The North American Free Trade Agreement took effect Saturday with little fanfare after a bruising political battle that tested President Clinton's control over Congress and the nation's commitment to expanded trade.
Mr. Clinton issued an executive order Tuesday implementing the agreement, and the United States, Canada and Mexico exchanged diplomatic notes certifying that each country had made the regulatory changes promised under the three-way pact.For the United States, the most important of these was achieved Dec. 20, when a presidential proclamation was published in the Federal Register slashing tariffs to Mexico. In the coming months, it will be these cuts - and those made by Mexico - that will have the greatest effect on trade between the two countries.
U.S. Customs Service officials said last week that they had dispatched computer-disk copies of the new tariff code for Mexico to every port of entry where the agency maintains facilities.
Last week, U.S. and Canadian officials continued the tariff-cutting agreed to under the Nafta by requesting the acceleration of tariff reductions by the other countries. For the United States, the target list of Mexican tariffs - spelled out in legislation implementing the Nafta - covers flat glass, home appliances, bedsprings, wine and brandy.
The yearly acceleration of tariff cuts started slowly under the 1988 U.S.-Canada Free Trade Agreement but has become a major source of trade liberalization. Trade experts say that once a commitment has been made to eliminate a tariff under a free-trade pact, businesses quickly adapt and importers end up pushing for acceleration with little opposition.
Although the trade agreement is now fully functioning, it will take some time for the three governments to follow through on all the commitments embodied in the 2,000-plus pages of Nafta.
For example, Mexico has completed plans to reforms its system for judging dumping and subsidy complaints, as called for under the agreement, but many of those reforms have not yet been implemented. U.S. officials will be monitoring how the new Mexican system works.
Another task for the governments is to set up the trinational institutions created by the Nafta.
For the U.S.-Canada agreement, that task involved equipping two tiny offices in Washington and Ottawa that coordinated the action of trade dispute panels and a limited number of other advisory duties. The offices, known together as the free-trade secretariat, are the staff for a binational
commission consisting of the trade ministers of the two governments.
The equivalent bureaucracy for the three nations under the Nafta will be substantially larger. In addition to three offices in Washington, Ottawa and Mexico City, a central administrative office will be located in Mexico that will have research and archive facilities.
Among other differences between the Nafta and the U.S.-Canada free-trade bureaucracy is the need to set up a comprehensive translation service. Mexico has made it clear that its legal documents will be filed in Spanish and that its bureaucrats and trade panelists may require instantaneous translation for official meetings.
Under the free-trade agreement with Canada, despite its status as a bilingual nation, all filings and proceedings were conducted in English.
In addition to the trade bureaucracy, side agreements to the Nafta negotiated last summer require the creation of trinational commissions on labor and the environment, with attendant secretariats.
Under a consensus of the three governments, the environment secretariat will be located in Canada and the labor secretariat will be located in Washington.
The labor agreement anticipates that the permanent staff of the labor secretariat will be 15. The environment secretariat is expected to be about the same size.
The two commissions - consisting of the labor and environment ministers of the three countries - will meet each year, discuss policy and sponsor studies.
Their most controversial duty is to field complaints about the non- enforcement of environment and labor laws in North America. After a torturous legal process, if a government fails to heed the commission recommendations for enforcement - and fails to justify its inaction - a panel of experts can impose fines of up to $20 million per count against the offending government.
For Mexico and Canada, failure to pay this fine in six months could allow a
commission to authorize the use of trade sanctions. For Canada, the commission could force payment of the fine through Canadian courts.