Canada expanded foreign access to its dairy sector in trade deals with the European Union and with 10 Pacific Rim countries.
"Even Canadian concessions on dairy may not be enough to make the US keep the current dispute resolutions", said Carlos Capistran and Mingzi Yi, economists at Bank of America Merrill Lynch, in a note.
"I think we understand there are certain issues on which we will need to compromise", one of the sources said when asked about increased dairy access for the USA industry.
The talks are focused on USA demands to scrap the so-called Chapter-19 dispute resolution mechanism in NAFTA, overturn some of Canada's current "carve-out" of cultural industries from free-trade rules and loosen protections under the dairy sector's supply management system.
Canadian Prime Minister Justin Trudeau, from US President Donald Trump, has unanimous domestic support for now but to keep a firm hold on power must wring concessions from an unwilling powerful dairy lobby in order to mollify Washington.
Freeland and her counterpart, U.S. Trade Representative Robert Lighthizer, left the bargaining table last Friday without a deal following two weeks of what Freeland described as intense, but productive, negotiations. Overall, he said, he believes Canada is handling the talks well. A bilateral deal announced by the United States and Mexico on Monday was a breakthrough that infused renewed optimism around a new NAFTA.
In reaching a new NAFTA, Canada is protecting its interests but also "looking to be flexible because it's time to update this deal after 25 years", he said.
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As the two nations' chief negotiators prepared to resume their talks in Washington Tuesday, dairy producers suggest this deal is a line in the sand for them. Asked if it would be gone from a NAFTA deal, he said, "I think it should be".
Meanwhile, despite the "several" issues still in dispute, there is strong will on the US side, especially, to wrap up the talks by Friday, trade lawyer Dan Ujczo said Monday.
Trudeau meets on Tuesday with the Dairy Farmers of Canada, which suspect he might be ready to sell them out. "I can't read the tea leaves, but. coming back and saying, "Sorry, we couldn't get an agreement" is just too hard politically to manage" on both sides, Sosnow said.
"Maybe that helps us all put into perspective the negotiations that we're having - and also put into a little bit of historical perspective the importance and the significance of the relationship between Canada and the United States", Freeland said as she arrived at the talks. "That's not who we are", Craft said in prepared remarks.
"There is no question Canada and Mexico are going to get a haircut and the best you can hope for when you get a haircut is that it looks stylish", Mr. Ujczo said.
Trudeau, for his part, added that: "we're just going to stay working constructively to get to that win-win-win that we know is there". They are aiming to complete a deal by the end of the month so that Mexico, Canada and the United States can sign an agreement by the end of November.