The World of Computer Software/The World of Computer Software.iso/nafta.syn

Text File | 1993-01-04 | 107KB | 2,659 lines

National Trade Data Bank - The Export Connection (R)
ITEM ID     : TR NAFTA2 PGM-DESC
DATE        : Aug 28, 1992

AGENCY        : OFFICE OF THE U.S. TRADE REPRESENTATIVE
PROGRAM     : NORTH AMERICAN FREE TRADE AGREEMENT
TITLE        : Program Description

Update sched: Periodically
Data type   : TEXT
End year    : 1992

               INTRODUCTION



This document provides a synopsis of the proposed North American
Free Trade Agreement.

On August 12, 1992, Canadian Minister of Industry, Science and
Technology and Minister for International Trade Michael Wilson,
Mexican Secretary of Trade and Industrial Development Jaime Serra
and United States Trade Representative Carla Hills completed
negotiations on a proposed North American Free Trade Agreement
(NAFTA).  Officials of the three governments have been directed
to complete work on the final text of the Agreement as soon as
possible.  The final text will be made public when completed.
The following description does not itself constitute an agreement
between the three countries and is not intended as an interpretation
of the final text.

For ease of reference a summary of significant environmental
provisions of the NAFTA is included at the end of this document.

For further information contact:

     Chip Roh
     Director of North American Affairs Section
     United States Special Trade Representative
     600 17th Street NW
     Washington, DC 20506
     Phone: [phone]




            TABLE OF CONTENTS



PREAMBLE . . . . . . . . . . . . . . . . . . . .

OBJECTIVES AND OTHER OPENING
      PROVISIONS . . . . . . . . . . . . . . . .

RULES OF ORIGIN. . . . . . . . . . . . . . . . .

CUSTOMS ADMINISTRATION . . . . . . . . . . . . .

TRADE IN GOODS . . . . . . . . . . . . . . . . .
      National Treatment
      Market Access
       Elimination of Tariffs
       Import and Export Restrictions
       Drawback
       Customs User Fees
       Waiver of Customs Duties
       Export Taxes
       Other Export Measures
       Duty-Free Temporary Admission of Goods
       Country-of-Origin Marking
       Alcoholic Beverages - Distinctive Products

TEXTILES AND APPAREL . . . . . . . . . . . . . .
      Elimination of Tariff and Non-Tariff Barriers
      Safeguards
      Rules of Origin
      Labelling Requirements

AUTOMOTIVE GOODS . . . . . . . . . . . . . . . .
      Tariff Elimination
       Vehicles
       Parts
      Rules of Origin
      Mexican Auto Decree
      Mexican Auto-Transportation Decree
      Imports of Used Vehicles
      Investment Restrictions
      Corporate Average Fuel Economy Fleet Content
      Automotive Standards

ENERGY AND BASIC PETROCHEMICALS. . . . . . . . .

AGRICULTURE. . . . . . . . . . . . . . . . . . .
      Tariffs and Non-Tariff Barriers
       Trade between Mexico and the United States
       Trade between Canada and Mexico
      Special Safeguard Provision
      Domestic Support
      Export Subsidies
      Agricultural Marketing Standards
      Resolution of Commercial Disputes
      Committee on Agricultural Trade

SANITARY AND PHYTOSANITARY
      MEASURES . . . . . . . . . . . . . . . . .
      Basic Rights and Obligations
      International Standards
      Harmonization and Equivalence
      Risk Assessment
      Adaptation to Regional Conditions
      Procedural "Transparency"
      Control, Inspection and Approval Procedures
      Technical Assistance
      Committee on Sanitary and Phytosanitary
       Measures

TECHNICAL STANDARDS. . . . . . . . . . . . . . .
      Basic Rights and Obligations
      International Standards
      Compatibility
      Conformity Assessment
      Procedural "Transparency"
      Technical Cooperation
      Committee on Standards-Related Measures

EMERGENCY ACTION . . . . . . . . . . . . . . . .
      Bilateral Safeguard
      Global Safeguard
      Procedural Requirements

REVIEW OF ANTIDUMPING
AND COUNTERVAILING DUTY MATTERS. . . . . . . . .
      Panel Process
      Retention of AD and CVD Laws
      Extraordinary Challenge Procedure
      Special Committee to Safeguard the Panel Process

GOVERNMENT PROCUREMENT . . . . . . . . . . . . .
      Coverage
      Procedural Obligations
      Technical Cooperation
      Future Negotiations

CROSS-BORDER TRADE IN SERVICES . . . . . . . . .
      National Treatment
      Most-Favored-Nation Treatment
      Local Presence
      Reservations
      Non-Discriminatory Quantitative Restrictions
      Licensing and Certification
      Denial of Benefits
      Exclusions

LAND TRANSPORTATION. . . . . . . . . . . . . . .
      Liberalization of Restrictions
       Bus and Trucking Services
       Rail Services
       Port Services
      Technical and Safety Standards
      Access to Information
      Review Process

TELECOMMUNICATIONS . . . . . . . . . . . . . . .
      Access to and Use of Public Networks
      Exclusions and Limitations
      Enhanced Telecommunications
      Standards-Related Measures
      Monopoly Provision of Services
      Provision of Information
      Technical Cooperation
INVESTMENT . . . . . . . . . . . . . . . . . . .
      Coverage
      Non-Discriminatory and Minimum Standards of
       Treatment
      Performance Requirements
      Transfers
      Expropriation
      Dispute Settlement
      Country-Specific Commitments and Exceptions
      Exceptions
      Investment and the Environment

COMPETITION POLICY, MONOPOLIES
AND STATE ENTERPRISES. . . . . . . . . . . . . .
      Competition Policy
      Monopolies and State Enterprises
       State Enterprises
       Monopolies
      Trade and Competition Committee

FINANCIAL SERVICES . . . . . . . . . . . . . . .
      Principles
       Commercial Presence and Cross-Border
        Services
       Non-Discriminatory Treatment
       Procedural "Transparency"
       Prudential and Balance of Payments
        Measures
      Consultations
      Country-Specific Commitments
       Canada
       Mexico
       United States
       Canada-United States

INTELLECTUAL PROPERTY. . . . . . . . . . . . . .
      Copyright
      Patents
      Other Intellectual Property Rights
      Enforcement Procedures

TEMPORARY ENTRY FOR BUSINESS
      PERSONS. . . . . . . . . . . . . . . . . .
      Consultations
      Provision of Information
      Non-Compliance

INSTITUTIONAL ARRANGEMENTS AND
DISPUTE SETTLEMENT PROCEDURES. . . . . . . . . .
      Institutional Arrangements
       Trade Commission
       Secretariat
      Dispute Settlement Procedures
       Consultations
       The Role of the Commission
       Initiation of Panel Proceedings
      Forum Selection
      Panel Procedures
      Implementation and Non-Compliance
      Alternate Dispute Resolution of Private
       Commercial Disputes


ADMINISTRATION OF LAWS . . . . . . . . . . . . .
      Procedural "Transparency"
      Contact Points

EXCEPTIONS . . . . . . . . . . . . . . . . . . .
      General Exceptions
      National Security
      Taxation
      Balance of Payments
      Cultural Industries

FINAL PROVISIONS . . . . . . . . . . . . . . . .
      Entry into Force
      Accession
      Amendments and Withdrawal

SUMMARY OF ENVIRONMENTAL
      PROVISIONS . . . . . . . . . . . . . . . .



            PREAMBLE


The Preamble to the NAFTA sets out the principles and
aspirations on which the Agreement is based.  It affirms the
three countries' commitment to promoting employment and
economic growth in each country through the expansion of trade
and investment opportunities in the free trade area and by
enhancing the competitiveness of Canadian, Mexican and U.S.
firms in global markets, in a manner that protects the
environment.  The Preamble confirms the resolve of the NAFTA
partners to promote sustainable development, to protect,
enhance and enforce workers' rights and to improve working
conditions in each country.




       OBJECTIVES AND OTHER OPENING PROVISIONS


The opening provisions of the NAFTA formally establish a free
trade area between Canada, Mexico and the United States,
consistent with the General Agreement on Tariffs and Trade
(GATT).  They set out the basic rules and principles that will
govern the Agreement and the objectives that will serve as the
basis for interpreting its provisions.

The objectives of the Agreement are to eliminate barriers to
trade, promote conditions of fair competition, increase
investment opportunities, provide adequate protection for
intellectual property rights, establish effective procedures for the
implementation and application of the Agreement and for the
resolution of disputes and to further trilateral, regional and
multilateral cooperation.  The NAFTA countries will meet these
objectives by observing the principles and rules of the
Agreement, such as national treatment, most-favored-nation
treatment and procedural "transparency".

Each country affirms its respective rights and obligations under
the GATT and other international agreements.  For purposes of
interpretation, the Agreement establishes that the NAFTA takes
priority over other agreements to the extent there is any conflict,
but provides for exceptions to this general rule.  For example,
the trade provisions of certain environmental agreements take
precedence over NAFTA, subject to a requirement to minimize
inconsistencies with the Agreement.

The opening provisions also set out a general rule regarding the
application of the Agreement to sub-federal levels of government
in the three countries.  In addition, this section defines terms
that apply to the whole Agreement, to ensure uniform and
consistent usage.




           RULES OF ORIGIN


NAFTA eliminates all tariffs on goods originating in Canada,
Mexico and the United States over a "transition period".  Rules
of origin are necessary to define which goods are eligible for this
preferential tariff treatment.

This section of the Agreement is designed to:

-     ensure that NAFTA benefits are accorded only to goods
      produced in the North American region -- not goods
      made wholly or in large part in other countries;

-     provide clear rules and predictable results; and

-     minimize administrative burdens for exporters, importers
      and producers trading under NAFTA.

The rules of origin specify that goods originate in North America
if they are wholly North American.  Goods containing non-
regional materials are also considered to be North American if
the non-regional materials are sufficiently transformed in the
NAFTA region so as to undergo a specified change in tariff
classification.  In some cases, goods must include a specified
percentage of North American content in addition to meeting
the tariff classification requirement.    The rules of origin section
also contains a provision similar to one in the Canada-United
States Free Trade Agreement (FTA) that allows goods to be
treated as originating when the finished good is specifically
named in the same tariff subheading as its parts and it meets the
required value content test.

Regional value content may be calculated using either the
"transaction-value" or the "net-cost" method.  The transaction-
value method is based on the price paid or payable for a good;
this avoids the need for complex cost accounting systems.  The
net-cost method is based on the total cost of the good less the
costs of royalties, sales promotion, and packing and shipping.
Additionally, the net-cost method sets a limitation on allowable
interest.  Although producers generally have the option to use
either method, the net-cost method must be used where the
transaction value is not acceptable under the GATT Customs
Valuation Code, and must also be used for certain products, such
as automotive goods.

In order to qualify for preferential tariff treatment, automotive
goods must contain a specified percentage of North American
content (rising to 62.5 percent for passenger automobiles and
light trucks as well as engines and transmissions for such
vehicles, and to 60 percent for other vehicles and automotive
parts) based on the net-cost formula.  In calculating the content
level of automotive goods, the value of imports of automotive
parts from outside the NAFTA region will be traced through the
production chain to improve the accuracy of the content
calculation.  Regional content averaging provisions afford
administrative flexibility for automotive parts producers and
assemblers.

A de minimis rule prevents goods from losing eligibility for
preference solely because they contain minimal amounts of "non-
originating" material.  Under this rule, a good that would
otherwise fail to meet a specific rule of origin will nonetheless
be considered to be North American if the value of non-NAFTA
materials comprises no more than seven percent of the price or
total cost of the good.



          CUSTOMS ADMINISTRATION


In order to ensure that only goods satisfying the rules of origin
are accorded preferential tariff treatment under the Agreement,
and to provide certainty to and streamlined procedures for
importers, exporters and producers of the three countries, the
NAFTA includes a number of provisions on customs
administration.  Specifically, this section provides for:

-     uniform regulations to ensure consistent interpretation,
      application and administration of the rules of origin;

-     a uniform Certificate of Origin as well as certification
      requirements and procedures for importers and exporters
      that claim preferential tariff treatment;

-     common record-keeping requirements in the three
      countries for such goods;

-     rules for both traders and customs authorities with respect
      to verifying the origin of such goods;

-     importers, exporters and producers to obtain advance
      rulings on the origin of goods from the customs authority
      of the country into which the goods are to be imported;

-     the importing country to give exporters and producers in
      other NAFTA countries substantially the same rights of
      review and appeal of its origin determinations and
      advance rulings as it provides to importers in its territory;

-     a trilateral working group to address future modifications
      of the rules of origin and the uniform regulations; and

-     specific time periods to ensure the expeditious resolution
      of disputes regarding the rules of origin between NAFTA
      partners.




             TRADE IN GOODS


National Treatment

The NAFTA incorporates the fundamental national treatment
obligation of the GATT.  Once goods have been imported into
one NAFTA country from another NAFTA country, they must
not be the object of discrimination.  This commitment extends to
provincial and state measures.




Market Access

These provisions establish rules governing trade in goods with
respect to customs duties and other charges, quantitative
restrictions, such as quotas, licenses and permits, and import and
export price requirements.  They improve and make more secure
the access for goods produced and traded within North America.


Elimination of Tariffs:  The NAFTA provides for the progressive
elimination of all tariffs on goods qualifying as North American
under its rules of origin.  For most goods, existing customs duties
will either be eliminated immediately or phased out in five or 10
equal annual stages.  For certain sensitive items, tariffs will be
phased out over a period of up to 15 years.  Tariffs will be
phased out from the applied rates in effect on July 1, 1991,
including the U.S. Generalized System of Preferences (GSP) and
the Canadian General Preferential Tariff (GPT) rates.  Tariff
phase-outs under the Canada-U.S. FTA will continue as
scheduled under that Agreement.  The NAFTA provides that the
three countries may consult and agree on a more rapid phase-out
of tariffs.

Import and Export Restrictions:  All three countries will eliminate
prohibitions and quantitative restrictions applied at the border,
such as quotas and import licenses.  However, each NAFTA
country maintains the right to impose border restrictions in
limited circumstances, for example, to protect human, animal or
plant life or health, or the environment.  Special rules apply to
trade in agriculture, autos, energy and textiles.

Drawback:  NAFTA establishes rules on the use of "drawback" or
similar programs that provide for the refund or waiver of
customs duties on materials used in the production of goods
subsequently exported to another NAFTA country.

Existing drawback programs will terminate by January 1, 2001,
for Mexico-U.S. and Canada-Mexico trade; the Agreement will
extend for two years the deadline established in the Canada-U.S.
FTA for the elimination of drawback programs.  At the time
these programs are eliminated, each NAFTA country will adopt
a procedure for goods still subject to duties in the free trade
area to avoid the "double taxation" effects of the payment of
duties in two countries.


Under these procedures, the amount of customs duties that a
country may waive or refund under such programs will not
exceed the lesser of:

-     duties owed or paid on imported, non-North American
      materials used in the production of a good subsequently
      exported to another NAFTA country; or

-     duties paid to that NAFTA country on the importation of
      such good.

Customs User Fees:  The three countries have agreed not to
impose new customs user fees similar to the U.S. merchandise
processing fee or the Mexican customs processing fee ("derechos
>>g:Chap05                    72
 de tr mite aduanero").  Mexico will eliminate by June 30, 1999,
de tr mite aduanero").  Mexico will eliminate by June 30, 1999,
its existing customs processing fee on North American goods.
The United States will eliminate its current merchandise
processing fee on goods originating in Mexico by the same date.
For goods originating in Canada, the United States currently is
phasing down and will eliminate this fee by January 1, 1994, as
provided in the Canada-U.S. FTA.

Waiver of Customs Duties:  The NAFTA prohibits any new
performance-based customs duty waiver or duty remission
programs.  Existing programs in Mexico will be eliminated by
January 1, 2001.  Consistent with the obligations of the Canada-
U.S. FTA, Canada will end its existing duty remission programs
by January 1, 1998.

Export Taxes:  The NAFTA prohibits all three countries from
applying export taxes unless such taxes are also applied on goods
to be consumed domestically.  Limited exceptions allow Mexico
to impose export taxes in order to relieve critical shortages of
foodstuffs and basic goods.

Other Export Measures:    When a NAFTA country imposes an
export restriction on a product, it must not reduce the proportion
of total supply of that product made available to the other
NAFTA countries below the level of the preceding three years
or other agreed period, impose a higher price on exports to
another NAFTA country than the domestic price or require the
disruption of normal supply channels.  Based on a reservation
that Mexico has taken, these obligations do not apply as between
Mexico and the other NAFTA countries.

Duty-Free Temporary Admission of Goods:  The Agreement
allows business persons covered by NAFTA's "temporary entry"
provisions to bring into a NAFTA country professional
equipment and "tools of the trade" on a duty-free, temporary
basis.    These rules also cover the importation of commercial
samples, certain types of advertising films, and goods imported
for sports purposes or for display and demonstration.  Other
rules provide that by 1998 all goods that are returned after
repair or alteration in another NAFTA country will re-enter
duty-free.  The United States undertakes to clarify what ship
repairs done in other NAFTA countries on U.S.-flagged vessels
qualify for preferential duty treatment.

Country-of-Origin Marking:  This section also provides principles
and rules governing country-of-origin marking.    These provisions
are designed to minimize unnecessary costs and facilitate the
flow of trade within the region, while ensuring that accurate
information about the country of origin remains available to
purchasers.

Alcoholic Beverages - Distinctive Products:  The three countries
have agreed to recognize Canadian Whiskey, Tequila, Mezcal,
Bourbon Whiskey and Tennessee Whiskey as "distinctive
products" and to prohibit the sale of products under these names
unless they meet the requirements of their country of origin.




        TEXTILES AND APPAREL


This section provides special rules for trade in fibers, yarns,
textiles and clothing in the North American market.  The
NAFTA textiles and apparel provisions take precedence over
those of the Multifiber Arrangement and other agreements
between NAFTA countries applicable to textile products.

Elimination of Tariff and Non-Tariff Barriers

The three countries will eliminate immediately or phase out over
a maximum period of 10 years their customs duties on textile
and apparel goods manufactured in North America that meet the
NAFTA rules of origin.    In addition, the United States will
immediately remove import quotas on such goods produced in
Mexico, and will gradually phase out import quotas on Mexican
textile and apparel goods that do not meet such rules.    No
NAFTA country may impose any new quota, except in
accordance with specified "safeguards" provisions.

Safeguards

If textile or apparel producers face serious damage as a result of
increased imports from another NAFTA country, the importing
country may, during the "transition period", either increase tariffs
or, with the exception of Canada-U.S. trade, impose quotas on
the imports to provide temporary relief to that industry, subject
to specific disciplines.  In the case of goods that meet NAFTA's
rules of origin, the importing country may take safeguard actions
only in the form of tariff increases.

Rules of Origin

Specific rules of origin in the NAFTA define when imported
textile or apparel goods qualify for preferential treatment.  For
most products, the rule of origin is "yarn forward", which means
that textile and apparel goods must be produced from yarn made
in a NAFTA country in order to benefit from such treatment.  A
"fiber forward" rule is provided for certain products such as
cotton and man-made fiber yarns.  Fiber forward means that
goods must be produced from fiber made in a NAFTA country.
In other cases, apparel cut and sewn from certain imported
fabrics that the NAFTA countries agree are in short supply, such
as silk, linen and certain shirting fabrics, can qualify for
preferential treatment.

Additional provisions, responsive to the needs of North
American industry, include "tariff rate quotas" (TRQ's), under
which yarns, fabrics and apparel that are made in North
America, but that do not meet the rules of origin, can still
qualify for preferential duty treatment up to specified import
levels.  The TRQ's for Canada that were included in the
Canada-U.S. FTA have been increased and provided an annual
growth rate for at least the first five years.

The NAFTA countries will undertake a general review of the
textile and apparel rules of origin prior to January 1, 1998.  In
the interim, they will consult on request on whether specific
goods should be made subject to different rules of origin, taking
into account availability of supply within the free trade area.  In
addition, the three countries have established a process to permit
annual adjustments to TRQ levels.

Labelling Requirements

A joint government and private sector Committee on Labelling
for Textile Products will recommend ways to eliminate
unnecessary obstacles to textile trade resulting from different
labelling requirements in the three countries through a work
program to develop uniform labelling requirements, for example
regarding pictograms and symbols, care instructions, fiber
content information and methods for attachment of labels.



          AUTOMOTIVE GOODS


The NAFTA will eliminate barriers to trade in North American
automobiles, trucks, buses and parts ("automotive goods") within
the free trade area, and eliminate investment restrictions in this
sector, over a 10-year transition period.

Tariff Elimination

Each NAFTA country will phase out all duties on its imports of
North American automotive goods during the transition period.
Most trade in automotive goods between Canada and the United
States is conducted on a duty-free basis under the terms of either
the Canada-U.S. FTA or the Canada-U.S. "Autopact".

Vehicles:  Canada and the United States eliminated tariffs on
their trade in vehicles under the Canada-U.S. FTA.  Under the
NAFTA, for its imports from Mexico, the United States will:

-     eliminate immediately its tariffs on passenger
      automobiles;

-     reduce immediately to 10 percent its tariffs on light trucks
      and phase out the remaining tariffs over five years; and

-     phase out its tariffs on other vehicles over 10 years.

For imports from Canada and the United States, Mexico will:

-     reduce immediately by 50 percent its tariffs on passenger
      automobiles and phase out the remaining tariffs over 10
      years;

-     reduce immediately by 50 percent its tariffs on light trucks
      and phase out the remaining tariffs over five years; and

-     phase out its tariffs on all other vehicles over 10 years.

Canada will eliminate its tariffs on vehicles imported from
Mexico on the same schedule as Mexico will follow for imports
from Canada and the United States.

Parts:    Each country will eliminate its remaining tariffs on certain
automotive parts immediately and phase out duties on other
parts over five years and a small portion over 10 years.

Rules of Origin
The NAFTA rules of origin section provides that in order to
qualify for preferential tariff treatment, automotive goods must
contain a specified percentage of North American content (rising
to 62.5 percent for passenger automobiles and light trucks as
well as engines and transmissions for such vehicles, and to 60
percent for other vehicles and automotive parts) based on the
net-cost formula.  In calculating the content level of automotive
goods, the value of imports of automotive parts from outside the
NAFTA region will be traced through the production chain to
improve the accuracy of the content calculation.

Mexican Auto Decree

The Mexican Auto Decree will terminate at the end of the
transition period.  Over this period, the restrictions under the
Auto Decree will be modified by:

-     eliminating immediately the limitation on imports of
      vehicles based on sales in the Mexican market;

-     amending its "trade balancing" requirements immediately
      to permit assemblers to reduce gradually the level of
      exports of vehicles and parts required to import such
      goods, and eliminating, at the end of the transition period,
      the requirement that only assemblers in Mexico may
      import vehicles;

-     changing its "national value-added" rules by reducing
      gradually the percentage of parts required to be
      purchased from Mexican parts producers; by counting
      purchases from certain in-bond production facilities
      ("maquiladoras") toward this percentage; by ensuring that
      Canadian, Mexican and U.S. parts manufacturers may
      participate in the growing Mexican market on a
      competitive basis, while requiring assemblers in Mexico
      during the transition period to continue to purchase parts
      from Mexican parts producers; and by eliminating at the
      end of the transition period the national value added
      requirement.

Mexican Auto-Transportation Decree

The Mexican Auto-Transportation Decree covering trucks (other
than light trucks) and buses will be eliminated immediately, and
replaced with a transitional system of quotas in effect for five
years.

Imports of Used Vehicles

Canada's remaining restrictions on the import of used motor
vehicles from the United States will be eliminated on January 1,
1994, in accordance with the Canada-U.S. FTA.  Beginning 15
years after the NAFTA goes into effect, Canada will phase out
over 10 years its prohibition on imports of Mexican used motor
vehicles.  Mexico will phase out its prohibition on imports of
North American used vehicles over the same period.

Investment Restrictions

In accordance with the NAFTA's investment provisions, Mexico
will immediately permit "NAFTA investors" to make investments
of up to 100 percent in Mexican "national suppliers" of parts, and
up to 49 percent in other automotive parts enterprises, increasing
to 100 percent after five years.  Mexico's thresholds for the
screening of takeovers in the automotive sector will be governed
by NAFTA's investment provisions.

Corporate Average Fuel Economy Fleet Content

Under the NAFTA, the United States will modify the fleet
content definition found in its Corporate Average Fuel Economy
("CAFE") rules, so that vehicle manufacturers may choose to
have those Mexican-produced parts and vehicles they export to
the United States classified as domestic.  After 10 years, Mexican
production exported to the United States will receive the same
treatment as U.S. or Canadian production for purposes of
CAFE.  Canadian-produced automobiles currently may be
classified as domestic for CAFE purposes.  The NAFTA does
not change the minimum fuel economy standards for vehicles
sold in the United States.

Automotive Standards

The NAFTA creates a special intergovernmental group to review
and make recommendations on federal automotive standards in
the three countries, including recommendations to achieve
greater compatibility in such standards.




       ENERGY AND BASIC PETROCHEMICALS


This section sets out the rights and obligations of the three
countries regarding crude oil, gas, refined products, basic
petrochemicals, coal, electricity and nuclear energy.

In the NAFTA, the three countries confirm their full respect for
their constitutions.  They also recognize the desirability of
strengthening the important role that trade in energy and basic
petrochemical goods plays in the North American region and of
enhancing this role through sustained and gradual liberalization.

The NAFTA's energy provisions incorporate and build on GATT
disciplines regarding quantitative restrictions on imports and
exports as they apply to energy and basic petrochemical trade.
The NAFTA provides that under these disciplines a country may
not impose minimum or maximum import or export price
requirements, subject to the same exceptions that apply to
quantitative restrictions.  The NAFTA also makes clear that
each country may administer export and import licensing
systems, provided that they are operated in a manner consistent
with the provisions of the Agreement.  In addition, no country
may impose a tax, duty or charge on the export of energy or
basic petrochemical goods unless the same tax, duty or charge is
applied to such goods when consumed domestically.

This section also provides that import and export restrictions on
energy trade will be limited to certain specific circumstances,
such as to conserve exhaustible natural resources, deal with a
short supply situation or implement a price stabilization plan.


Further, when a NAFTA country imposes any such restriction, it
must not reduce the proportion of total supply made available to
the other NAFTA countries below the level of the preceding
three years or other agreed period, impose a higher price on
exports to another NAFTA country than the domestic price or
require the disruption of normal supply channels.  Based on a
reservation that Mexico has taken, these obligations do not apply
as between Mexico and the other NAFTA countries.

This section also limits the grounds on which a NAFTA country
may restrict exports or imports of energy or basic petrochemical
goods for reasons of national security.  However, based on a
reservation that Mexico has taken, energy trade between Mexico
and the other NAFTA countries will not be subject to this
discipline, but will instead be governed by the Agreement's
general national security provision, described in the "Exceptions"
section below.

The NAFTA confirms that energy regulatory measures are
subject to the Agreement's general rules regarding national
treatment, import and export restrictions and export taxes.  The
three countries also agree that the implementation of regulatory
measures should be undertaken in a manner that recognizes the
importance of a stable regulatory environment.

In the NAFTA, Mexico reserves to the Mexican State goods,
activities and investments in Mexico in the oil, gas, refining,
basic petrochemicals, nuclear and electricity sectors.

The NAFTA energy provisions recognize new private investment
opportunities in Mexico in non-basic petrochemical goods and in
electricity generating facilities for "own use", co-generation and
independent power production by allowing NAFTA investors to
acquire, establish and operate facilities in these activities.
Investment in non-basic petrochemical goods is governed by the
general provisions of the Agreement.

To promote cross-border trade in natural gas and basic
petrochemicals, NAFTA provides that state enterprises, end
users and suppliers have the right to negotiate supply contracts.
In addition, independent power producers, CFE (Mexico's state-
owned electricity firm) and electric utilities in other NAFTA
countries also have the right to negotiate power purchase and
sale contracts.

Each country will also allow its state enterprises to negotiate
performance clauses in their service contracts.

Certain specific commitments relating to special aspects of
Canada-U.S. energy trade, set out in the Energy Chapter of the
Canada-U.S. FTA, will continue to apply between the two
countries.



               AGRICULTURE


The NAFTA sets out separate bilateral undertakings on cross-
border trade in agricultural products, one between Canada and
Mexico, and the other between Mexico and the United States.
Both include a special transitional safeguard mechanism.  As a
general matter, the rules of the Canada-U.S. FTA on tariff and
non-tariff barriers will continue to apply to agricultural trade
between Canada and the United States.  Trilateral provisions in
the NAFTA address domestic support for agricultural goods and
agricultural export subsidies.

Tariffs and Non-Tariff Barriers

Trade between Mexico and the United States:  When the
Agreement goes into effect, Mexico and the United States will
eliminate immediately all non-tariff barriers to their agricultural
trade, generally through their conversion to either "tariff-rate
quotas" (TRQ's) or ordinary tariffs.

The TRQ's will facilitate the transition for producers of import-
sensitive products in each country.  No tariffs will be imposed on
imports within the quota amount.  The quantity eligible to enter
duty-free under the TRQ will be based on recent average trade
levels and will grow generally at three percent per year.  The
over-quota duty -- initially established at a level designed to
equal the existing tariff value of each non-tariff barrier -- will
progressively decline to zero during either a 10- or 15-year
transition period, depending on the product.

Under the NAFTA, Mexico and the United States will eliminate
immediately tariffs on a broad range of agricultural products.
This means that roughly one-half of U.S.-Mexico bilateral
agricultural trade will be duty-free when the Agreement goes
into effect.  All tariff barriers between Mexico and the United
States will be eliminated no later than 10 years after the
Agreement takes effect, with the exception of duties on certain
highly sensitive products  -- including corn and dry beans for
Mexico, and orange juice and sugar for the United States.  Tariff
phase-outs on these few remaining products will be completed
after five more years.

Mexico and the United States will gradually liberalize bilateral
trade in sugar.  Both countries will apply TRQ's of equivalent
effect on third country sugar by the sixth year after the
Agreement goes into effect.  All restrictions on trade in sugar
between the two countries will be eliminated by the end of the
15-year transition period, except that sugar exported under the
U.S. Sugar Re-Export Programs will remain subject to most-
favored-nation (MFN) tariff rates.

Trade between Canada and Mexico:  Canada and Mexico will
eliminate all tariff and non-tariff barriers on their agricultural
trade, with the exception of those in the dairy, poultry, egg and
sugar sectors.

Canada will immediately exempt Mexico from import restrictions
covering wheat, barley and their products, beef and veal, and
margarine.  Canada and Mexico will eliminate immediately or
phase out within five years tariffs on many fruit and vegetable
products, while tariffs on remaining fruit and vegetable products
will be phased out over 10 years.  A small number of these
products will be subject to the special transitional safeguard
described below.

Other than in the dairy, poultry and egg sectors, Mexico will
replace its import licenses with tariffs, for example on wheat, or
TRQ's, for example respecting corn and barley.  These tariffs
will generally be phased out over a 10-year period.

Special Safeguard Provision

During the first 10 years the Agreement is in effect, the NAFTA
provides a special safeguard provision that applies to certain
products within the scope of the bilateral undertakings described
above.    A NAFTA country may invoke the mechanism where
imports of such products from the other country reach "trigger"
levels set out in the Agreement.  In such circumstances, the
importing country may apply the tariff rate in effect at the time
the Agreement went into effect or the then-current MFN rate,
whichever is lower.  This tariff rate may be applied for the
remainder of the season or the calendar year, depending on the
product.  The trigger levels will increase over this 10-year period.


Domestic Support

Recognizing both the importance of domestic support measures
to their respective agricultural sectors and the potential effect of
such measures on trade, each of the NAFTA countries will
endeavor to move toward domestic support policies that are not
trade- distorting.  In addition, the three countries recognize that
a country may change its domestic support mechanisms so long
as such change is in compliance with applicable GATT
obligations.

Export Subsidies

Recognizing that the use of export subsidies within the free trade
area is inappropriate except to counter subsidized imports from a
non-NAFTA country, the Agreement provides that:

-     a NAFTA exporting country must give three-days' notice
      of its intent to introduce a subsidy on agricultural exports
      to another NAFTA country;

-     when an exporting NAFTA country believes that another
      NAFTA country is importing non-NAFTA agricultural
      goods that benefit from export subsidies, it may request
      consultations on measures the importing country could
      take against such subsidized imports; and

-     if the importing country adopts mutually agreed measures
      to counter that subsidy, the NAFTA exporting country will
      not introduce its own export subsidy.

Building on the bilateral discipline on export subsidies in the
Canada-U.S. FTA, the three countries will work toward the
elimination of export subsidies in North American agricultural
trade in pursuit of their objective of eliminating such subsidies
worldwide.

Agricultural Marketing Standards

The NAFTA provides that when either Mexico or the United
States applies a measure regarding the classification, grading or
marketing of a domestic agricultural product, it will provide no
less favorable treatment to like products imported from the
other country for processing.

Resolution of Commercial Disputes

The three countries will work toward development of a
mechanism for resolving private cross-border commercial
disputes involving agricultural products.

Committee on Agricultural Trade

A trilateral committee on agricultural trade will monitor the
implementation and administration of this section.  In addition, a
Mexico-U.S. working group and a Canada-Mexico working group
will be established under the committee to review the operation
of grade and quality standards.




     SANITARY AND PHYTOSANITARY MEASURES


This section imposes disciplines on the development, adoption
and enforcement of sanitary and phytosanitary (SPS) measures,
namely those taken for the protection of human, animal or plant
life or health from risks arising from animal or plant pests or
diseases, food additives or contaminants.  These disciplines are
designed to prevent use of SPS measures as disguised restrictions
on trade, while safeguarding each country's right to take SPS
measures to protect human, animal or plant life or health.

Basic Rights and Obligations

The NAFTA confirms the right of each country to establish the
level of SPS protection that it considers appropriate and provides
that a NAFTA country may achieve that level of protection
through SPS measures that:

-     are based on scientific principles and a risk assessment;

-     are applied only to the extent necessary to provide a
      country's chosen level of protection; and

-     do not result in unfair discrimination or disguised
      restrictions on trade.

International Standards

To avoid creating unnecessary barriers to trade, the NAFTA
encourages the three countries to use relevant international
standards in the development of their SPS measures.  However,
it permits each country to adopt more stringent, science-based
measures when necessary to achieve its chosen level of
protection.

The NAFTA partners will promote the development and review
of international SPS standards in such international and North
American standardizing organizations as the Codex Alimentarius
Commission, the International Office of Epizootics, the
Tripartite Animal Health Commission, the International Plant
Protection Convention and the North American Plant Protection
Organization.

Harmonization and Equivalence

The three countries have agreed to work toward equivalent SPS
measures without reducing any country's chosen level of
protection of human, animal or plant life or health.  Each
NAFTA country will accept SPS measures of another NAFTA
country as equivalent to its own, provided that the exporting
country demonstrates that its measures achieve the importing
country's chosen level of protection.

Risk Assessment

The NAFTA establishes disciplines on risk assessment, including
for evaluating the likelihood of entry, establishment or spread of
pests and diseases.  SPS measures must be based on an
assessment of risk to human, animal or plant life or health,
taking into account risk assessment techniques developed by
international or North American standardizing organizations.  A
NAFTA country may grant a phase-in period for compliance by
goods from another NAFTA country where the phase-in would
be consistent with ensuring the importing country's chosen level
of SPS protection.

Adaptation to Regional Conditions

This section also establishes rules for the adaptation of SPS
measures to regional conditions, in particular regarding pest- or
disease-free areas and areas of low pest or disease prevalence.
An exporting country must provide objective evidence whenever
it claims that goods from its territory originate in a pest- or
disease-free area or area of low pest or disease prevalence.

Procedural "Transparency"

The NAFTA requires public notice in most cases prior to the
adoption or modification of any SPS measure that may affect
trade in North America.  The notice must identify the goods to
be covered, and the objectives of and reasons for the measure.
All SPS measures must be published promptly.  Each NAFTA
country will ensure that a designated inquiry point provides
information regarding such measures.

Control, Inspection and Approval Procedures

The NAFTA also establishes rules governing procedures for
ensuring the fulfillment of SPS measures.  These rules allow for
the continued operation of domestic control, inspection and
approval procedures, including national systems for approving
the use of additives or for establishing tolerances for
contaminants in foods, beverages or feedstuffs, subject to such
disciplines as national treatment, timeliness and procedural
"transparency".

Technical Assistance

The three countries will facilitate the provision of technical
assistance concerning SPS measures either directly or through
appropriate international or North American standardizing
organizations.
Committee on Sanitary and Phytosanitary Measures

A Committee on Sanitary and Phytosanitary Measures will
facilitate the enhancement of food safety and sanitary conditions
in the free trade area, promote the harmonization and
equivalence of SPS measures and facilitate technical cooperation
and consultations, including consultations regarding disputes
involving SPS measures.




           TECHNICAL STANDARDS


This section applies to standards-related measures, namely
standards, governmental technical regulations and the procedures
used to determine that these standards and regulations are met.
It recognizes the crucial role of these measures in promoting
safety and protecting human, animal and plant life and health,
the environment and consumers.    The three countries have
agreed not to use standards-related measures as unnecessary
obstacles to trade, and will cooperate and work towards the
enhancement and compatibility of these measures in the free
trade area.

Basic Rights and Obligations

The NAFTA affirms that each country maintains the right to
adopt, apply and enforce standards-related measures, to choose
the level of protection it wishes to achieve through such
measures and to conduct assessments of risk to ensure that those
levels are achieved.  In addition, the NAFTA affirms each
country's rights and obligations under the GATT Agreement on
Technical Barriers to Trade and other international agreements,
including environmental and conservation agreements.

The NAFTA also sets out certain disciplines on the use of
standards-related measures, with a view to facilitating trade
between the NAFTA partners.  For example, each country must
ensure that its standards-related measures provide both national
treatment and most-favored-nation treatment.  That is, they must
ensure that goods or specified services from the other two
countries are treated no less favorably than like goods or services
of national origin, and like goods or services from non-NAFTA
countries.

International Standards

Each NAFTA country will use international standards as a basis
for its standards-related measures if those standards are an
effective and appropriate means to fulfill the country's objectives.
However, each country retains the right to adopt, apply and
enforce standards-related measures that result in a higher level
of protection than would be achieved by measures based on
international standards.



Compatibility

The NAFTA countries will work jointly to enhance safety, health
and environmental and consumer protection.  They will also seek
to make their standards-related measures more compatible,
taking into account international standard-setting activities, so as
to facilitate trade and to reduce the additional costs that arise
from having to meet different requirements in each country.

Conformity Assessment

Conformity assessment procedures are used to determine that
the requirements set out in technical regulations or standards are
fulfilled.  The Agreement sets out a detailed list of rules
governing these procedures to ensure that they do not create
unnecessary obstacles to trade between the NAFTA countries.

Procedural "Transparency"

The NAFTA requires public notice in most cases prior to the
adoption or modification of standards-related measures that may
affect trade in North America.    The notice must identify the
goods or services to be covered and the objectives of and the
reasons for the measure.  Other NAFTA countries and anyone
interested in a particular standards-related measure will be
allowed to comment on it.  Each NAFTA country will ensure
that designated inquiry points are able to respond to questions
and provide information regarding standards-related measures to
other NAFTA countries and any interested person.

Technical Cooperation

Each country will, on request, provide to another NAFTA
country technical advice, information and assistance on mutually
agreed terms and conditions to enhance their standards-related
measures.  The Agreement encourages cooperation between the
standardizing bodies of the NAFTA countries.

Committee on Standards-Related Measures

A Committee on Standards-Related Measures will monitor the
implementation and administration of this section of the
Agreement, facilitate the attainment of compatibility, enhance
cooperation on developing, applying and enforcing
standards-related measures and facilitate consultations regarding
disputes in this area.    Subcommittees and working groups will be
created to deal with specific topics of interest.  The Agreement
provides that these subcommittees and working groups may
invite the participation of scientists and representatives of
interested non-governmental organizations from the three
countries.




            EMERGENCY ACTION


This section of the Agreement establishes rules and procedures
under which a NAFTA country may take "safeguard" actions to
provide temporary relief to industries adversely affected by
surges in imports.  A transitional bilateral safeguard mechanism
applies to emergency actions taken against import surges that
result from tariff reductions under the NAFTA.    A global
safeguard applies to import surges from all countries.

The Agreement's procedures governing safeguard actions provide
that relief may be imposed for only a limited period of time and
require that the NAFTA country taking the action must
compensate the NAFTA country against whose good the action
is taken.  If the countries are not able to agree on the
appropriate compensation, the exporting country may take trade
measures of equivalent effect to compensate for the trade effect
of the safeguard.

Bilateral Safeguard

During the transition period, if increases in imports from another
NAFTA country cause or threaten to cause serious injury to a
domestic industry, a NAFTA country may take a safeguard
action that temporarily suspends the agreed duty elimination or
re-establishes the pre-NAFTA rate of duty.  The injury must
result from the elimination of duties under the NAFTA.    Such a
safeguard action may be taken only once, and for a maximum
period of three years.    In the case of certain extremely sensitive
goods, a country may extend the safeguard action for a fourth
year.  Bilateral safeguard actions may be taken after the
transition period only with the consent of the country whose
good would be affected by such action.

Global Safeguard

The Agreement provides that where a NAFTA partner
undertakes a safeguard action on a global or multilateral basis
(in accordance with Article XIX of the GATT, which permits
both tariff and quota-based safeguard measures), each NAFTA
partner must be excluded from the action unless its exports:

-     account for a substantial share of total imports of the
      good in question; and

-     contribute importantly to the serious injury or the threat
      of injury.

The Agreement stipulates that a NAFTA country normally will
not be considered to account for a substantial share of imports if
it does not fall among the top five suppliers of the good.  For a
NAFTA country's goods to be deemed not to contribute
importantly to injury, the rate of growth of imports of the goods
entering from that country must be appreciably lower than that
of total imports of those goods.  Even if a NAFTA country is
initially excluded from a safeguard action, the country taking the
action has the right subsequently to include it in the action if a
surge in imports from that country undermines the effectiveness
of the action.

Procedural Requirements

This section also provides detailed procedures to guide the
administration of safeguard measures, including:

-     entrusting injury determinations to a specified
      administrative authority; and


-     requirements for the form and content of petitions, the
      conduct of investigations, including public hearings to
      allow all interested parties an opportunity to present
      views, and notification and publication of investigations
      and decisions.



          REVIEW OF ANTIDUMPING
          AND COUNTERVAILING DUTY MATTERS


The NAFTA establishes a mechanism for independent binational
panels to review final antidumping (AD) and countervailing duty
(CVD) determinations by administrative authorities in each
country.  Each country will make those changes to its law
necessary to ensure effective panel review.  This section also sets
out procedures for panel review of future amendments to each
country's antidumping and countervailing duty laws.  In addition,
it establishes an "extraordinary challenge" procedure to deal with
allegations that certain actions may have affected a panel's
decision and the panel review process.    Finally, the NAFTA
creates a safeguard mechanism designed to remedy instances in
which application of a country's domestic law undermines the
functioning of the panel process.

Panel Process

Binational panels will substitute for domestic judicial review in
cases in which either the importing or exporting country seeks
panel review of a determination based on a request by a person
entitled to judicial review of that determination under the
domestic law of the importing country.

Each panel will comprise five qualified individuals from the
countries involved, drawn from a roster maintained by the three
countries.  Each country involved will select two panelists, with
the fifth selected by agreement of those countries or, in the
absence of agreement, by the agreement of the four designated
panelists or by lot.

A panel must apply the domestic law of the importing country in
reviewing a determination.  The three countries will develop
rules of procedure for panels.    The panel will either uphold the
determination or remand it to the administrative authority for
action not inconsistent with the panel's decision.  Panel decisions
will be binding.

Retention of AD and CVD Laws

The NAFTA explicitly preserves the right of each country to
retain its AD and CVD laws.  Each country may amend its AD
and CVD laws after the NAFTA takes effect.  Any such
amendment, to the extent it applies to imports from another
NAFTA country, may be subject to panel review for
inconsistency with the object and purpose of the Agreement, the
GATT or the relevant GATT codes.  If a panel finds such an
inconsistency, and consultations fail to resolve the matter, the
country that requested the review may take comparable
legislative or administrative action or terminate the Agreement.


Extraordinary Challenge Procedure

The NAFTA also provides for an extraordinary challenge
procedure and establishes certain grounds for invoking this
procedure.  Following a panel decision, either of the countries
involved may request the establishment of a three-person
extraordinary challenge committee, comprising judges or former
judges from those countries.  If it determines that one of the
grounds for the extraordinary challenge has been met, it will
vacate the original panel decision.  In such event, a new panel
will be established.

Special Committee to Safeguard the Panel Process

This section provides a safeguard mechanism to ensure that the
panel process functions as intended.  A NAFTA country may
request a "special committee" to determine if the application of
another country's domestic law has:

-     prevented the establishment of a panel;

-     prevented a panel from rendering a final decision;

-     prevented the implementation of a panel's decision or
      denied it binding force and effect; or

-     failed to provide opportunity for judicial review of the
      basis for the disputed administrative determination by an
      independent court applying the standards set out in the
      country's domestic law.

If a special committee makes an affirmative finding on any of
these grounds, the countries involved will attempt to resolve the
matter in the light of the special committee's finding.  If they are
unable to do so, the complaining country may suspend the
binational panel system with respect to the other country or may
suspend other benefits under the Agreement.  If the complaining
country suspends the panel system, the country complained
against may take reciprocal action.  Unless the countries
involved resolve the matter, or unless the country complained
against demonstrates to the special committee that it has taken
the necessary corrective action, any suspension of benefits may
remain in effect.




            GOVERNMENT PROCUREMENT


The Agreement opens a significant portion of the government
procurement market in each NAFTA country on a non-
discriminatory basis to suppliers from the other NAFTA
countries for goods, services and construction services.

Coverage

The NAFTA covers procurements by specified federal
government departments and agencies and federal government
enterprises in each NAFTA country.


The NAFTA applies to procurements by federal government
departments and agencies of:

-     over US$50,000 for goods and services; and

-     over US$6.5 million for construction services.

For federal government enterprises, the NAFTA applies to
procurements of:

-     over US$250,000 for goods and services; and

-     over US$8 million for construction services.

For procurements covered by the Canada-U.S. FTA, the dollar
thresholds of that Agreement will continue to apply.

Mexico will phase in its coverage over a transition period.

This section does not apply to the procurement of arms,
ammunition, weapons and other national security procurements.
Each country reserves the right to favor national suppliers for
procurements specified in the Agreement.

Procedural Obligations

In addition to requiring national and most-favored NAFTA
country treatment, the Agreement imposes procedural disciplines
on covered procurements that:

-     promote transparency and predictability by providing rules
      for technical specifications, qualifications of suppliers,
      setting of time limits and other aspects of the
      procurement process;

-     prohibit offset practices and other discriminatory buy-
      national requirements; and

-     require each country to establish a bid protest system that
      allows suppliers to challenge procedures or awards.

Technical Cooperation

The three countries will exchange information regarding their
procurement systems to assist suppliers in each country to take
advantage of the opportunities created by this section.

A Committee on Small Business will assist NAFTA small
businesses to identify procurement opportunities in NAFTA
countries.

Future Negotiations

Recognizing that improvements to NAFTA's procurement
section are desirable, the three countries will endeavor to extend
the coverage of this section to state and provincial governments
that, after consultations, voluntarily accept its commitments.



       CROSS-BORDER TRADE IN SERVICES


The NAFTA expands on initiatives in the Canada-U.S. FTA and
the Uruguay Round of multilateral trade negotiations to create
internationally-agreed disciplines on government regulation of
trade in services.  The cross-border trade in services provisions
establish a set of basic rules and obligations to facilitate trade in
services between the three countries.

National Treatment

The Agreement extends to services the basic obligation of
national treatment, which has long been applied to goods
through the GATT and other trade agreements.  Under
NAFTA's national treatment rule, each NAFTA country must
treat service providers of the other NAFTA countries no less
favorably than it treats its own service providers in like
circumstances.

With respect to measures of a state or province, national
treatment means treatment no less favorable than the most
favorable treatment that the state or province accords to the
service providers of the country of which it forms a part.

Most-Favored-Nation Treatment

The Agreement also applies another basic GATT obligation to
services:  that of most-favored-nation treatment.  This rule
requires each NAFTA country to treat service providers of the
other NAFTA countries no less favorably than it treats service
providers of any other country in like circumstances.

Local Presence

Under the Agreement, a NAFTA country may not require a
service provider of another NAFTA country to establish or
maintain a residence, representative office, branch or any other
form of enterprise in its territory as a condition for the provision
of a service.

Reservations

Each NAFTA country will be able to keep certain current laws
and other measures that do not comply with the rules and
obligations described above.  Such federal, state and provincial
measures will be listed in the Agreement.  Each NAFTA country
will have up to two years to complete the list of state and
provincial measures of this kind.  All such measures currently in
force at the municipal and other local government level may be
retained.

Each NAFTA country may renew or amend its non-conforming
measures provided that the renewal or amendment does not
make a measure more inconsistent with the rules and obligations
described above.


Non-Discriminatory Quantitative Restrictions

Each country will also list its existing non-discriminatory
measures that limit the number of service providers or the
operations of service providers in a particular sector.  Any other
NAFTA country will be able to request consultations on such
measures with a view to negotiating their liberalization or
removal.

Licensing and Certification

The NAFTA provisions related to professional licensing and
certification are designed to avoid unnecessary barriers to trade.
Specifically, each country must seek to ensure that its licensing
and certification requirements and procedures are based on
objective and transparent criteria such as professional
competence, are no more burdensome than is necessary to
ensure the quality of the service and are not in themselves a
restriction on the provision of the service.  This section also
provides a mechanism for the mutual recognition of licenses and
certifications, but does not require a NAFTA country
automatically to recognize the credentials of service providers of
another country.  In particular, the three countries will undertake
a work program with a view to liberalizing the licensing of
foreign legal consultants and the temporary licensing of
engineers.

Commencing two years after implementation of the Agreement,
a NAFTA country will remove any citizenship or permanent
residency requirement for the licensing and certification of
professional service providers in its territory.  Any failure to
comply with this obligation will entitle the other NAFTA
countries to maintain or reinstate equivalent requirements in the
same service sector.

Denial of Benefits

A NAFTA country may deny the benefits of this section to a
specific firm if the services involved are provided through an
enterprise of another NAFTA country that is owned or
controlled by persons of a non-NAFTA country and the
enterprise has no substantive business activities in the free trade
area.  In addition, for transportation services, a NAFTA country
may deny benefits to a firm if these services are provided with
equipment that is not registered by any of the NAFTA countries.

Exclusions

The services section does not apply to a number of matters dealt
with in other parts of the Agreement, including government
procurement, subsidies, financial services and energy-related
services.  The rules described above also will not affect most air
services, basic telecommunications, social services provided by
the government of any NAFTA country, the maritime industry
except for certain services between Canada and Mexico and
sectors currently reserved by the Mexican Constitution to the
Mexican State and Mexican nationals.  Each NAFTA country
maintains the right to take action necessary to enforce measures
of general application that are consistent with the Agreement,
such as regarding deceptive practices.



         LAND TRANSPORTATION


The NAFTA provides a timetable for the removal of barriers to
the provision of land transportation services between the
NAFTA countries and for the establishment of compatible land
transport technical and safety standards.  It provides for the
phase out of restrictions on cross-border land transportation
services among the three countries in order to create equal
opportunities in the North American international land
transportation market.    The provisions are designed to ensure
that the land transportation services industries of the three
countries will have a full opportunity to enhance their
competitiveness without being placed at a disadvantage during
the transition to liberalized trade.

Liberalization of Restrictions

Bus and Trucking Services:  When the NAFTA goes into effect,
the United States will amend its moratorium on grants of truck
and bus operating authority by allowing full access for Mexican
charter and tour bus operators to its cross-border market.
Mexico will grant equivalent rights to U.S. and Canadian charter
and tour bus operators.  Canadian truck and bus companies are
not subject to the U.S. moratorium.  Canada will continue to
permit U.S. and Mexican truck and bus operators to obtain
operating authority in Canada on a national treatment basis.

Three years after signature of the Agreement, Mexico will allow
U.S. and Canadian truck operators to make cross-border
deliveries to, and pick up cargo in, Mexican border states, and
the United States will allow Mexican truck operators to perform
the same services in U.S. border states.  At the same time,
Mexico will allow 49 percent Canadian and U.S. investment in
bus companies and in truck companies providing international
cargo services (including point-to-point distribution of such cargo
within Mexico).  The United States and Canada will permit
Mexican truck companies to distribute international cargo as
well.  The United States will maintain its moratorium on grants
of operating authority for truck carriage of domestic cargo and
for domestic passenger service, continuing to allow Mexicans to
hold a non-controlling interest in U.S. companies.

Three years after the Agreement goes into effect, the United
States will allow bus firms from Mexico to begin scheduled cross-
border bus service to and from any part of the United States.  At
the same time, Mexico will provide the same treatment to bus
firms from Canada and the United States.

Six years after the Agreement goes into effect, the United States
will provide cross-border access to its entire territory to trucking
firms from Mexico.  Mexico will provide the same treatment to
trucking firms from Canada and the United States.

Seven years after the Agreement goes into effect, Mexico will
allow 51 percent Canadian and U.S. investment in Mexican bus
companies and in Mexican truck companies providing
international cargo services.  At the same time, the United States
will lift its moratorium on domestic operating authority for
Mexican bus companies.

Ten years after the Agreement goes into effect, Mexico will
permit 100 percent investment in truck and bus companies in
Mexico.  No NAFTA country will be required to remove
restrictions on truck carriage of domestic cargo.

Rail Services:    Under the Agreement and consistent with a
Mexican reservation taken pursuant to its Constitution, Canadian
and U.S. railroads will continue to be free to market their
services in Mexico, operate unit trains with their own
locomotives, construct and own terminals and finance rail
infrastructure.  Mexico will continue to enjoy full access to the
Canadian and U.S. railroad systems.  The Agreement does not
affect each NAFTA country's immigration law requirements for
crews to change at or near their borders.

Port Services:    The Agreement also liberalizes land-side aspects
of marine transport.  Mexico will immediately allow 100 percent
Canadian and U.S. investment in, and operation of, port facilities
such as cranes, piers, terminals and stevedoring companies for
enterprises that handle their own cargo.  For enterprises
handling other companies' cargo, 100 percent Canadian and U.S.
ownership will be allowed after screening by the Mexican
Foreign Investment Commission.    Canada and the United States
will continue to permit full Mexican participation in these
activities.

Technical and Safety Standards

Consistent with their commitment to enhance safety, health and
environmental and consumer protection, the NAFTA partners
will endeavor to make compatible, over a period of six years,
their standards-related measures with respect to motor carrier
and rail operations, including:

-     vehicles, including equipment such as tires and brakes,
      weights and dimensions, maintenance and repair and
      certain aspects of emission levels;

-     non-medical testing and licensing of truck drivers;

-     medical standards for truck drivers;

-     locomotives and other rail equipment and operating
      personnel standards relevant to cross-border operations;

-     standards relating to the transportation of dangerous
      goods; and

-     road signs and supervision of motor carrier safety
      compliance.

Access to Information

Each NAFTA country will designate contact points to provide
information regarding land transportation matters such as those
related to operating authorizations and safety requirements.

Review Process

Beginning five years after the Agreement goes into effect, a
committee of government officials will consider the effectiveness
of liberalization in the land transportation sector, including any
specific problems or unanticipated effects liberalization might
have on each country's motor carrier industry.  No later than
seven years after the Agreement goes into effect, consultations
will also address possible further liberalization.  The results of
these consultations will be forwarded to the NAFTA Trade
Commission for appropriate action.



         TELECOMMUNICATIONS


NAFTA provides that public telecommunications transport
networks ("public networks") and services are to be available on
reasonable and non-discriminatory terms and conditions for firms
or individuals who use those networks for the conduct of their
business.  These uses include the provision of enhanced or
value-added telecommunications services and intracorporate
communications.  However, the operation and provision of
public networks and services have not been made subject to the
NAFTA.

Access to and Use of Public Networks

The three countries will ensure that reasonable conditions of
access and use include the ability to:

-     lease private lines;

-     attach terminal or other equipment to public networks;

-     interconnect private circuits to public networks;

-     perform switching, signalling and processing functions;
      and

-     use operating protocols of the user's choice.

Moreover, conditions on access and use may be imposed only if
necessary to safeguard the public service responsibilities of
network operators or to protect the technical integrity of public
networks.  Provided that these criteria are met, such conditions
on access and use may include restrictions on resale or shared
use of public telecommunications transport services,
requirements to use specified technical interfaces with public
networks or services and restrictions on the interconnection of
private circuits to provide public networks or services.

Rates for public telecommunications transport services must
reflect economic costs, and private leased circuits must be
available on a flat-rate pricing basis.  However, NAFTA does
not prohibit cross-subsidization between public
telecommunications transport services.    In addition, firms or
individuals may use public networks and services to move
information within a country and across NAFTA borders.

The provisions in this section do not apply to measures affecting
the distribution of radio or television programming by broadcast
stations or cable systems, which will have continued access to
and use of public networks and services.

Exclusions and Limitations

The three countries are not required to authorize a person of
another NAFTA country to provide or operate
telecommunications transport networks or services and may
prohibit operators of private networks from providing public
networks and services.

Enhanced Telecommunications

The NAFTA provides that each country will ensure that its
licensing or other authorization procedures for the provision of
enhanced or value-added telecommunications services are
transparent, non-discriminatory and applied expeditiously.
Enhanced providers of the three countries will not be subject to
obligations that are normally imposed on providers of public
networks and services, such as providing services to the public
generally or cost-justifying their rates.

Standards-Related Measures

The NAFTA limits the types of standards-related measures that
may be imposed on the attachment of telecommunications
equipment to public networks.  Such measures must be necessary
to prevent technical damage to, and interference with, public
networks and services, to prevent billing equipment malfunctions
and to ensure user safety and access.  In addition, any technically
qualified entity will be permitted to test equipment to be
attached to public networks.  This section also establishes
procedures in each country to permit the acceptance of
equipment test results conducted in the other NAFTA countries.

Monopoly Provision of Services

The NAFTA recognizes that a country may maintain or
designate a monopoly provider of public networks or services.
Each country will ensure that any such monopoly does not abuse
its monopoly position by engaging in anti-competitive conduct
outside its monopoly that adversely affects a person of another
NAFTA country.

Provision of Information

Information affecting access to and use of public networks and
services must be made publicly available, including:

-     tariffs and other terms and conditions of service;

-     specification of network and service technical interfaces;

-     information on standardizing organizations;

-     conditions for the attachment of terminal or other
      equipment; and

-     notification, permit, registration or licensing requirements.

Technical Cooperation

The NAFTA countries will cooperate in the exchange of
technical information and in the development of
government-to-government training programs.  Recognizing the
importance to global telecommunications of international
standards, they will also promote such standards through the
work of the International Telecommunications Union, the
International Organization for Standardization and other
relevant international organizations.




             INVESTMENT


The NAFTA removes significant investment barriers, ensures
basic protections for NAFTA investors and provides a
mechanism for the settlement of disputes between such investors
and a NAFTA country.

Coverage

This section covers investments in one country by NAFTA
investors from another NAFTA country.  NAFTA investors
include all enterprises with substantial business activities in a
NAFTA country.    Investment covers all forms of ownership and
interests in a business enterprise, tangible and intangible
property and contractual investment interests.

Non-Discriminatory and Minimum Standards of Treatment

Each country will treat NAFTA investors and their investments
no less favorably than its own investors -- national treatment --
and investors of other countries -- most-favored-nation
treatment.  With respect to measures of a state, provincial or
local government, national treatment is defined to mean
treatment no less favorable than the most favorable treatment
accorded to investors of the country of which it forms a part.    In
addition, each country must provide investments of NAFTA
investors treatment in accordance with international law,
including fair and equitable treatment and full protection and
security.

Performance Requirements

No NAFTA country may impose specified "performance
requirements" in connection with any investments in its territory,
namely specified export levels, minimum domestic content,
preferences for domestic sourcing, trade balancing, technology
transfer or product mandating.    However, these disciplines do
not apply to any NAFTA country's government procurement,
export promotion or foreign aid activities.

Transfers

NAFTA investors will be able to convert local currency into
foreign currency at the prevailing market rate of exchange for
earnings, proceeds of a sale, loan repayments or other
transactions associated with an investment.  Each NAFTA
country will ensure that such foreign currency may be freely
transferred.

Expropriation

No NAFTA country may directly or indirectly expropriate
investments of NAFTA investors except for a public purpose, on
a non-discriminatory basis and in accordance with principles of
due process of law.  Compensation to the investor must be paid
without delay at the fair market value of the expropriated
investment, plus any applicable interest.

Dispute Settlement

This section sets out a detailed mechanism for the resolution of
investment disputes involving a breach of the NAFTA
investment rules by the host country.  A NAFTA investor, at its
option, may seek either monetary damages through binding
investor-state arbitration or the remedies that are available in
the host country's domestic courts.

Country-Specific Commitments and Exceptions

The NAFTA includes explicit country-specific liberalization
commitments and exceptions to the national treatment, MFN
and performance requirement rules.  In the case of Mexico,
these exceptions take into account constitutional requirements
reserving certain activities to the Mexican State.  Each country
will specify exceptions for state and provincial measures within
two years.  Exceptions may not be made more restrictive and, if
liberalized, may not subsequently be made more restrictive.
However, a few sectors, such as basic telecommunications, social
services and maritime services, are not subject to this constraint.

Canada may review acquisitions as provided in the Canada-U.S.
FTA.  Mexico may review acquisitions with an initial threshold
of $25 million phased up to $150 million in the tenth year after
the Agreement goes into effect.  Threshold levels will be
indexed.

Exceptions

The investment provisions do not apply to government
procurement and subsidies.  Other provisions of the Agreement
address exceptions related to national security and to Canada's
cultural industries.

Investment and the Environment

The NAFTA provides that no country should lower its
environmental standards to attract an investment and that the
countries will consult on the observance of this provision.  The
Agreement also specifies that a country may take action
consistent with the NAFTA's investment provisions to protect its
environment.




           COMPETITION POLICY, MONOPOLIES
           AND STATE ENTERPRISES


The NAFTA includes provisions on anticompetitive government
and private business practices, in recognition that disciplines in
this area will help fulfill the objectives of the Agreement.




Competition Policy

Each NAFTA country will adopt or maintain measures against
anticompetitive business practices and will cooperate on issues of
competition law enforcement and other competition issues.

Monopolies and State Enterprises

State Enterprises:  The Agreement requires any enterprise owned
or controlled by a federal, provincial or state government to act
in a manner consistent with that country's NAFTA obligations
when exercising regulatory, administrative or other governmental
authority, such as the granting of licenses.

Monopolies:  The NAFTA imposes certain additional disciplines
on current and future federal government-owned monopolies and
on any privately-owned monopoly that a NAFTA country may
designate in the future.  When buying or selling a monopoly
good or service, the monopoly must follow commercial
considerations, consistent with the terms of its government
mandate, and must not discriminate against goods or businesses
of the other NAFTA countries.  NAFTA provides that each
country must ensure that such monopolies do not use their
monopoly positions to engage in anticompetitive practices in
non-monopoly markets in that country's territory.

Trade and Competition Committee

A trilateral committee will consider issues concerning the
relationship between competition laws and policies and trade in
the free trade area.




         FINANCIAL SERVICES


The NAFTA establishes a comprehensive principles-based
approach to disciplining government measures regulating
financial services.  This section covers measures affecting the
provision of financial services by financial institutions in the
banking, insurance and securities sectors as well as other
financial services.  The section also sets out certain country-
specific liberalization commitments, transition periods for
compliance with the agreed principles and certain reservations
listed by each country.

Principles

Commercial Presence and Cross-Border Services:    Under the
Agreement, financial service providers of a NAFTA country may
establish in any other NAFTA country banking, insurance and
securities operations as well as other types of financial services.
Each country must permit its residents to purchase financial
services in the territory of another NAFTA country.  In addition,
a country may not impose new restrictions on the cross-border
provision of financial services in a sector, unless the country has
exempted that sector from this obligation.

Non-Discriminatory Treatment:  Each country will provide both
national treatment, including treatment respecting competitive
opportunities, and most-favored-nation treatment to other
NAFTA financial service providers operating in its territory.
Under the Agreement, any measure that does not disadvantage
financial service providers of another NAFTA country in their
ability to provide financial services, by comparison to domestic
providers, is deemed to provide equality of competitive
opportunity.

Procedural "Transparency":  In processing applications for entry
into its financial services markets, each country will:

-     inform interested persons of its requirements for
      completing applications;

-     provide information on the status of an application on
      request;

-     make an administrative determination on a completed
      application within 120 days, where possible;

-     publish measures of general application no later than
      their effective date and, where practicable, allow
      interested persons the opportunity to comment on
      proposed measures; and

-     establish one or more inquiry points to answer questions
      about its financial services measures.

Prudential and Balance of Payments Measures:  The NAFTA
ensures that each country retains the right to take reasonable
prudential measures notwithstanding any other provision of the
Agreement.  It also provides that a country may take measures
for balance-of-payment purposes under limited circumstances.

Consultations

The Agreement provides specific procedures for NAFTA
countries to consult on financial services matters.

Country-Specific Commitments

Canada:  Under the Canada-U.S. FTA, U.S. firms and
individuals are exempt from the non-resident provisions of
Canada's "10/25" rules.  Under the NAFTA, Canada will extend
this exemption to Mexican firms and individuals who will thus be
exempt from Canada's prohibition against non-residents
collectively acquiring more than 25 percent of the shares of a
federally-regulated Canadian financial institution.  Mexican
banks will also not be subject to the combined 12 percent asset
ceiling that applies to non-NAFTA banks, nor will they be
required to seek the approval of the Minister of Finance as a
condition of opening multiple branches in Canada.

Mexico:  Mexico will permit financial firms organized under the
laws of another NAFTA country to establish financial institutions
in Mexico, subject to certain market share limits that will apply
during a transition period ending by the year 2000.  Thereafter,
temporary safeguard provisions may be applicable in the banking
and securities sectors.

Banking and Securities:  During the transition period, Mexico
will gradually increase the aggregate market share limit in
banking from eight percent to 15 percent.  For securities firms,
the limit will increase from 10 percent to 20 percent over the
same period.  Mexico will apply individual market share caps of
1.5 percent for banks and four percent for securities dealers
during the transition period.  After the transition period, bank
acquisitions will remain subject to reasonable prudential
considerations and a four percent market share limit on the
resulting institution.

Insurance:  Under the NAFTA, Canadian and U.S. insurers may
gain access to the Mexican market in two ways.    First, firms that
form joint ventures with Mexican insurers may increase their
foreign equity participation in such ventures in steps from 30
percent in 1994 to 51 percent by 1998, and to 100 percent by the
year 2000.  These firms will not be subject to aggregate or
individual market share limits.  Second, foreign insurers may
establish subsidiaries, subject to aggregate limits of six percent of market
share, gradually increasing to 12 percent in 1999, and
subject to individual market share caps of 1.5 percent.  These
limits will be eliminated on January 1, 2000.  Canadian and U.S.
firms that currently have an ownership interest in Mexican
insurers may increase their equity participation to 100 percent by
January 1, 1996.  Intermediary and auxiliary insurance services
companies will be permitted to establish subsidiaries with no
ownership or market share limits when the Agreement goes into
effect.

Finance Companies:  Mexico will permit Canadian and U.S.
finance companies, on terms no less favorable than those
accorded to Mexican institutions, to establish separate
subsidiaries in Mexico to provide consumer lending, commercial
lending, mortgage lending or credit card services.  However,
during the transition period, the aggregate assets of such
subsidiaries may not exceed three percent of the sum of the
aggregate assets of all banks in Mexico plus the aggregate assets
of all types of limited-scope financial institutions in Mexico.
Lending by affiliates of automotive companies with respect to
the vehicles such companies produce will not be subject to, or
taken into account in, the three percent limit.

Other Firms:  NAFTA factoring and leasing companies will be
subject to transition limits on aggregate market share in Mexico
of the same duration and magnitude as those applying to
securities firms, except that they will not be subject to individual
market share limits.  NAFTA warehousing and bonding
companies, foreign exchange houses and mutual fund
management companies will be permitted to establish
subsidiaries with no ownership or market share limits when the
Agreement goes into effect.

United States:    The United States will permit any Mexican
financial group that has lawfully acquired a Mexican bank with
operations in the United States to continue to operate a
securities firm in the United States for five years after the
acquisition.  The acquisition must occur before the NAFTA goes
into effect and the bank and securities firm involved must have
been operating in the U.S. market on January 1, 1992 and June
30, 1992, respectively.  The securities firm may not expand the
scope of its activities or acquire other securities firms in the
United States, and will be subject to nondiscriminatory
restrictions on transactions between it and its affiliates.  Other
than these provisions, nothing in this commitment will affect the
U.S. banking operations of a Mexican financial group.


Canada-United States:  Financial services commitments of
Canada and the United States to each other under the Canada-
U.S. FTA will be incorporated into the NAFTA.




        INTELLECTUAL PROPERTY


Building on the work done in the GATT and various
international intellectual property treaties, NAFTA establishes a
high level of obligations respecting intellectual property.  Each
country will provide adequate and effective protection of
intellectual property rights on the basis of national treatment and
will provide effective enforcement of these rights against
infringement, both internally and at the border.

The Agreement sets out specific commitments regarding the
protection of:

-     copyrights, including sound recordings;

-     patents;

-     trademarks;

-     plant breeders' rights;

-     industrial designs;

-     trade secrets;

-     integrated circuits (semiconductor chips); and

-     geographical indications.

Copyright

For copyright, the Agreement's obligations include requirements
to:

-     protect computer programs as literary works and
      databases as compilations;

-     provide rental rights for computer programs and sound
      recordings; and

-     provide a term of protection of at least 50 years for sound
      recordings.

Patents

The NAFTA provides protection for inventions by requiring each
country to:

-     provide product and process patents for virtually all types
      of inventions, including pharmaceuticals and agricultural
      chemicals;

-     eliminate any special regimes for particular product
      categories, any special provisions for acquisition of patent
      rights and any discrimination in the availability and
      enjoyment of patent rights made available locally and
      abroad; and

-     provide patent owners the opportunity to obtain product
      patent protection for pharmaceutical and agricultural
      chemical inventions for which product patents were
      previously unavailable.

Other Intellectual Property Rights

This section also provides rules for protecting:

-     service marks to the same extent as trademarks;

-     encrypted satellite signals against illegal use;

-     trade secrets generally, as well as for protecting from
      disclosure by the government test data submitted by firms
      regarding the safety and efficacy of pharmaceutical and
      agri-chemical products;

-     integrated circuits, both directly and in goods that
      incorporate them; and

-     geographical indications so as to avoid misleading the
      public, while protecting trademark owners.

Enforcement Procedures

The NAFTA also includes detailed obligations regarding:

-     procedures for the enforcement of intellectual property
      rights, including provisions on damages, injunctive relief
      and general due process issues; and

-     enforcement of intellectual property rights at the border,
      including safeguards to prevent abuse.




         TEMPORARY ENTRY FOR BUSINESS PERSONS


Taking account of the preferential trading relationship between
the NAFTA countries, this section sets out commitments by the
three countries to facilitate on a reciprocal basis temporary entry
into their respective territories of business persons who are
citizens of Canada, Mexico or the United States.

The NAFTA does not create a common market for the
movement of labor.  Each NAFTA country maintains its rights
to protect the permanent employment base of its domestic labor
force, to implement its own immigration policies and to protect
the security of its borders.




This section's rules governing entry of business persons,
constructed along the lines of similar provisions of the Canada-
U.S. FTA, are tailored to meet the needs of all NAFTA
partners.

Each country will grant temporary entry to four categories of
business persons:

-     business visitors engaged in international business
      activities for the purpose of conducting activities related
      to research and design, growth, manufacture and
      production, marketing, sales, distribution, after-sales
      service and other general services;

-     traders who carry on substantial trade in goods or services
      between their own country and the country they wish to
      enter, as well as investors seeking to commit a substantial
      amount of capital in that country, provided that such
      persons are employed or operate in a supervisory or
      executive capacity or one that involves essential skills;

-     intra-company transferees employed by a company in a
      managerial or executive capacity or one that involves
      specialized knowledge and who are transferred within that
      company to another NAFTA country; and

-     certain categories of professionals who meet minimum
      educational requirements or who possess alternative
      credentials and who seek to engage in business activities
      at a professional level in that country.

Mexico and the United States have agreed to an annual
numerical limit of 5,500 Mexican professionals entering the
United States.    This number is in addition to those admitted
under a similar category in U.S. law that is subject to a global
limitation of 65,000 professionals, but which remains unaffected
by the NAFTA.  The numerical limit of 5,500 may be increased
by agreement between the United States and Mexico, and will
expire 10 years after the Agreement goes into effect unless the
two countries decide to remove the limit earlier.  Canada has
not set a numerical limit with respect to Mexico.

Consultations

The three countries will consult through a specialized working
group on temporary entry matters.  As part of its work, the
group will consider providing temporary entry to spouses of
business persons granted entry under NAFTA for periods of one
year or more as traders and investors, intra-company transferees
and professionals.

Provision of Information

Each country will publish clear explanatory material on
procedures that business persons must follow to take advantage
of the NAFTA temporary entry provisions.

Non-Compliance

The dispute settlement provisions of the Agreement may be
invoked only if a country claims,  on the basis of repeated
practices, that another country has not complied with the
temporary entry provisions.


           INSTITUTIONAL ARRANGEMENTS AND
        DISPUTE SETTLEMENT PROCEDURES


Institutional Arrangements

This section establishes the institutions responsible for
implementing the Agreement, ensuring its joint management and
for avoiding and settling any disputes between the NAFTA
countries regarding its interpretation and application.

Trade Commission:  The central institution of the Agreement is
the Trade Commission, comprising Ministers or cabinet-level
officers designated by each country.  Regular meetings are to be
held annually, although the day-to-day work of the Commission
will be carried out by officials of the three governments
participating in the various committees and working groups
mandated by the Agreement, operating on the basis of
consensus.

Secretariat:  The NAFTA establishes a Secretariat to serve the
Commission as well as other subsidiary bodies and dispute
settlement panels.  The administrative and technical support that
the Secretariat will provide is designed to assist the Commission
to ensure effective and joint management of the free trade area.

Dispute Settlement Procedures

The dispute settlement procedures of the NAFTA provide
expeditious and effective means for the resolution of disputes.

Consultations:    Whenever any matter arises that could affect a
country's rights under the Agreement, it may request
consultations and the countries concerned will promptly consult
on the matter.    The NAFTA places priority on reaching an
amicable settlement.  The third country may participate, or may
seek its own consultations.

The Role of the Commission:  Should the consultations fail to
resolve the matter within 30 to 45 days, any country may call a
meeting of the Trade Commission with all three countries
present.  The NAFTA directs the Commission to seek to settle
the dispute promptly.  The Commission may use good offices,
mediation, conciliation or other means of alternative dispute
resolution to this end.

Initiation of Panel Proceedings:  If the countries concerned are
unable to reach a mutually satisfactory resolution through the
Commission, any consulting country may initiate panel
proceedings.

Forum Selection

If a dispute could be brought under both the GATT and the
NAFTA, the complaining country may choose either forum.  If
the third NAFTA country wants to bring the same case in the
other forum, the two complaining countries will consult, with a
view to agreement on  a single forum.  If those countries cannot
agree, the dispute settlement proceeding normally will be heard
by a NAFTA panel.  Once selected, the chosen forum must be
used to the exclusion of the other.
If a dispute involves factual issues regarding certain standards-
related environmental, safety, health or conservation measures or
if the dispute arises under specific environmental agreements,
the responding country may elect to have the dispute considered
by a NAFTA panel.  The rules also set out procedures for
addressing disputes relating to matters covered by the Canada-
U.S. FTA.

Panel Procedures

If the complaining country elects to have the matter heard
through NAFTA procedures, it may request the establishment of
an arbitral panel.  The third country may either join as a
complaining country or limit its participation to oral and written
submissions.  The panel will typically be charged with making
findings of fact and determining whether the action taken by the
defending country is inconsistent with its obligations under the
NAFTA, and may make recommendations for resolution of the
dispute.

Panels will be composed of five members, who will normally be
chosen from a trilaterally agreed roster of eminent trade, legal
and other experts, including from countries outside the NAFTA.
The NAFTA provides for a special roster of experts for disputes
involving financial services.

The panel will be chosen through a process of "reverse selection"
to ensure impartiality:  the chair of the panel will be selected
first, either by agreement of the disputing countries or, failing
agreement, by designation of one disputing side, chosen by lot.
The chair may not be a citizen of the side making the selection,
and may be a non-NAFTA national.  Each side will then select
two additional panelists who are citizens of the country or
countries on the other side.  Whenever an individual not on the
roster of panelists is nominated, any other disputing NAFTA
country may exercise a peremptory challenge against that
individual.

Rules of procedure, to be more fully elaborated by the
Commission, provide for written submissions, rebuttals and at
least one oral hearing.  There are strict time limits to ensure
prompt resolution.  A special procedure permits scientific boards
to provide expert advice to panels on factual questions related to
the environment and other scientific matters.

Unless the disputing countries decide otherwise, within 90 days
of a panel's selection, it will present to them a confidential initial
report.  They will then have 14 days in which to provide
comments to the panel.    Within 30 days of the presentation of its
initial report, the panel will present its final report to the
countries concerned.  The report will then be transmitted to the
Commission, which will normally publish it.

Implementation and Non-Compliance

Upon receiving the panel's report, the disputing countries are to
agree on the resolution of the dispute, which will normally
conform to the recommendations of the panel.  If a panel
determines that the responding country has acted in a manner
inconsistent with its NAFTA obligations, and the disputing
countries do not reach agreement within 30 days or other
mutually agreed period after receipt of the report, the
complaining country may suspend the application of equivalent
benefits until the issue is resolved.  Any country that considers
the retaliation to be excessive may obtain a panel ruling on this
question.

Alternate Dispute Resolution of Private Commercial Disputes

Special provisions, described in the investment section, set out
procedures for international arbitration of disputes between
investors and NAFTA governments.  The NAFTA countries will
also encourage and facilitate the use of alternative dispute
resolution as a means of settling international commercial
disputes between private parties in the NAFTA region.  The
three countries will provide for the enforcement of arbitral
agreements and arbitral awards.  The Agreement establishes an
advisory committee concerning the use of alternative dispute
resolution for such disputes.




           ADMINISTRATION OF LAWS


Procedural "Transparency"

This section provides rules designed to ensure that laws,
regulations and other measures affecting traders and investors
will be accessible and will be administered fairly and in
accordance with notions of due process by officials in all three
countries.  Each country will also ensure, under its domestic
laws, independent administrative or judicial review of
government action relating to matters covered by the NAFTA.

The NAFTA's notification and exchange of information
provisions will allow each government the opportunity to consult
on any action taken by another country that could affect the
operation of the Agreement.  These provisions are designed to
assist the three countries to avoid or minimize potential disputes.

Contact Points

Each country will designate a contact point to facilitate
communications between NAFTA countries.




             EXCEPTIONS


The NAFTA includes provisions that ensure that the Agreement
does not constrain a country's ability to protect its national
interests.

General Exceptions

This provision permits a country to take measures otherwise
inconsistent with its obligations affecting trade in goods to
protect such interests as public morals, human, animal or plant
life or health or national treasures, to conserve exhaustible
natural resources or to take enforcement measures regarding
such matters as deceptive practices or anticompetitive behavior.
However, such measures must not result in arbitrary
discrimination or disguised restrictions on trade between
NAFTA countries.

National Security

Nothing in the Agreement will affect a NAFTA country's ability
to take measures it considers necessary for the protection of its
essential security interests.

Taxation

The NAFTA provides that, as a general matter, taxation
questions will be governed by applicable double taxation
agreements between the NAFTA countries.

Balance of Payments

Under the Agreement, a NAFTA country may take trade-
restrictive measures to protect its balance of payments only in
limited circumstances and in accordance with the rules of the
International Monetary Fund.

Cultural Industries

The rights of Canada and the United States with respect to
cultural industries will be governed by the Canada-U.S. FTA.
Each country reserves the right to take measures of equivalent
commercial effect in response to any action regarding cultural
industries that would have been a violation of the Canada-U.S.
FTA but for the cultural industries provisions.  Such
compensatory measures will not be limited by the obligations
imposed by the NAFTA.

The rights and obligations between Canada and Mexico
regarding cultural industries will be identical to those applying
between Canada and the United States.




          FINAL PROVISIONS


Entry into Force

This section provides that the Agreement will enter into force on
January 1, 1994, upon completion of domestic approval
procedures.

Accession

The NAFTA provides that other countries or groups of countries
may be admitted into the Agreement if the NAFTA countries
agree, and subject to terms and conditions that they require and
to the completion of domestic approval procedures in each
country.

Amendments and Withdrawal

This section also provides for amendments to the Agreement,
subject to domestic approval procedures.  Any country may
withdraw from the Agreement on six-months' notice.



     SUMMARY OF ENVIRONMENTAL PROVISIONS


The three NAFTA countries have committed in the NAFTA to
implementing the Agreement in a manner consistent with
environmental protection and to promoting sustainable
development.  Specific provisions throughout the Agreement
build upon these commitments.  For example:

-     The trade obligations of the NAFTA countries under
      specified international environmental agreements
      regarding endangered species, ozone-depleting substances
      and hazardous wastes will take precedence over NAFTA
      provisions, subject to a requirement to minimize
      inconsistency with the NAFTA.  This ensures that the
      NAFTA will not diminish a country's right to take action
      under these environmental agreements.

-     The Agreement affirms the right of each country to
      choose the level of protection of human, animal or plant
      life or health or of environmental protection that it
      considers appropriate.

-     NAFTA also makes clear that each country may maintain
      and adopt standards and sanitary and phytosanitary
      measures, including those more stringent than
      international standards, to secure its chosen level of
      protection.

-     The NAFTA countries will work jointly to enhance the
      protection of human, animal and plant life and health and
      the environment.

-     The Agreement provides that no NAFTA country should
      lower its health, safety or environmental standards for the
      purpose of attracting investment.

-     When a dispute regarding a country's standards raises
      factual issues concerning the environment, that country
      may choose to have the dispute submitted to NAFTA
      dispute settlement procedures rather than under the
      procedures of other trade agreements.  This same option
      is available for disputes concerning trade measures taken
      under specified international environmental agreements.

-     NAFTA dispute settlement panels may call on scientific
      experts, including environmental experts, to provide
      advice on factual questions related to the environment
      and other scientific matters.

-     In dispute settlement, the complaining country bears the
      burden of proving that another NAFTA country's
      environmental or health measure is inconsistent with the
      NAFTA.