August 16, 2018 / 6:50 PM / in 3 months

USTR Lighthizer eyes NAFTA 'breakthrough,' Mexico urges flexibility

WASHINGTON (Reuters) - U.S. Trade Representative Robert Lighthizer on Thursday expressed hope a breakthrough could be made in coming days on reworking the NAFTA trade deal, though his Mexican counterpart said flexibility was needed to reach agreement.

FILE PHOTO: U.S. Trade Representative Robert Lighthizer testifies before Senate Appropriations Commerce, Justice, Science, and Related Agencies Subcommittee hearing on the proposed budget estimates and justification for FY2019 for the Office of the United States Trade Representative, at the Dirksen Senate Office Building in Washington, U.S., July 26, 2018. REUTERS/Mary F. Calvert/File Photo

Lighthizer was speaking in Washington during the latest round of high-level talks between U.S. and Mexican officials to rejig the North American Free Trade Agreement, known as NAFTA, with a deal still elusive a year after the renegotiation began.

“I’m hopeful that in the next several days we’ll have a breakthrough,” Lighthizer said in response to a question from U.S. President Donald Trump on how talks were progressing during a U.S. cabinet meeting at the White House.

Trump himself said he was in “no rush” to conclude the talks, repeating his oft-stated complaint that the 24-year-old trade agreement had been a “disaster” for the United States.

“We have much better alternatives than that. So if you can’t make the right deal, don’t make it,” Trump told Lighthizer.

Departing from morning talks at Lighthizer’s offices, Mexican Economy Minister Ildefonso Guajardo suggested there was still work to be done before agreement could be reached.

“Everybody has got to show flexibility,” he told reporters.

Guajardo last month expressed hope that there could be a preliminary NAFTA deal by the end of August, but he has since appeared to pull back from that position.

NAFTA talks ground to a halt in late May in the run-up to the presidential election in Mexico on July 1.

After the election, U.S. and Mexican officials began meeting again without the third member of the pact, Canada, in an effort to tackle difficult issues, including revamped automotive sector rules and a sunset clause that could kill NAFTA after five years if it is not renegotiated.

“We have everything on the table, there are no preconditions and we’ll see at the end how the whole thing falls into place,” Guajardo said as Thursday’s meetings concluded.

He added that they would resume talks on Friday, but the sunset provision would be among the “very last items” to be dealt with in the talks.

Senator John Cornyn of Texas, the second-ranking Republican in the Senate, said he was more optimistic a deal on NAFTA would be reached after a recent phone conversation with Lighthizer.

“Ambassador Lighthizer has been making some phone calls and without talking about the specifics I am pretty optimistic, more optimistic than I have been in a while,” Cornyn told reporters at the Capitol, adding that this would calm anxiety among farmers and businesses over Trump’s trade disputes.

AUTO TARIFF ISSUES LINGER

Some auto industry executives have said the United States and Mexico are close to a deal to increase North American automotive content thresholds, with substantial requirements for content produced in high wage areas, namely the United States and Canada.

But preserving Trump’s ability to levy national security tariffs on Mexican-produced autos that either do not comply with the new rules or from newly built auto plants has been a thorny issue in recent weeks.

Industry officials said on Thursday that the administration still has not agreed to remove the threat of “Section 232” tariffs on vehicles built at new plants nor specified whether passenger vehicles that do not comply with the rules would face a higher tariff than the current 2.5 percent.

Trump has driven the U.S. negotiating process, threatening to dump NAFTA if it is not renegotiated in favor of the United States.

The U.S. president has argued the deal has facilitated an exodus of manufacturing jobs from the United States to Mexico, but NAFTA’s supporters say it has kept the region competitive.

Reporting by Jason Lange, Steve Holland, David Shepardson and David Lawder; writing by Daina Beth Solomon and David Lawder; editing by Dave Graham and Gary Crosse

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