Canada’s ambassador to Washington says he is optimistic a renegotiated NAFTA could soon be had, telling reporters Sunday that officials are working furiously to secure a trilateral deal hours out from a U.S.-imposed deadline of Oct. 1. 

“It’s good — we’re working hard,” David MacNaughton told reporters after leaving Prime Minister Justin Trudeau’s office in Ottawa Sunday. “We’ve been at it for a long time so, you know, I’m cautiously optimistic but we’ll see.”

David MacNaughton talks to reporters outside the Prime Minister’s office in Ottawa on Sept. 30 as negotiators work to meet a NAFTA deadline set by the U.S. and Mexico. 0:56

Foreign Affairs Minister Chrystia Freeland and senior members of Trudeau’s team, including his principal secretary, Gerry Butts, are holed up in Ottawa, connected via video link to their counterparts in the U.S., furiously negotiating some final details of the trilateral trade deal.

Both sides have their eyes on a fast-approaching deadline of midnight tonight. Senior Canadian sources, with direct knowledge of the situation, told CBC News there is reason for optimism.

“We’re close,” a senior source told CBC’s Katie Simpson. “The elements for a deal are there, they just have to see if they can get it across the goal line.”

Canadian officials met late into the night Saturday, and returned to the office by 7 a.m. Sunday morning, in the hopes of getting to an agreement.

‘Headed in the right direction’

However, one of Donald Trump’s senior advisers is repeating the American threat to move on without Canada, if it will not fall in line by midnight. 

By Monday morning “You’ll have some news one way or the other,” U.S. trade adviser Peter Navarro said on Fox News Sunday morning. 

“Everybody’s negotiating in good faith right now as we speak … So it’s either going to be the text goes in with Mexico and the U.S., or the text goes in with all three countries.”

Early Sunday afternoon, a source with knowledge of the negotiations gave an update to CBC News, explaining that talks were “headed in the right direction.”

Multiple sources were upbeat, citing what they called progress. However, they would not specify whether a deal tonight was likely or not. 

Things kicked into high gear on Saturday morning when Foreign Affairs Minister Chrystia Freeland abruptly shifted her UN General Assembly speech to Monday. Officials at Global Affairs confirmed to CBC News that her rescheduling was related to NAFTA talks, and another Canadian official may have to give her Monday speech. 

The deadline is based off the requirement that the full text of a new agreement be published 60 days before it can be signed by Congress. 

Minister of Foreign Affairs Chrystia Freeland and Gerald Butts, senior political advisor to Prime Minister Justin Trudeau, walk in the loading dock of the Office of the Prime Minister and Privy Council where NAFTA talks are being held. (THE CANADIAN PRESS)

Significant issues unsolved

Three of the major outstanding issues between Canada and the U.S. in NAFTA talks leading up to this week were Section 232 national security tariffs, NAFTA’s Chapter 19 dispute resolution mechanism, and regulations around Canada’s dairy sector. 

A bulk of Canada’s efforts this weekend have been focused on securing an exemption to the Section 232 tariffs — especially dealing with autos — which allow President Donald Trump to slap duties on foreign products in the name of national security, a source with direct knowledge of the talks confirmed. 

On top of that, Canada’s 270 per cent tariffs on dairy products that exceed the established quota have long left a sour taste in the president’s mouth. As of Friday night, sources say that dispute has yet to be resolved. 

U.S. dairy farmers are subsidized and create a huge oversupply of milk. 

Watch: Last minute NAFTA talks

Canada, the U.S. and Mexico are all pushing for a trilateral NAFTA pact, a change of tone after the latter two countries had planned to release details on a renegotiated deal without Canada. 1:32

Chapter 19, another sore spot, is the dispute mechanism that allows the three countries to challenge each others’ duties in front of a panel comprised of experts from both disputing countries. The U.S. wants to scrap that mechanism. 

A lot of the work being done Sunday is documenting what has been agreed to, a source with direct knowledge of the negotiations said, adding that there has been progress on dairy regulations but would not comment on the tariff fight or the status of Chapter 19. 

Last month, Trump announced his negotiators had reached a bilateral deal with Mexico. He outlined the deadline  — Sept. 30 at midnight — for the text of that deal to be submitted to Congress. Canada would be allowed on board, he explained, but they’d have to agree to the terms spelled out in the bilateral agreement. 

Trump made it clear Canada’s failure to join would be unacceptable, with hefty auto tariffs as a consequence.  

A Mexican intervention?

Mexico’s new president-elect, however, said in an interview Friday that he has agreed to push the American side to make a deal with Canada.

President-elect Andres Manuel Lopez Obrador said Prime Minister Justin Trudeau asked him during a Thursday phone call “to intervene and call on the U.S. government to reach an agreement” with Canada on the renegotiation of NAFTA.

“We agreed to that,” Lopez Obrador told reporters in Mexico City. The president-elect also said he would insist on a trilateral pact.

However, later Friday evening, Lopez Obrador’s Senate leader, Ricardo Monreal, said Mexico wouldn’t walk away from a bilateral agreement. 

“The ideal is a trilateral deal, but we’re prepared for the possible need of a bilateral,” he told Bloomberg News.

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