By Stuart Auerbach
Washington Post Staff Writer
Thursday, August 13, 1992; Page A01

The United States, Canada and Mexico concluded a hemispheric free-trade agreement yesterday that would create the world's largest trade bloc, one designed to make North American companies more competitive against their Asian and European rivals.

The agreement covers a territory stretching from the Yukon to the Yucatan with some 360 million people and an economy of $6 trillion.

Under the pact, known as the North American Free Trade Agreement, tariffs and other barriers to the movement of goods, services and money between the United States and its neighbors to the north and south will be erased over the next 15 years.

Just hours after the agreement was reached, President Bush stepped out into the morning sun of the White House Rose Garden to announce the pact and call it "the beginning of a new era" for North American economic cooperation that will "create jobs and generate growth in all three countries."

While U.S. business cheered the announcement, Democrats, organized labor and others immediately raised questions about its impact, signaling a difficult ratification battle in Congress next year.

Democratic presidential nominee Bill Clinton said he supports a free-trade pact if it "provides adequate protection for workers, farmers and the environment on both sides of the border."

Two influential Democratic lawmakers -- House Majority Leader Richard A. Gephardt (Mo.) and Sen. Max Baucus (Mont.), chairman of the Senate Finance Committee's trade panel -- said the trade pact negotiated by the Bush administration failed those tests. They called for a renegotiation of the agreement to strengthen its provisions on protecting the environment and helping workers who lose their jobs because of the accord.

Under the agreement, which is to take effect on Jan. 1, 1994, patterns of trade are expected to change in all of North America, just as they changed between the United States and Canada under a similar accord between those two countries 3 1/2 years ago. The concept behind these agreements is that the economy of the entire region will grow more vigorously and be more competitive with foreign rivals as a whole than as separate national economies.

With Mexican tariffs now averaging 250 percent higher than U.S. tariffs, American makers of cars, auto parts, telecommunications equipment, computers and other products expect the lowering of barriers to vastly increase their sales in Mexico. Further, the agreement opens new markets in Mexico for U.S. banks, insurance companies, investment houses and oil service companies, all of which faced restrictions or bans on doing business there.

"Mexico is our fastest growing export opportunity ... and this agreement not only locks in the economic reforms and export opportunities that we have secured to date, but builds upon them and creates a real job machine at our back door," said U.S. Trade Representative Carla A. Hills.

She signed off on the trade pact shortly before 2 a.m. yesterday, after a final, intense two-week round of talks that concluded 14 months of negotiations.

The White House, apparently anxious to gain political capital from the conclusion of the trade pact, arranged for the presidential announcement hours before final agreement was reached. Nonetheless, Hills said she was under no political pressure to conclude the agreement before next week's Republican convention.

Both President Carlos Salinas de Gortari of Mexico and Canadian Prime Minister Brian Mulroney praised the accord yesterday. Salinas, who sought the trade agreement with the United States, is banking on it to lift Mexico into an economic force in the world.

Canada joined the talks late to gain improvements in its bilateral trade pact with the United States.

Bush, in his short Rose Garden announcement, sounded themes that are certain to be a part of his reelection campaign. He said that open markets in Canada and Mexico mean more and higher-paying American jobs, "the kind that our nation needs to grow and prosper, the kind that showcase American talent and technology."

Congressional Democrats, however, attacked the pact on the jobs issue. Sen. Donald W. Riegle Jr. (D-Mich.) called it "a real danger to Michigan and the entire American economy ... because we have plants closing all across America and moving to Mexico to take advantage of very low wage rates."

The Republican side was more supportive. Sen. John C. Danforth (R-Mo.) called it "a bold and exciting idea" that ranks "among the most important economic developments for the United States since World War II."

Hills and her chief negotiator, Deputy U.S. Trade Representative Julius Katz, said lawyers will go over the agreement next week to make sure its language is clear and all its provisions are consistent. At the same time, some 40 industry advisory groups will prepare reports for Congress on the impact it will have on their businesses.

The completed text and those reports will be presented to Congress when it returns from the Labor Day recess in early September. Under the law, Congress has 90 days to study the agreement and to work with the administration to draft legislation that will implement the agreement into law. Congress then has 90 legislative days, which could stretch out for as long as eight months, to pass that legislation under special "fast-track" provisions that permit no delays or amendments.

This means the legislation will be acted on by a new Congress, with as many as 125 new members, and could be presented by a new president with ideas of his own on the contents of agreement.

Organized labor and major environmental groups joined in the attack on the accord, which AFL-CIO Secretary-Treasurer Thomas Donahue called "a bad deal for American workers, consumers and the long-term health of the American economy."

But practically across the board, the agreement was hailed by major U.S. industrial groups and corporations, which feel it will help them sell more in Mexico's previously closed markets, help them compete better against foreign rivals in North America and allow them to manufacture across the continent so they can become more efficient competitors in European and Asian markets.

Typical of comments on the agreement from big business, General Motors Corp. Chairman Robert C. Stempel said, "It has the potential to create jobs in the United States and increase trade by all three countries."

Despite attacks by environmental groups, Hills and Environmental Protection Agency Administrator William K. Reilly praised the environmental sections of the agreement, which they said preserves stringent U.S. health, safety and environmental laws.

"NAFTA is the most environmentally sensitive trade agreement ever negotiated anywhere, and it will be seen as a model for other countries. Rejecting NAFTA on environmental grounds would be the environmental mistake of the decade," Reilly said.