-officials@ (Recasts, adds quote from Canadian official)
MEXICO CITY, Feb 26 (Reuters) - The U.S. negotiator for regional content requirements in autos flew back to Washington from a NAFTA round in Mexico on Monday to talk with car companies, officials said, in a development some hoped would lead to progress on the contentious issue.
Three Mexican, Canadian and U.S. trade officials said the negotiator, Jason Bernstein, had been called back, with two of the officials saying he was there to meet U.S. automakers. Another said he would also meet U.S. Trade Representative Robert Lighthizer, and was due back later in the week.
The change in plans disrupted a schedule for talks early in the week about a proposal by the administration of U.S. President Donald Trump to make automakers source more from the region and the United States, a major sticking point the industry warns would disrupt supply chains and raise costs.
Mexican negotiators have said the auto content issue must be resolved in large part between the White House and the Big Three Detroit automakers that dominate the industry.
"What Ive heard is that hes back in Washington because apparently they are meeting with the Detroit three. If thats the case, thats really positive," said Flavio Volpe, president of the Toronto-based Automotive Parts Manufacturers Association.
"The timing is awkward. But if USTR is finally talking to those companies it's something that we've been asking for for months," Volpe said, referring to the United States Trade Representative (USTR).
U.S. trade officials and a Mexican auto industry official in Mexico City said they also believed the fact Bernstein had been called to Washington was a positive development for the talks to renegotiate the 1994 North American Free Trade Agreement.
A seventh round of talks began on Sunday with the three sides aiming to finish reworking less contentious chapters while also meeting to discuss the trickiest subjects blocking progress to rework the pact that underpins $1.2 trillion in annual trade.
"We're hopeful to make quite a bit if progress this round. So we'll see how it goes," said Steve Verheul, Canadas chief negotiator as he arrived at the negotiations on Monday.
Two auto lobbyists in the United States, who spoke on background, said they did not believe there was a joint meeting scheduled with the Detroit auto companies but individual consultations might happen.
Mexico's government is concerned that a lack of progress on the automotive content issue could hurt the wider renegotiation, a former official still familiar with the process said.
Seeking to break the deadlock, the Mexican government has said it would put forward a proposal on rules of origin during the current round of talks, but a Mexican official said on Monday no new ideas had been presented so far.
The renegotiation began last year at the behest of Trump who said the agreement must be overhauled to better favor American interests or Washington would quit the accord. The latest round has been clouded by renewed tension between Mexico and Trump over his planned border wall.
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 over the weekend that plan had been postponed after a phone call between the two soured over the wall earlier this month.
Mexico's government has not commented officially on the derailment of the Trump-Pena Nieto meeting, but Juan Pablo Castanon, head of the powerful CCE business lobby, was less reticent as he took stock of the unfolding NAFTA negotiations in Mexico City.
"Obviously, the cancellation of the Mexican president's trip to the United States is an important element in the negotiations: it's politics that can help us resolve the technical issues we're moving forward on," Castanon said.
Castanon said several chapters are close to being finished, including measures on e-commerce, telecommunications and sanitary standards for agricultural products. Others close to the talks believe the energy chapter could also be concluded.
Officials do not anticipate major breakthroughs on other intractable issues such as agriculture and dispute resolution mechanisms in the Mexico City round, due to run until March 5.
There was little sign of compromise on any 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. (Additional reporting by Dave Graham; Editing by Frank Jack Daniel, Tom Brown and Lisa Shumaker)