U.S. House Democratic leader: NAFTA should stay a trilateral deal

By Richard Cowan and David Ljunggren

WASHINGTON/OTTAWA (Reuters) - U.S. House of Representatives Democratic Leader Nancy Pelosi on Friday warned the Trump administration that NAFTA should be maintained as a trilateral pact between the United States, Mexico and Canada and not just as a U.S.-Mexico arrangement.

Pelosi's remarks are significant because whatever deal to renew the North American Free Trade Agreement is ultimately reached will be reviewed by the next Congress that convenes in January. Pelosi could be the speaker of the House if Democrats win this November's congressional midterm elections.

Talks to update NAFTA, which U.S. President Donald Trump says is unfair to the United States and must be radically revised, have been bogged down amid disagreements between Canadian and American negotiators.

Trump last month announced a side deal with Mexico and has warned Ottawa that he is prepared to leave Canada out if it fails to accept terms more favourable to the United States.

As House speaker, Pelosi sets the legislative agenda, and often has the political muscle to assure passage or defeat of initiatives.

"I think it should be trilateral," she told reporters, adding she did not think it would be "in the interest of this hemisphere" to turn NAFTA into a bilateral deal.

The U.S. administration wants the text of a deal ready by Oct. 1 but Canadian officials say they are not rushing, given the remaining differences. The two sides are arguing over dispute settlement mechanisms and a U.S. demand that Canada open up its protected dairy market.

Canadian officials say privately that some concessions will be needed on dairy, an approach that has alarmed the politically influential farming community.

Most Canadian dairy farmers live in the populous provinces of Ontario and Quebec, where Prime Minister Justin Trudeau's ruling Liberal Party needs to do well if he is to retain power in an election set for October 2019.

Pierre Lampron, president of the Dairy Farmers of Canada lobby group, planned to meet Canadian Foreign Minister Chrystia Freeland on Friday to ask her about NAFTA. The DFC said it had asked for the meeting.

Freeland's office did not respond to a request for comment.

Trudeau said on Thursday he wanted a good NAFTA deal as soon as possible, but did not answer directly when asked if he felt the end of September was the final deadline for talks.

Mexico said on Wednesday it had to be ready to pursue a bilateral deal with the United States if Ottawa and Washington did not come to terms.

But Pelosi said she was seeking more details on the results of the U.S.-Mexico negotiations, adding she had instructed aides to set up briefings for rank-and-file lawmakers.

"Any arrangement of that kind, of that length of being in effect should be subjected to some scrutiny," she said.

(Reporting by Richard Cowan and David Ljunggren; Editing by Marguerita Choy)