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Deputy Prime Minister Chrystia Freeland rushed to Washington on Wednesday for an hour-long meeting with U.S. Trade Representative Robert Lighthizer and Jesus Seade, Mexico’s point person on the trade deal.J. Scott Applewhite/The Associated Press

The United States, Canada and Mexico are closing in on a deal to add a side agreement to the new continental trade pact that would help it win the approval of congressional Democrats.

Deputy Prime Minister Chrystia Freeland rushed to Washington on Wednesday for an hour-long meeting with U.S. Trade Representative Robert Lighthizer and Jesus Seade, Mexico’s point person on the trade deal. Mr. Lighthizer took the unusual step of warmly greeting her with a cheek kiss in full view of reporters outside his office complex near the White House.

The side deal is likely to include provisions that would strengthen the U.S.-Mexico-Canada Agreement’s dispute settlement mechanisms, allow trade tribunals to investigate working conditions in Mexican factories and see Canada help pay for Mexico to implement tougher labour standards, according to Mexican officials and a U.S. industry source.

Freeland set to negotiate USMCA addendum in push for ratification, sources say

The Globe and Mail is not identifying the sources because they were not authorized to speak publicly on bargaining matters.

“Canada believes in this agreement. We have a strong interest in having this deal ratified in all three countries,” Ms. Freeland told reporters after the sit down on the eve of American Thanksgiving. “It was a good discussion.”

The three countries finished negotiating the USMCA, a reworked version of the current NAFTA deal that governs continental trade, in September of last year. But the Democrats, who hold a majority in the U.S. House of Representatives, are demanding changes to USMCA in exchange for ratifying it.

In order to avoid reopening the finished agreement, the three countries are working on a side letter that would be added to USMCA and contain some of the measures Democrats want. Most of the Democratic demands are targeted at Mexico, which they accuse of unfairly luring away U.S. manufacturing jobs with lower wages and laxer environmental standards. Mr. Lighthizer and Mr. Seade met for several hours Wednesday before Ms. Freeland arrived.

Mr. Seade said he and Mr. Lighthizer were hammering out a compromise on the key sticking point between the two countries. Rather than give the U.S. unlimited power to inspect Mexican factories to ensure they are living up to USMCA’s tougher labour standards, as the Democrats had demanded, the deal would instead hand this ability to the international tribunals that adjudicate trade disputes under the deal.

“Every single issue that has made me lose my sleep is off the table,” Mr. Seade said.

He said the deal is also expected to include a key provision that would end “panel blocking,” a tactic in which one country stops the resolution of trade disputes by refusing to appoint members to the tribunals. The move would be a victory for Canada and Mexico, which have repeatedly complained about American panel-blocking and unsuccessfully pushed for a stronger dispute-resolution mechanism in USMCA negotiations last year.

Mr. Seade said the talks are “on the way to a resolution” and that he would travel to Ottawa on Friday to meet again with Ms. Freeland. He said he hoped a deal would be completed before Christmas.

The U.S. industry source said talks have also included Canada helping Mexico pay for labour reforms to comply with USMCA. Among other things, Mexico is setting up a new system to settle labour disputes and handle union certifications.

U.S. President Donald Trump has this month been ramping up his attacks on Speaker Nancy Pelosi, whom he accuses of taking too long to pass the deal. Replacing NAFTA was one of Mr. Trump’s key campaign promises in 2016 and he is eager to have USMCA ratified before his re-election campaign next year.

Mexico had already ratified USMCA and Prime Minister Justin Trudeau has vowed to do the same once the U.S. has approved the deal. Mr. Lighthizer, Ms. Freeland, Mr. Seade and Richard Neal, the Democratic chair of the House committee that oversees trade, have been in talks for months.

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