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NAFTA talks looked set to move forward as the U.S. dropped a contentious American content rule for cars exported to the U.S. from Canada and Mexico, sources close to the talks say.

The U.S. negotiating team had been demanding that cars manufactured in Canada and Mexico for shipment to the U.S. had to contain at least 50 % American content. Canada and Mexico had rejected the demand, saying it gave the U.S. an unfair advantage over them.

The news that the U.S. had changed its mind on the American content rule came following a meeting between Canadian Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer.

David MacNaughton, Canadian ambassador to the U.S., told Canadian Press that in the last couple of weeks NAFTA talks "have been more positive than I've seen them before. 

"I can say in all honesty that there has been substantive progress made, certainly on the auto side. I am confident that we are going to move forward.”

MacNaughton said the U.S. team had presented workable compromise proposals that would address U.S. President Trump’s American content demand without requiring the original hard-line 50 % content rule.

"If true, that would be a very strong indication that we're in deal-making mode," said Flavio Volpe, president of the Automotive Parts Manufacturers' Association of Canada.

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