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Each establishes a Commission, headed by a cabinet-level representative of each 

 government, which will make sure that the concerns of labor and of the environ- 

 ment have no less attention than that accorded in NAFTA to trade issues. 



The Commissions will provide the first trinational forum for addressing environ- 

 mental and labor problems facing this continent. For example, the environmental 

 commissions can look at the spectrum of environmental issues from migratory and 

 endangered species to transboundary pollution, to advising the NAFTA Commission 

 on disputes on health restrictions. The labor commission will work on matters from 

 worker safety, to worker rights, to improved protection against child labor abuses 

 and improving competitiveness and productivity. 



The Cabinet officials will carry out their new responsibilities with the support of 

 a secretariat, and the Commissions will be able to draw on private expertise as well. 

 The environmental secretariat will be centrally located; the labor secretariat will 

 consist of national sections in each country. 



To encourage improved enforcement, each of the agreements provides a means by 

 which there can be an independent, objective evaluation and report on the effective- 

 ness of national enforcement of national laws in the environmental and labor 

 areas — by the secretariat (in the case of the environmental agreement) — and by an 

 Evaluation Committee of Experts (in the labor agreement). 



The agreements also provide for dispute settlement in the event of a persistent 

 pattern of failure to effectively enforce national laws. Where consultations fail to re- 

 solve such disputes, a neutral panel of independent experts would be established by 

 a two-thirds vote of the parties. Ultimately, if a panel found that there was such 

 a persistent pattern, and if a party failed to remedy the matter, then there could 

 be fines and trade sanctions. Canada has agreed, in lieu of trade sanctions, to make 

 assessments and other panel -ordered remedies fully enforceable by the Commission 

 in Canadian courts. 



The Import Surge Agreement will complement the NAFTA by improving the effec- 

 tiveness of safeguard provisions that allow action against imports that might cause 

 or threaten serious injury to a domestic industry including the workers of that in- 

 dustry. 



These supplemental agreements strengthen NAFTA, and represent an unprece- 

 dented commitment to cooperate on these issues in connection with a trade agree- 

 ment. 



FUNDING REQUIREMENTS FOR NAFTA 



The administration recognizes that implementing NAFTA will have costs for the 

 Federal Government. The reduced tariff revenue, as required under the Budget En- 

 forcement Act, must be offset. Under the administration's proposal to create a Bor- 

 der Environmental Administration (BEA), one of its financing mechanisms (the Bor- 

 der Environmental Financing Facility) will also require contributions from the Unit- 

 ed States, although it will rely primarily on private sector funding. Funding will 

 also be required to assure benefits to workers who lose their jobs as a result of eco- 

 nomic changes such as NAFTA. The labor and environment commissions will re- 

 quire modest funding for staffing ahd operations. 



The administration believes that the implementation of NAFTA will expand the 

 U.S. economy (i.e., increase income) over time, bringing in additional revenues 

 through existing taxes. Using current economic studies of NAFTA's effect on the 

 U.S. economy, additional Federal revenues in the near term could average $6 bil- 

 lion. Under the Budget Enforcement Act, however, only the direct effects of legisla- 

 tion (i.e., the loss of revenues through reduction in tariffs) on the Federal budget 

 are considered. The reduction in revenues will be, on average, $500 million a year. 

 As part of the cooperative process of developing the legislation to implement 

 NAFTA, the administration will consult with the Congress over the next few weeks 

 to develop appropriate measures for ensuring that this minimal loss of revenue will 

 not increase the U.S. budget deficit. 



FOREIGN POLICY IMPLICATIONS 



The NAFTA deserves to be approved on its economic merits. However, especially 

 in the light of U.S. agriculture's heavy dependence on international markets, foreign 

 policy implications of this issue should not be minimized. Echoing comments made 

 by my friend and colleague, Secretary of State Warren Christopher, last week: "Re- 

 jection of NAFTA would seriously damage our relations with Mexico and erode our 

 credibility with the other nations of the hemisphere and around the world. For the 

 United States, failure to approve NAFTA would be a self-inflicted setback of historic 

 proportions." 



