NAFTA talks make progress; U.S., Canadian officials to work into night

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ANALYST TAKE: "As we head into the business end of the week, markets are trading with a slightly negative tone as traders turn their attention back to NAFTA talks and a potential announcement on Chinese tariffs", said Craig Erlam, senior market analyst at OANDA.

NAFTA's Chapter 19 allows companies who feel wronged by anti-dumping, or countervailing duties, to have their issues settled by independent panels of experts from the countries caught in the dispute.

In a statement Wednesday, the Bank of Canada said more hikes should be expected thanks to encouraging numbers for business investment, exports and evidence that households are adjusting to pricier borrowing costs.

Freeland insisted that the latest round of talks is being conducted in in "good faith".

European officials are watching the NAFTA negotiations closely for a sign of how Trump and his team will approach trade talks with Europe.

Canada now faces a serious threat of trade and investment diversion over time if Mexican producers have tariff-free access to the USA while Canadian producers do not.

Trump charges that the 1994 pact, which underpins US$1.2 trillion in trade between the three countries, has caused the loss of hundreds of thousands of United States jobs, a statement most economists dispute. Still, she called Trudeau's words "important".

"Our officials have continued to work hard and constructively over the weekend and we are looking forward to constructive conversations today", Canadian Foreign Minister Chrystia Freeland told reporters on Wednesday in Washington.

With the USA midterms eight weeks away, and Trump facing pressure to maintain the Republican hold on the House and Senate, the influence of Congress will permeate the resumption of Wednesday's talks.

The dispute over the new U.S. -Mexico trade deal looks set to continue with Canadian Prime Minister Justin Trudeau trying to play hardball in the face of conservative criticism. But it makes up a small amount of all the goods traded between the two countries. "Analysts say that could be very bad for the USA auto industry, which makes cars and sources parts across all three countries".

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Though the United States president often threatens to withdraw from Nafta, the latest pledges are piling up pressure on negotiators who are trying to wrap up more than a year's worth of talks and strike a deal that could be signed before 1 December.

Trump notified Congress last Friday of his intention to sign a trade agreement in 90 days with Mexico - and Canada, if Ottawa decides to join them.

"We' ve said from the very beginning that we need a dispute resolution mechanism like Chapter 19 and we will hold firm on that", Canadian Prime Minister Justin Trudeau said on Tuesday.

The talks to remake NAFTA resumed after hitting an impasse last week over 's high dairy tariffs and USA moves to eliminate a dispute resolution system known as Chapter 19 that potentially favors Ottawa.

A stronger USA dollar pushed Canada's main stock market lower and hurt commodity prices in the first day of trading since the holiday weekend.

Both sides are feeling pressure to finalize a deal.

"There is no political necessity to keep Canada in the new NAFTA deal", Trump tweeted Saturday.

Lorna Dawson, director of the Canada Institute at Washington's Wilson Center, watched all of the consultation hearings Congress held previous year prior to the start of the NAFTA re-negotiation.

"Now our negotiators are heading back to Washington tomorrow to engage in a constructive and collaborative way to see if there is a deal for all of us there", Trudeau said.

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