September 27, 2017 / 3:30 PM / a year ago

Negotiators weigh NAFTA progress as Canada fumes over Bombardier

OTTAWA, Sept 27 (Reuters) - Top negotiators from the United States, Canada, and Mexico sought to keep NAFTA talks on track on Wednesday as Canada fumed over a U.S. decision to impose preliminary duties on Bombardier's CSeries jets, which is likely to add to trade tensions.

The decision by the U.S. Commerce Department is likely to further harden Canada's stance on keeping a key dispute-settlement mechanism in the North American Free Trade Agreement, which the Trump administration wants to eliminate.

The talks are supposed to finish in December but trade experts say this is unlikely, given the complexity of some of the most contentious topics. The Ottawa round is the third of seven scheduled five-day meetings.

U.S. Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland and Mexico's Economy Minister Ildefonso Guajardo were set to identify specific areas of progress, current state of talks and plans for the next round of negotiations in Washington in early October, officials said.

A joint statement was expected at 2:30 p.m. eastern time.

The final day of the Ottawa meeting is likely to be clouded by the U.S. decision late Tuesday to slap preliminary anti-subsidy duties on Bombardier's CSeries jets after rival Boeing Co accused Canada of unfairly subsidizing the aircraft.

It was not immediately clear whether Freeland addressed the Bombardier case at dinner with Lighthizer and Guajardo on Tuesday after the Bombardier decision was made public.

"This is an unjust, punitive ruling," Freeland told reporters before the dinner, reiterating comments by Canadian Prime Minister Justin Trudeau. "The government of Canada cannot treat, as a trusted partner, a company which is attacking our aerospace sector," she said.

Freeland has suggested that Canada could walk away from the NAFTA talks over the so-called Chapter 19 dispute mechanism, under which binational panels make binding decisions on complaints about illegal subsidies and dumping. The United States has frequently lost such cases.

A lengthy fight over Chapter 19 could drag out NAFTA negotiations beyond a planned end-December deadline to reach a deal ahead of Mexico's presidential election campaign.

Mexican and Canadian officials have already expressed concern that the United States has not yet presented details on some of the toughest issues in NAFTA, such as rules of origin which outlines how much of a product needs to originate in a NAFTA country.

The U.S. delegation presented draft text on NAFTA labor standards on Tuesday and put forward proposals on investment and intellectual property at the weekend.

Laxer labor standards and lower pay in Mexico have swelled corporate profits at the expense of Canadian and U.S. workers, making the issue one of the major battlegrounds of the NAFTA talks.

Trade among the three nations has quadrupled since NAFTA came into effect in 1994, surpassing $1 trillion in 2015. But U.S. President Donald Trump regularly calls the treaty a disaster and has threatened to walk away from it unless major changes are made, citing U.S. job losses and a trade deficit with Mexico.

Reporting by Lesley Wroughton, additional reporting by Adriana Barrera; Editing by Nick Zieminski

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