Canada's Premier Gets Boost From US Yielding on NAFTA

US and Mexico could face sanctions under accords, Canada will not

SCORE one foreign trade victory for Canada and a big political plus for Canadian Prime Minister Kim Campbell.

Whether it is baseball, hockey, or trade talks, Canadians like nothing better than besting the United States. And after months of butting heads with the US over how to enforce labor and environment side agreements to the North American Free Trade Agreement (NAFTA), Ms. Campbell's team last week refused to bend - and won.

US Trade Representative Mickey Kantor had insisted that trade sanctions were the only enforcement "teeth" acceptable to the US Congress to ensure that Mexico and Canada would uphold labor and environment standards. Canada disagreed, preferring fines or court action to sanctions.

After meeting in Ottawa with Canadian Trade Minister Tom Hockin on Thursday, Campbell assembled reporters and declared the side agreement talks had reached an impasse.

With time running out to sell the deal to Congress, the Clinton administration accepted the Canadian proposal the next day. While the US and Mexico can face trade sanctions under NAFTA enforcement measures, Canada will face only fines and court challenges. Canada's message

Mr. Hockin and Campbell "sent the US a message that 'this is as much juice as you're going to squeeze out of this lemon,' " says Gordon Ritchie, Canada's former trade negotiator, and an architect of the 1989 US-Canada Free Trade Agreement (FTA). "The worry was that if you give the Americans a [sanctions] club, sooner or later they'll get around to hitting you with it."

Public cynicism toward trade deals has deepened since the FTA went into effect. Canadian industries have found themselves in one trade dispute after another with the US. Whether the bickering over beer, pork, steel, autos, or lumber is justified or not, the public here has come to see these spats as the US bullying Canada.

Given that public mood, Campbell's hard line appears politically astute. "PM's hard-line bombshell proves a master stroke," trumpeted the Toronto Star newspaper on Saturday. It was, several analysts agreed, just what she needed to help distance her from former Prime Minister Brian Mulroney, who had been seen as too accommodating toward the US.

But perhaps even more important, Campbell's tough line satisfied business groups that had demonstrated that they were quite willing to see NAFTA fail rather than accept trade sanctions - groups whose backing is key to Campbell's reelection campaign.

"We certainly expressed volubly our concern over the use of trade sanctions," says Stephen Van Houten, who heads the Canadian Manufacturers' Association, which represents 2,600 companies and three-quarters of Canada's manufacturing output. "We're very pleased with the outcome."

Many others in Canada are somewhat less pleased. The political left, including the New Democratic Party, still opposes NAFTA on the grounds that it will take jobs and business to lower wage areas with lower environmental standards. Not just Mexico, they say, but southern states in the US as well.

"NAFTA will further the job loss we've experienced under the [existing FTA]," said Ontario Premier Bob Rae. One of Canada's sharpest critics of the new pact, Mr. Rae says the side agreements do not address his concerns over NAFTA's encroachment on provincial jurisdiction. Provincial support

Under Canada's system of government, most federal labor regulations and a range of environmental laws are overseen by the 10 provincial governments with little involvement by the federal government. Some analysts say that absent provincial support for NAFTA, Canada may not be able to cite the US or Mexico for NAFTA violations.

Ontario is the nation's industrial core, and its 9.7 million people make up more than a third of Canada's population. Ontario, along with Quebec, British Columbia, and Alberta may be NAFTA holdouts. Quebec's provincial utility, Hydro-Quebec, is under attack from US environmentalists who want to block it from flooding sub-arctic land to generate power.

British Columbia's lumber and logging companies are being criticized for their clear-cutting practices. Alberta may balk if its oil and gas exploration policies come under attack by environmentalists.

Canadian environmentalists, however, complain that fines against the Canadian government for environment violations are not enough. Neither NAFTA or the side agreements will be enough to make the trade pact countries live up to their own laws, much less improve upon those laws, says Zen Makuch, a lawyer with the Canadian Environmental Law Association.

"If provincial or federal governments sought to introduce forest conservation measures, for example, even crude ones like reforestation - it would be challenged immediately as an illegal subsidy," says Mr. Makuch.

"Business groups are happy because their voices have been heard," says Peter Bleyer, executive director of the Council of Canadians, an Ottawa lobby group opposing the FTA and NAFTA.

"Under these agreements only one thing has changed," he says. "Instead of the offending corporations paying fines, the Canadian government on behalf of Canadian taxpayers will be paying the fines."

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