceeded exports by $ 71 billion. So far this year, the trade deficit with Mexico is even greater.
On Sunday morning, Peter Navarro, one of Trump's closest trade advisers to the White House, said the negotiators were working "in good faith" to reach an agreement with three countries by midnight and had reached a "General agreement" on most issues.
"There are several points of friction," he admitted.
One of the most difficult obstacles has been Canada's request for an exemption or some other form of protection against the President's tariffs on steel and aluminum imports, possibly apply to automobiles in Canadian plants.
Canada should accept some form of quota on its shipments to the US, according to two sources informed about the talks that requested anonymity to discuss confidential deliberations. But the details remained to be settled Sunday evening.
The latest outstanding issues included US requests for better access to Canada's dairy market and Canada's insistence on maintaining a dispute resolution process that Washington wanted to scrap.
The provincial election in Quebec, a center of the Canadian dairy industry, also overshadowed the discussions. According to several analysts at the end of the talks, Canadian officials were reluctant to visit the issue of politically sensitive dairy products as voters head to the polls on October 1.
Every month, government officials insisted that they should publish the text of the new agreement – with the two countries, or only Mexico – by September 30th. This would be in line with the Congress' notification requirement and would allow Mexican President Enrique Peña Nieto to sign the agreement on his last day in the office, they said.
Officials said they wanted the deal to be signed before the new president of Mexico, the left populist Andrés Manuel López Obrador, took office in case he demanded changes. But López Obrador said on Friday that he would not seek to reopen the talks, questioning the validity of the deadline that the negotiators had imposed themselves.
Since the beginning of the three – party talks in August 2017, the negotiators have declared several deadlines and have exceeded it.
The new agreement preserves a regional economic unit that allows North American manufacturers, particularly in the automotive industry, to compete with their global competitors. Canada and Mexico rank first and second in the export markets of US firms. Last year, the total trade of the United States with the two countries reached 1 100 billion dollars.
A central objective of the new agreement is to restore "North America as a production center" by encouraging US companies to use domestic suppliers rather than companies based elsewhere, Navarro said.
The agreement will require 75% of duty-free vehicles to be manufactured in North America, compared with 62.5% currently. This will also require increased use of steel and other domestic materials and will create a new requirement imposing work done by workers earning at least $ 16 at the hour, which will benefit the United States and in Canada at the expense of Mexico.
The NAFTA came into force in 1994 with the bipartisan support of Republican President George H. W. Bush, who signed it in 1992, and the Democratic legislators who approved it the following year.
But the treaty was controversial from the beginning. Critics included US trade unions and Ross Perot, a businessman and presidential candidate from a third party, who had warned of a "giant sucking sound," as employers reassign their jobs in Mexico, where wages are low.
Last week, the president said he would no longer use the name of NAFTA, instead of baptizing the new "US-Mexico-Canada" or USMC.
Damian Paletta contributed to this report.
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