MEXICO CITY, Feb 26 (Reuters) - U.S., Mexican and Canadian negotiators meet on Monday seeking to narrow disagreements on how to overhaul the NAFTA trade deal despite renewed signs of tension between Mexico and U.S. President Donald Trump over his planned border wall.
The trade teams began a seventh round of talks on Sunday aiming to finish reworking less contentious chapters of the North American Free Trade Agreement in order to create space to broker agreement on the trickiest subjects.
Still, with a presidential election looming in Mexico in July and U.S. mid-term congressional elections in November, the talks increasingly run the risk of getting entangled in domestic political considerations.
Negotiators are confident that the lesser hurdles will gradually be cleared. But not for the first time, the discussions have been clouded by the wall along the U.S. southern border that Trump has long touted as a necessity to curb illegal immigration and that he says Mexico must pay for.
Mexico has consistently rejected paying for the wall, and its government had hoped to arrange a meeting between President Enrique Pena Nieto and Trump in the next few weeks. However, a senior U.S. official said at the weekend that plan had been postponed after a phone call between the two soured over the wall earlier this month.
The trade negotiators have become used to such distractions, but the talks are increasingly centering on U.S. demands that officials say can only be resolved at the top political level.
The NAFTA talks were launched last year after Trump said the 1994 agreement should be overhauled to better favor American interests or Washington would withdraw.
Officials do not anticipate major breakthroughs on the most intractable proposals during the latest round of talks in Mexico City, which are due to run until March 5.
Those U.S. demands range from changes to automotive content origin rules and dispute resolution mechanisms, to imposing a clause that could automatically kill NAFTA after five years.
Agriculture, rules of origin, labor and regulatory practices are among the issues scheduled to be tackled by the experts on Monday, one day before the chief negotiators return to the fray.
The Trump administration wants NAFTA rules of origin changed to impose higher sourcing requirements on automotive content, a major sticking point that the industry itself opposes.
Seeking to break the deadlock, the Mexican government has said it would put forward a proposal on rules of origin, though it has not given any details. A Mexican official said late on Sunday that the country did not yet have a counterproposal.
There was little sign of compromise on other thorny issues early on, with a senior Canadian agriculture official pushing back against U.S. demands to dismantle Canadian protections for the dairy and poultry sectors known as supply management.
"When it comes to supply management, we believe there can be no concession," said Jeff Leal, the minister of agriculture, food and rural affairs for the province of Ontario. (Writing by Dave Graham; Editing by Frances Kerryting by Frances Kerry)