National flags of the United States, Canada, and Mexico fly in the breeze in New Orleans on April 21, 2008.

Image Credit: THE CANADIAN PRESS/AP, Judi Bottoni

OTTAWA - The federal government finds itself in a holding pattern on NAFTA negotiations with one-on-one talks between the United States and Mexico set to spill into next week.

A source familiar with the effort said Friday that Canadian negotiators won't be returning to the NAFTA bargaining table in Washington until its two partners find common ground on their outstanding issues, especially the complex sticking points around the auto sector.

However, if the U.S. and Mexico can resolve their bilateral differences in the coming days, the source said it's "very possible" Canada's team — potentially including Foreign Affairs Minister Chrystia Freeland — could rejoin negotiations later in the week.

Media reports said Friday's NAFTA discussions between U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo ended with bilateral work still to be done. On his way out of the meeting, reports said Guajardo indicated the two sides have made progress and will meet again next week to continue their talks for a fourth straight week.

"We continue to be in the same position where Mexico and the U.S. need to continue to work out their issues," said the Canadian source, who spoke on condition of anonymity because they weren't authorized to speak publicly about the matter.

"The next obvious question is, do we have a firm date of Canada physically going to join the talks? And the answer is no, as long as the U.S. and Mexico have not resolved their issues, specifically auto."

The source added that Freeland and David MacNaughton, Canada's ambassador to the U.S., remain in regular contact with relevant officials from the U.S. and Mexico.

The U.S. and Mexican governments have both expressed optimism the entire NAFTA deal could be concluded before the end of the month.

MacNaughton said in an interview last week that predictions NAFTA can be settled by the end of August are "aspirational." However, he added that he supports the effort and that Canadian negotiators are ready to work long hours to help make it happen.

NAFTA negotiations between the U.S. and Mexico have been building momentum after taking a break in late May ahead of Mexico's July presidential election.

Some observers have raised concerns about Canada's absence from recent high-level talks on the three-country trade deal. There have been warnings Canada could be put in a position where it might have to accept a deal reached between the U.S. and Mexico.

To complicate matters, the already rocky Canada-U.S. relationship has deteriorated since the partners suspended talks in the spring.

U.S. President Donald Trump slapped Canada and other allies with steel and aluminum duties, which led to retaliatory levies from Ottawa. Trump has also threatened to apply far more damaging tariffs on the deeply integrated automotive sector.

And in June, Trump called Prime Minister Justin Trudeau "very dishonest and weak" shortly after he left the G7 meeting in Quebec.

But Canadian officials, including MacNaughton, have insisted Ottawa hasn't been sidelined during the bilateral discussions, arguing there have been lots of one-on-one talks between NAFTA partners during the year-long renegotiation process.

Once Canada returns to the talks, the continental partners are expected to shift their focus to other tough, unresolved issues.

MacNaughton has listed some of those stubborn areas. He said they include dispute resolution, agriculture issues, intellectual property, government procurement, the proposed inclusion of a five-year sunset clause and the de minimis threshold, which is the maximum value of an item that Canadians can order from a foreign country without paying duties or taxes.

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News from © The Canadian Press, 2018