Dive Brief:

• The U.S. and Mexico reached a bilateral agreement on key NAFTA issues including auto rules of origin and access to the Mexican energy sector, various news sources announced Monday.
• The handshake deal does not imply a full revision of the 20-year-old trade deal has been agreed upon, but it is an important step forward. Canada, so far, has been excluded from the talks as Mexico and the U.S. resolve their issues.
• In a tweet, Mexican President Enrique Peña Nieto said he called Canadian Prime Minister Justin Trudeau shortly after the news broke, asking his team to return to the negotiating table promptly so a trilateral NAFTA deal could be finalized by the end of this week.

A big deal looking good with Mexico!

— Donald J. Trump (@realDonaldTrump) August 27, 2018

Dive Insight:

"Nothing is agreed until everything is agreed." Those are the words of Mexico's Economy Minister Ildefonso Guajardo last week as he summarized the progress of talks to renegotiate the North American Free Trade Agreement, according to The Wall Street Journal.

Reporters have been waiting all weekend for the U.S. and Mexico to announce their handshake deal. A month ago, representatives from both the U.S. and Mexico returned to the table after Mexico's elections forced a two-month hiatus on negotiations. When they returned, representatives said the two parties sought to reach a deal by the end of August, so the sitting Mexican president could sign it before he left office in December.

After the bilateral deal is announced today — you can see the announcement in the video below — the negotiations will be on track to conclude by that point.

That is, if Canada's re-entry into the talks and political posturing do not add new roadblocks to the negotiations. Canada and the U.S. are both on the eve of contentious mid-term elections, which could affect the timeline of the negotiations.

Mexico's case provides an example: When the talks first began a year ago, negotiators sought to reach a deal by the end of 2018, so the nation's Congress could approve a deal before elections took place. No deal was reached, however, and the three sides had to pause talks as political uncertainty led to an impasse among the three parties.

After the election, the new president-elect's team met with U.S. representatives and joined the negotiations as a sign of goodwill. A month of talks followed, in August, but a new roadblock emerged: Mexico's outgoing administration had a different position on foreign access to the country's energy sector than the incoming one, which delayed an agreement to this week. (Negotiators worked all weekend to reach a deal, according to POLITICO's coverage.) 

El Financiero reports negotiators have already called on Canada to rejoin the talks now that a U.S.-Mexico bilateral agreement has been reached, and Canadian representatives could arrive in Washington, D.C. as early as Monday.

Canada's Foreign Affairs Minister, Chrystia Freeland, said recently she was waiting on the U.S. and Mexico to resolve their differences on automotive rules of origin before returning to the table.

@BoyerMichel
NEW: Spokesperson for @cafreeland issues this statement on #NAFTA progress today. #cdnpoli pic.twitter.com/0n9RHHMxr2

— Michel Boyer (@BoyerMichel) August 27, 2018

"I do want to underscore that I've been hearing optimism from those countries about the progress they're making and Canada is very sympathetic to the fact that these issues are very complicated," she told reporters in Richmond, British Columbia, according to CTV News. "We want a good deal, not just any deal."

Demands on rules of origin have been described as one of various "poison pills" that threatened to derail negotiations over the past year. The other was the U.S. proposal for a "sunset clause" within the agreement.

Yet, CNBC reports the U.S. softened its position over a sunset clause in the past months of talks. If the bilateral talks with Mexico also solved concerns over rules of origin, the path for a deal by the end of this year may well be clear.