By Ana Isabel Martinez and Kevin Krolicki
ATLANTA, Sept 30 (Reuters) - Negotiators trying to clinch a Pacific Rim free trade deal made headway on Wednesday over how to remove a stumbling block and give automakers a freer hand to sell cars in the United States with more parts purchased in Asia.
People briefed on the closed-door talks said Canada and Mexico signaled a willingness to open the North American auto market to more parts made in Asia, one of the key hurdles to sealing a broader deal on the Trans-Pacific Partnership.
The TPP seeks to cut trade barriers and set common standards among a dozen nations reaching from Japan to Chile, but talks have become snared over a small set of issues, including dairy trade and patent periods for biologic drugs.
Japan has pushed hard during talks in Atalanta for a deal on auto parts, a crucial issue for Japananese carmakers, led by Toyota Motor Corp 7203.T , who depend on sales to the U.S. market and want flexibility in how and where they source parts.
"We have to head into this with the expectation that we can wrap things up," Japanese Economy Minister Akira Amari was quoted by Japanese media as saying.
Australian Trade Minister Andrew Robb said ministers meeting on Wednesday had detailed remaining issues.
"There's an intent there. We are now swapping different versions of possible outcomes, but we have got a lot to do," Robb told Reuters after the plenary session on the TPP.
An earlier round of talks in July had failed after Mexican officials objected to a proposal by Japan and the United States on autos concerning the "rules of origin" that determine whether a vehicle can be exported without tariffs.
In Atlanta, officials from Mexico and Canada were aiming for a 45-percent threshold for local content on vehicles, two people briefed on the talks said.
If it becomes part of the final trade deal, it would mean more than half of a vehicle could be sourced from outside the 12 countries participating in the TPP and still be sold in the United States - the bloc's largest market - without tariffs.
Separately, Japan was pushing for a local sourcing threshold of 32.5 percent for individual auto parts, the people briefed on the talks said.
Those thresholds would be below the two-decade old North American Free Trade Agreement rules which have been credited with driving the auto industry boom in Mexico.
Ministers will meet again on Thursday but no deal is seen likely before Friday.
Monopoly periods for next-generation biologics drugs remain an unresolved issue.
Protestors gathered outside the talks on Tuesday to protest trade rules which could mean longer delays in bringing generic versions of such drugs to market for some TPP countries.
"Even one year's delay in affordable treatment can be a death sentence," said breast cancer patient Zahara Heckscher. Heckscher was later taken away in handcuffs by local police when she refused to leave the venue in downtown Atlanta without seeing a draft of the TPP text.
New Zealand Prime Minister John Key said the pact could be scuppered if negotiations were to drag on.
Speaking at the Asia Society in New York City, Key said New Zealand, home to the world's largest dairy exporter Fonterra FCG.NZ , was still not happy with dairy market access.
With presidential elections in the United States set for November 2016 and some opposition in Congress to the deal, time is of the essence to complete the agreement, which become part of President Barack Obama's legacy.
"The window of opportunity to complete TPP is closing so you wouldn't say it's impossible to complete the deal if it doesn't take place in Atlanta, but it does become more difficult," Key said.
TPP leaders are scheduled to meet at an Asia-Pacific Economic Cooperation summit in the Philippines in mid-November, which Key said was "probably the last opportunity for 2015" to close the trade deal.