US Proposals on NAFTA Pose Problems for Canada

CANADA is looking at the North American Free Trade Agreement with a mixture of longing and loathing.

If Mexico and the United States Congress follow Canada's lead in giving legislative approval to the massive free-trade deal, it will be the culmination of the ruling Progressive Conservative Party's free-trade efforts. It would also be an accomplishment the party could tout in a federal election fight this fall. The ruling party relishes that possibility.

But there is a degree of loathing, too. That is because US negotiators are reportedly insisting that two side agreements - one setting tough environmental standards, the other limiting the loss of US jobs - have "real teeth" to enforce their provisions. Both side deals are aimed primarily at upgrading Mexican environmental and labor conditions.

Canada's NAFTA proponents, however, though generally favoring improved environmental standards, are unhappy with trade sanctions as the means of enforcement. Resistance from within the conservative party and allied business groups could cause problems at the crucial talks that begin today, analysts say.

"If NAFTA fell apart Canada wouldn't weep," says Gordon Ritchie, former chief Canadian trade negotiator and an architect of the 1989 US-Canada Free Trade Agreement (FTA). "If you add on these additional restrictions, there are a whole lot of Canadians including Canadian businessmen who will be saying `who needs it?' " Canada already has the FTA, he and others say.

Canadian unhappiness with the side agreements has much to do with a growing skepticism over the value of past free trade deals with the US. Since the FTA went into effect in 1989, Canada has been embroiled with the US in one trade dispute after another over beer, pork, steel, autos, and softwood lumber. The Canadian public has come to view the spats as US bullying of Canada.

Mr. Ritchie says the US is guilty of "massive, systemic, bad faith" under the FTA "that is now increasingly being understood in this country."

STILL, Canada is prepared to implement the overall NAFTA agreement. Parliament has already passed enabling legislation on the main deal, though that is still a far cry from endorsing the side agreements, Ritchie says. Final implementation could be held up if the US Congress or the administration produce side agreements the government does not like, he says.

Yet teeth in the side agreements seem necessary if the Clinton administration is to convince the US Congress to approve the deal before its implementation date of Jan. 1, 1994. US Trade Representative Mickey Kantor last week slammed suggestions that the US was backing off on including sanctions. "We want real teeth, real enforcement," Mr. Kantor said, later telling an audience of steelworkers that, "We will not, I repeat, we will not send NAFTA to the Congress unless we have effective side agreements."

With such statements, members of the Clinton administration have "boxed themselves in" says Murray Smith, director of the Center for Trade Policy and Law in Ottawa. "They have committed themselves politically on the issue of trade sanctions without any sense that those could actually be obtained," he says. "Walking [away from NAFTA] is a credible option for Canada."

Other analysts argue, however, that the conservative government has invested too much political capital to walk away. "I just can't see this government turning around and walking away after eight years," says Maude Barlow, leader of the Council of Canadians, an anti-trade lobby group in Ottawa. "The signals are that there will be an agreement."

There may be a third scenario, Ms. Barlow says. She can envision a plan whereby the business community pools billions of dollars to clean up Mexico's environment; Clinton would offer that proposal to the US Congress in lieu of trade sanctions.

"[Prime Minister Kim] Campbell will get to sell it as a kinder, gentler NAFTA," Barlow says, while quietly telling the business community that "it won't have the kind of teeth they're afraid of."