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U.S. Trade Representative Robert Lighthizer arrived on Friday for talks with Canada on renegotiating Nafta this week.

U.S. Trade Representative Robert Lighthizer arrived on Friday for talks with Canada on renegotiating Nafta this week.


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Andrew Harnik/Associated Press

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The U.S. and Canada missed a Friday deadline imposed by the Trump administration to revamp the North American Free Trade Agreement, but agreed to extend talks rather than rip up the quarter-century-old treaty.

After four days of marathon talks ended with significant differences remaining, President Trump said he still planned to stick with the timetable he laid out earlier this week to sign a new pact in late November to replace the three-nation accord he has branded “a disaster.”

But Mr. Trump didn’t define the precise shape of that pact, leaving open the possibility of a two-way accord with Nafta’s other partner, Mexico, unless Canada adopts his vision of a fairer agreement. Mr. Trump on Monday struck a deal with Mexico on a redone Nafta and then pressed Canadian Prime Minister Justin Trudeau to join by the week’s end.

“I intend to enter into a trade agreement with Mexico—and with Canada if it is willing, in a timely manner,” Mr. Trump told Congressional leaders in a Friday letter.

It’s unclear precisely what the new timetable is for Canada to join. The two sides said talks would resume on Wednesday, and people familiar with the process said that new deadline could extend to Sept. 30. That’s when, according to U.S. law, the Trump administration would need to make public final text for a trade pact that he could sign by Nov. 30, when Mexico’s leader leaves office.

One problem hanging over the talks this week—and likely to complicate them going forward—are ongoing tensions between Messrs. Trump and Trudeau, and the U.S. leader’s constant harsh comments about Canada.

In the latest sign of hostility, Mr. Trump was quoted by the Toronto Star newspaper as saying Thursday that he would only sign a deal “totally on our terms.” The Star said it was quoting the unpublished, off-the-record portion of a transcript of an interview Mr. Trump gave to Bloomberg News.

After the U.S. and Mexico announced a trade deal Monday, Canada is scrambling to come to an agreement with the two countries by the end of the week. WSJ’s Shelby Holliday takes a look at some sticking points. Photo: Getty Images

In response, Mr. Trump, speaking at a North Carolina fundraiser Friday, accused Bloomberg of violating the ground-rules of his interview but adding: “Here’s the good news, at least Canada knows where I stand because we can’t have these countries taking advantage of the United States anymore.”

Bloomberg issued a statement saying, “When we agree that something is off the record, we respect that.”

Asked about Mr. Trump’s leaked comments, Canada’s chief negotiator, Foreign Minister Chrystia Freeland, told reporters after talks broke up that she felt the Trump team was negotiating in “good faith,” and added that “we know a win-win-win agreement is within reach.”

Mr. Trump has made renegotiating—or killing—Nafta a top priority of his “America First” trade policy, saying the old agreement encourages U.S. manufacturers to shift factories to Mexico. He contends it has been responsible for the steadily increasing U.S. trade deficit with its southern neighbor, which hit $68 billion last year.

Economists say Nafta has led to employment growth in all three member countries, and generally agree that trade deficits are caused by a variety of reasons, including a lack of savings.

Trump aides say the accord announced Monday with Mexican President Enrique Peña Nieto goes a long way to addressing those concerns, with new rules requiring more cars made inside the bloc to be made with high-wage labor.

Canadian officials have also embraced that core part of the U.S.-Mexico agreement, which they say would benefit their country as well. But a list of other spats between the U.S. and Canada prevented the two sides from reaching agreement this week.

People familiar with the talks say negotiations stalled over Ottawa’s insistence than any revised Nafta maintain the existing pact’s dispute-resolution system in which any of the three member countries can challenge tariffs imposed by one of the others. Canada has long considered this important to protect its industry from U.S. government actions.

The Trump administration has sought to remove the system, arguing that it infringes on American sovereignty, and persuaded Mexico to acquiesce to that demand.

Canada has long considered this important to protect its industry from U.S. government actions. The Trump administration has sought to remove the system, arguing that it infringes on American sovereignty, and persuaded Mexico to acquiesce to that demand.

A second sticking point has been Canada’s policies protecting its dairy industry, which Mr. Trump has regularly attacked as unfair to U.S. producers. Trump aides issued a statement Friday morning saying that “there have been no concessions by Canada on agriculture.”

Another fight broke out over Canada’s policies aimed at protecting cultural sectors, covering music, television and publications. Cultural protection is part of the current Nafta, and is meant to ensure Canada is not overwhelmed by U.S. media.

This is viewed as crucial to the French-speaking province of Quebec—a vote-rich region and a minority in mostly anglophone North America—and in cities in media centers such as Toronto and Vancouver, which the governing Liberals rely on for support. Mr. Trudeau could pay a political price if Canada agreed to water down the provision, according to political observers.

The week’s Nafta drama ended with hopeful signals from all sides that a revised version of the pact remains on track. But it leaves uncertainty over just how the countries will proceed and what happens if the efforts fail over the next few weeks.

One factor driving Mr. Trump’s urgency has been the pressure that he has faced from supporters, especially in the export-dependent farm belt, about a trade policy that so far has appeared aimed more at restricting trade—through tearing up old agreements and imposing tariffs on China and other countries—than preserving and expanding it. The president is already touting the prospect of a new Nafta deal as he campaigns for Republican candidates in the November congressional elections.

Friday’s announcement of plans to sign some kind of deal by Nov. 30 without yet having completed the talks drew criticism from Oregon Sen. Ron Wyden, the top Democrat on the Senate Finance Committee overseeing trade policy.

“It is premature for the president to announce he intends to sign a trade agreement when so many difficult issues remain unresolved,” Mr. Wyden said. “It sure looks like the president is more concerned with announcing a deal during election season, rather than getting the best deal possible.”

The urgency is also driven by efforts to sign a deal before Mr. Peña Nieto’s left-wing successor, Andrés Manuel López Obrador, comes to power.

While Mr. Trump has indicated a willingness to replace Nafta with a bilateral Mexico deal, lawmakers and business groups—whose support has usually been vital for passage of trade pacts—have made clear that a Nafta without Canada would face an uphill battle to receive the required Congressional ratification.

Some lawmakers have said that they have only authorized Mr. Trump to negotiate a three-country deal, and a two-country agreement might not even be accepted for consideration.

“Anything other than a trilateral agreement won’t win Congressional approval and would lose business support,” Thomas J. Donohue, president of the U.S. Chamber of Commerce, said in a statement Friday.

“Nafta’s many strengths rest on the fact that it ties together three economically vibrant nations, drawing upon each of our strengths to boost the competitiveness of the whole. If you break off one member of this agreement, you break it all.”

—Juan Montes in Mexico City and Joshua Zumbrun and Vivian Salama in Washington contributed to this article.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and Paul Vieira at paul.vieira@wsj.com

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