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NAFTA ministers seen announcing progress on non-controversial topics

MEXICO CITY, Sept 5 (Reuters) - Trade negotiators from Canada, the United States and Mexico were set on Tuesday to wrap up the second round of talks to modernize the North American Free Trade agreement with a need to demonstrate at least some progress on non-controversial areas.

No major breakthroughs were expected at a joint news conference with U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland scheduled for 2:45 p.m. CDT (1945 GMT).

But government officials and lobbyists said they were hoping that the trade ministers would be able to announce a timetable for completing some chapters.

Juan Pablo Castañon, head of Mexico's influential CCE business lobby group, said negotiators had made headway on areas such as energy, telecommunications and investment, as well as improving conditions for small-and-medium-sized firms and streamlining customs procedures.

Castañon told Mexican radio on Tuesday he hoped the talks in the remaining hours would produce "a unified text that allows discussion to finalize chapters on trade facilitation, on small and medium-sized businesses and telecommunications."

The three countries are racing to rewrite the NAFTA agreement by early next year to avoid conflicts with 2018 election cycles in Mexico and the United States. Moving quickly to consolidate texts is paramount if they are to achieve that goal.

It took five years and more than 20 negotiating rounds to negotiate the since-canceled 12-country Trans-Pacific Partnership trade deal.

The NAFTA negotiators were not expected to make progress on difficult subjects such as rules of origin, labor standards and changes to dispute-resolution mechanisms, for which Canadian and Mexican officials have not seen specific U.S. proposals, officials and industry representatives briefed on the talks said.

One area of concern identified by lobbyists is Lighthizer's stated objective of incorporating a U.S.-specific automotive content requirement, which they say could prove a major obstacle that delays the talks.

Another problem is whether U.S. President Donald Trump will find the final outcome acceptable enough to stay in NAFTA. Trump used the agreement as a punching bag during his election campaign last year and has repeatedly threatened to pull out of it, even after the modernization talks began on Aug. 16.

Lighthizer has adhered to Trump's line that NAFTA must be rewritten to reduce U.S. trade deficits of about $64 billion with Mexico and $11 billion with Canada and started the talks with strong demands for major changes.

"Sparks could fly at some of the tables today because Lighthizer is here," said a Mexican business executive briefed on the talks. "I don't think today's meetings will be easy." (Additional reporting by Anthony Esposito and Adriana Barrera; Editing by Dan Grebler)