North American Free Trade Agreement: Structure and Status of Implementing
Organizations (Briefing Report, 10/07/94, GAO/GGD-95-10BR).

In January 1994, the North American Free Trade Agreement (NAFTA) between
the United States, Canada, and Mexico entered into effect. The most
comprehensive free trade agreement ever negotiated, NAFTA is expected to
create the world's largest free trade zone when it is gradually
implemented during the next decade. This briefing report provides
information on the progress of establishing organizations to carry out
NAFTA's goals and the extent to which a new bureaucracy is being created
to manage the terms of the agreements. GAO identifies (1) the design and
composition of the various organizations created by NAFTA and its
related agreements, (2) the status of staffing and budget-related issues
for these organizations, and (3) any instances of the expansion of
NAFTA's bureaucracy.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-95-10BR
     TITLE:  North American Free Trade Agreement: Structure and Status 
             of Implementing Organizations
      DATE:  10/07/94
   SUBJECT:  International agreements
             International economic relations
             International organizations
             International trade
             Foreign trade agreements
             Foreign trade policies
             International trade regulation
             Foreign governments
             Budget administration
IDENTIFIER:  NAFTA
             North American Free Trade Agreement
             Canada
             Mexico
             
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Cover
================================================================ COVER


Briefing Report to Congressional Requesters

October 1994

NORTH AMERICAN FREE TRADE
AGREEMENT - STRUCTURE AND STATUS
OF IMPLEMENTING ORGANIZATIONS

GAO/GGD-95-10BR

NAFTA Organizations


Abbreviations
=============================================================== ABBREV

  BECC - Border Environment Cooperation Commission
  CAIP - Community Adjustment and Investment Program
  CEC - Commission for Environmental Cooperation
  CFTA - U.S.-Canada Free Trade Agreement
  CLC - Commission for Labor Cooperation
  DOC - U.S.  Department of Commerce
  EPA - Environmental Protection Agency
  FTA - Free Trade Agreement
  FTC - Free Trade Commission
  NAAEC - North American Agreement on Environmental Cooperation
  NAALC - North American Agreement on Labor Cooperation
  NADBank - North American Development Bank
  NAFTA - North American Free Trade Agreement
  NAO - National Administrative Office
  NCS - NAFTA Coordinating Secretariat
  USTR - U.S.  Trade Representative

Letter
=============================================================== LETTER


B-258628

October 7, 1994

The Honorable William F.  Clinger, Jr.
Ranking Minority Member

The Honorable Al McCandless
Ranking Minority Member
Subcommittee on Legislation and
 National Security

The Honorable Steven Schiff
Ranking Minority Member
Subcommittee on Human Resources and
 Intergovernmental Affairs
Committee on Government Operations
House of Representatives

The Honorable John Mica
The Honorable Rob Portman
The Honorable Deborah Pryce
House of Representatives

On January 1, 1994, the North American Free Trade Agreement (NAFTA)
between the United States, Canada, and Mexico entered into effect. 
NAFTA, the most comprehensive free trade agreement ever negotiated,
is expected to create the world's largest free trade zone when it is
gradually implemented over the next decade.  Since NAFTA was such a
controversial treaty, the three countries agreed to adopt
NAFTA-related accords in order to address concerns about environment,
labor, and border area development.  A series of secretariats,
commissions, working groups, and other bodies are now being created
to execute the intent of these NAFTA-related agreements. 

You asked us to provide information on the progress of establishing
organizations to carry out NAFTA's goals and the extent to which a
new bureaucracy is being created to manage the terms of the
agreements.  Specifically, our objectives were to identify (1) the
design and composition of the various organizations created by NAFTA
and its related agreements, (2) the status of staffing and
budget-related issues for these organizations, and (3) any instances
of the expansion of NAFTA's bureaucracy. 

We provided a briefing to Committee and Subcommittee staff on
September 27, 1994.  This report summarizes the substance of that
briefing. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

NAFTA and its related agreements created a number of bodies in three
general categories:  those created by NAFTA itself; those created by
trilateral agreements between the United States, Canada, and Mexico;
and those created by a bilateral agreement between the United States
and Mexico.  These agreements each established an organizational
structure, headed by a commission or board of directors made up of
government ministers from each country, to carry out the terms of the
agreements.  These organizations are the

  Free Trade Commission (FTC), designated by NAFTA to supervise the
     implementation of the agreement, which has no permanent location
     or staff and rotates meeting places among the three countries;

  Commission for Environmental Cooperation (CEC), a trilateral body
     created by the North American Agreement on Environmental
     Cooperation and located in Montreal;

  Commission for Labor Cooperation (CLC), a trilateral body created
     by the North American Agreement on Labor Cooperation and to be
     located in Dallas;

  board of directors of the Border Environment Cooperation Commission
     (BECC), set up under a bilateral agreement between the United
     States and Mexico and to be located in Ciudad Juarez, Mexico;
     and

  board of the North American Development Bank (NADBank), also set up
     under a bilateral agreement between the United States and Mexico
     and to be located in San Antonio, TX. 

Each of the commissions and boards oversees its own organization
composed of bodies variously called committees or working groups to
address issues related to their areas of responsibility (app.  I
describes NAFTA and its related agreements in greater detail; app. 
II lists FTC committees and working groups). 

U.S.  Trade Representative (USTR) officials expect committees and
working groups under FTC to utilize existing government staff and
budget resources.  Participation in these groups is expected to
amount to less than 5 percent of the participants' overall work time
on average, according to USTR officials. 

On the other hand, NAFTA's related agreements, which represent a new
approach to addressing labor and environmental issues, create a
number of new bodies, requiring new staff.  For example, CEC expects
to hire
32 people to staff its office in Montreal, while CLC expects to hire
15 people to staff its office in Dallas. 

The responsibility for establishing and managing the various NAFTA
bodies is generally being shared equally by the three partners.  This
shared partnership extends to leadership, location, and staffing of
the bodies.  Similarly, the budgets for each of the related bodies
will be shared equally by the three countries. 

Setting up several of NAFTA's supporting bodies has taken longer than
was initially expected, according to government officials.  Although
NAFTA and its related agreements do not specify time frames for
formation of the various committees and working groups, the
ministerial councils set out projections for the initial steps of
hiring key staff.  In several cases, these targets have not been met,
resulting in delays in setting up sites for the supporting bodies. 

The potential exists to expand the number of NAFTA organizations. 
FTC has the authority under NAFTA to create additional committees and
working groups if it deems necessary.  Four new working groups have
been set up by the trade ministers of the three governments in
addition to the
20 groups specifically established by NAFTA.  However, USTR officials
state that all the committees and working groups under FTC will only
meet on an as-needed basis and will require minimal resources.  CEC,
CLC, and the board of NADBank also have the authority, based on their
charters, to create new committees and working groups.  None had done
so as of September 16, 1994. 

The three countries' trade ministers have also proposed a body that
would require new staff and a permanent site:  the NAFTA Coordinating
Secretariat (NCS).  The trade ministers, after NAFTA entered into
effect, agreed in principle to form a coordinating secretariat, to be
located in Mexico City.  However, negotiations to formally establish
NCS have been delayed, due in part to disagreement over the number of
permanent staff to be assigned from each country, unresolved
differences about the specific functions of NCS, and the need to
obtain appropriation authority from the U.S.  Congress.  As of
September 16, 1994, an agreement had not been finalized by the three
countries. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :2

In order to identify the design and composition of the various
organizations created by NAFTA and its related agreements, we
reviewed the texts of NAFTA, the North American Agreement on Labor
Cooperation, the North American Agreement on Environmental
Cooperation, and the agreement establishing both NADBank and BECC. 
We also reviewed government documents on commission charters, staff
and budget allocations, and committee work plans obtained from the
U.S.  Departments of State, Commerce, Labor, and the Treasury; the
Office of the U.S.  Trade Representative; and the Environmental
Protection Agency (EPA).  In addition, we interviewed officials from
these agencies in Washington, D.C. 

In order to identify the status of staff and budget issues for the
new NAFTA-related organizations, as well as identify any instances of
expansion of NAFTA's bureaucracy, we interviewed U.S.  government
officials responsible for implementation, as well as U.S.  officials
serving on several of the NAFTA bodies.  We also reviewed the
agreements creating the various new organizations. 

We did not independently verify the accuracy of the data obtained and
did not interview officials from the governments of Canada and
Mexico. 

We did our work from May 1994 to September 1994 in accordance with
generally accepted government auditing standards. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :3

We discussed the contents of this report with USTR officials on
September 14, 1994, including the Director for Canadian Affairs and
the Deputy Director for Mexican Affairs, and incorporated their
technical comments and clarifications where appropriate.  USTR
generally agreed with the report's characterization of the status of
NAFTA-related organizations.  On the basis of USTR's comments, we
included a more explicit description of the USTR position that FTC
committees and working groups are expected to require minimal
resources. 


---------------------------------------------------------- Letter :3.1

As agreed with you, unless you announce the contents of this briefing
report earlier, we plan no further distribution of this report until
14 days from its issue date.  At that time, we will send copies to
other interested congressional committees, the U.S.  Trade
Representative, and other interested parties.  Copies will be made
available to others on request. 

The major contributors to this briefing report are listed in appendix
III.  Please contact me at (202) 512-4812 if you have any questions
concerning this report. 

Allan I.  Mendelowitz, Managing Director
International Trade, Finance, and
 Competitiveness


NORTH AMERICAN FREE TRADE
AGREEMENT:  ORGANIZATIONAL
STRUCTURE AND IMPLEMENTATION
STATUS
=========================================================== Appendix I

Figure I.1:  North American Free Trade Agreement

Figure I.2:  GAO Report Objectives

Figure I.3:  Overview of NAFTA and Related
Organizations


   OVERVIEW OF NAFTA AND RELATED
   ORGANIZATIONS
--------------------------------------------------------- Appendix I:1

NAFTA and its related agreements created a number of independent
bodies.  These bodies generally fall into three broad categories,
based on the authority under which they were created:  (1) a
commission and committees created under the authority of NAFTA; (2)
commissions and committees created under the authority of
trilaterally negotiated agreements; and (3) boards of directors and
committees created under the authority of a bilaterally negotiated
agreement between the United States and Mexico. 

NAFTA entered into effect on January 1, 1994.  The Free Trade
Commission (FTC) is NAFTA's governing body.  Its charter sets out a
number of committees and working groups responsible for facilitating
implementation of specific sectors within the agreement (see app. 
II). 

In response to congressional interest in incorporating labor and
environmental issues into the negotiations, the three countries
undertook discussions that culminated in the North American Agreement
on Environmental Cooperation (NAAEC) and the North American Agreement
on Labor Cooperation (NAALC).  These trilateral agreements each
created a new international organization, the Commission for
Environmental Cooperation (CEC) and the Commission for Labor
Cooperation (CLC), respectively.  CEC is designed to address and
resolve environmental issues that arise between the parties.  CLC is
designed to improve working conditions and living standards in each
country, enhance communication, and pursue cooperative labor-related
activities among the three countries. 

In response to interest in improving border environmental conditions
and infrastructure, the United States and Mexico entered into the
"Agreement Between the Government of the United States of America and
the Government of the United Mexican States Concerning the
Establishment of a Border Environment Cooperation Commission and a
North American Development Bank" in November 1993.  This bilateral
agreement created two new international organizations:  the Border
Environment Cooperation Commission (BECC) and the North American
Development Bank (NADBank).  BECC is expected to assist border states
in both countries to design and finance environmental infrastructure
projects in the border region.  NADBank is expected to provide
financing for environmental projects certified by BECC and also to
provide support for community adjustment and investment projects. 

Figure I.4:  Map of New NAFTA Office Locations


   LOCATIONS OF NEW ORGANIZATIONS
--------------------------------------------------------- Appendix I:2

Several of the NAFTA-related organizations will require new permanent
locations and staff.  These are to be located in various cities
across North America.  Ministerial negotiations determined the host
country for each new location, generally assuring representation for
each country.  U.S.  Trade Representative (USTR) officials explained
that it was then up to the host country to determine the city in
which the permanent site would be located.  As of September 16, 1994,
CEC was operating in its permanent site in Montreal, Canada, while
CLC, BECC, and NADBank had not begun operations. 

In most cases, the cost of office supplies and leases are to be
shared equally by participating countries.  However, NADBank is an
exception.  The city of San Antonio, TX, where NADBank is expected to
be located, has agreed to provide temporary office space and basic
building services, conference facilities, and eventually permanent
space in a yet-to-be constructed building, all at no cost to NADBank. 

Figure I.5:  Free Trade Commission Organization
Chart


   NAFTA FREE TRADE COMMISSION
--------------------------------------------------------- Appendix I:3

The Free Trade Commission serves as the governing body of NAFTA. 
According to NAFTA, FTC members must be cabinet-level representatives
of the three countries.  They currently are the U.S.  Trade
Representative, Canada's Minister of Trade, and Mexico's Secretary of
Trade and Industrial Development.  FTC's responsibilities include

  supervising the implementation of NAFTA,

  resolving disputes that may arise regarding NAFTA's interpretation
     or application,

  supervising the work of the NAFTA Secretariat and NAFTA committees
     and working groups, and

  establishing additional committees and working groups as needed. 

FTC held its first meeting in Mexico City on January 14, 1994. 

Figure I.6:  NAFTA Free Trade Commission: 
Secretariat


   NAFTA FTC SECRETARIAT
--------------------------------------------------------- Appendix I:4

NAFTA's Secretariat, comprised of three National Sections, is
primarily responsible for supporting NAFTA's dispute resolution
processes, including providing administrative assistance for dispute
resolution panels formed under chapters 19 and 20 of NAFTA.  National
Sections originated in the U.S.-Canada Free Trade Agreement to
administer binational procedures for panel reviews.  In NAFTA,
dispute resolution provisions were extended to Mexico as well, and a
Section for Mexico was added. 

The manager of the section is called the Secretary of the Section. 
The sections also include support staff and are located in each
nation's capital.  The U.S.  Section contains the Secretary and three
staff, according to the U.S.  Secretary.  The U.S.  Section's staff
size has not increased under NAFTA from its level under the
U.S.-Canada Free Trade Agreement (FTA). 

Mexico recently announced the appointment of its Secretary and is now
in the process of setting up its section. 

Figure I.7:  NAFTA Free Trade Commission: 
Committees and Working Groups


   NAFTA FTC COMMITTEES AND
   WORKING GROUPS
--------------------------------------------------------- Appendix I:5

A number of committees and working groups have been formed to
facilitate NAFTA's implementation.  Most were specified in various
chapters of NAFTA, while several were created by FTC at its first
official meeting in January 1994.  The purpose of these groups is to
provide a channel for discussion of issues of ongoing concern to the
NAFTA countries; the groups are generally comprised of government
experts.  For example, USTR officials stated that several of the
groups were created to provide a standing forum for issues that were
unresolved under NAFTA.  The groups are expected to meet at least
annually but are generally likely to get together when one or more of
the countries requests a meeting. 

USTR officials believe that the committees and working groups will
not cause an increase in U.S.  budgetary expenses since they (1) are
composed of current employees of the government, (2) require no new
location or office space, and (3) are to meet only as needed. 

Figure I.8:  NAFTA-Related Agreements:  Trilateral

Figure I.9:  NAFTA-Related Agreement:  Bilateral

Figure I.10:  Commission for Environmental
Cooperation Organization Chart


   ORGANIZATIONAL STRUCTURE OF THE
   COMMISSION FOR ENVIRONMENTAL
   COOPERATION
--------------------------------------------------------- Appendix I:6

The Commission for Environmental Cooperation is comprised of (1) a
three-member Council of cabinet-level or equivalent representatives
from each country:  the U.S.  Environmental Protection Agency
Administrator, Mexico's Secretary of Social Development, and Canada's
Minister of Environment; (2) a Secretariat led by an Executive
Director who was selected by the Council; and (3) a Joint Public
Advisory Committee, consisting of 15 members, 5 appointed from each
country. 

The Council, as CEC's governing body, oversees all CEC operations and
is supposed to meet at least once every year.  Its first meeting was
held March 23, 1994.  The Secretariat is to provide technical,
administrative, and operational support both to the Council and to
committees and groups established by the Council.  The Joint Public
Advisory Committee is expected to convene at least once a year at the
time of the Council's regular session, or at its members' discretion. 
The Joint Public Advisory Committee may advise the Council or provide
technical information to the Secretariat.  Each party may also
convene a national and a governmental committee to provide advice on
NAFTA's implementation. 

Figure I.11:  Status of CEC Staff and Budget


   STATUS OF CEC STAFF AND BUDGET
--------------------------------------------------------- Appendix I:7

CEC is further along in establishing its operations than the other
NAFTA-related organizations, according to EPA officials, in part
because it has selected its Secretariat's Executive Director.  EPA
officials explained that the most controversial issue surrounding the
establishment of CEC was the nationality of the Secretariat's
Executive Director.  Since the three governments agreed that the
nationality of the Executive Directors of the CEC and CLC
Secretariats (and the proposed NAFTA Coordinating Secretariat) should
differ, the selection of the CEC Executive Director had a direct
bearing on who would be chosen for the other Secretariats.  The three
governments decided that the CEC Executive Director would be a
citizen of Mexico.  According to EPA officials, Mexico's candidate
met with unanimous support from all of the parties and was appointed
in July 1994. 

The Executive Director is currently interviewing candidates for about
32 positions within the CEC Secretariat in Montreal, Canada.  These
positions include environmental attorneys, economists, and others
with expertise in environmental matters, and also include
administrative staff.  In addition, the Executive Director is in the
process of implementing a work plan approved by the Council. 

During their ministerial meeting in July 1994, the Council approved a
$9-million budget for 1995 that should be contributed equally by the
members.  The U.S.  portion would be supplied through EPA's fiscal
year 1995 budget which, as of September 16, 1994, had not yet been
appropriated by the Congress.  This amount is less than was
authorized in NAFTA's implementing legislation, where the Congress
authorized a U.S.  contribution to CEC of $5 million for fiscal year
1995. 

Figure I.12:  North American Agreement on Labor
Cooperation Organization Chart


   ORGANIZATIONAL STRUCTURE OF THE
   NORTH AMERICAN AGREEMENT ON
   LABOR COOPERATION
--------------------------------------------------------- Appendix I:8

NAALC has two components--one trinational and one national.  The
trinational component is represented by CLC, which is comprised of a
ministerial Council and a supporting Secretariat.  The Council
oversees the implementation of the agreement, hires the Executive
Director of the Secretariat, and directs its work.  The Council's
members are the U.S.  Secretary of Labor, Canada's Minister of Human
Resources Development, and Mexico's Secretary of Labor and Social
Welfare.  The Council held its first meeting on March 21, 1994, to
discuss the formation of the Secretariat and other implementation
issues.  The Secretariat, which assists the Council in exercising its
functions and prepares various reports and studies, will be located
in Dallas. 

The national component of NAALC consists of a federal government
level office in each country called the National Administrative
Office (NAO).  Each country's NAO is led by a secretary and has
several functions:  it serves as a domestic focal point for parties
interested in NAALC issues, disseminates information on CLC
activities, requests consultations with other NAOs, and receives
public complaints about nonenforcement of labor law.  The U.S.  NAO
is located in the Department of Labor's Bureau of International Labor
Affairs and was established on January 1, 1994. 

NAALC also authorizes each country to convene two advisory
committees:  a National Advisory Committee comprised of
representatives of labor, business, and the public; and a
Governmental Committee comprised of representatives of federal and
state officials.  A charter has been developed for the U.S.  National
Advisory Committee, but members have not yet been appointed.  No
action on the Governmental Committee has been taken so far. 

Figure I.13:  Status of NAALC Staff and Budget


   STATUS OF NAALC STAFF AND
   BUDGET
--------------------------------------------------------- Appendix I:9

As of September 16, 1994, no CLC staff had been hired.  The Council,
which hires the Executive Director of CLC, had initially anticipated
that it would fill the position by June 1, 1994.  However, this
objective was not met because the three governments did not agree on
the nationality of the Executive Director until the CEC Executive
Director was appointed in July 1994.  At that time, the three
governments decided to appoint a Canadian citizen to head CLC, and
the Council will fill the position when Canada submits a list of
names of prospective candidates. 

CLC's operations will be run by an Executive Director and two Deputy
Directors.  Once hired, the Executive Director will then proceed to
hire the 15 CLC staff called for in NAALC, including several labor
market economists and labor law specialists, as well as
administrative staff. 

Since its inception, U.S.  NAO has operated using staff detailed from
the Department of Labor.  In July 1994, however, a permanent NAO
Secretary was appointed.  Beginning in October 1994 NAO expects to
hire about
13 staff, according to Department of Labor officials, if the budget
permits. 

Funding for the NAALC organizations is pending.  CLC will be funded
by the three governments, with three equal contributions, while the
costs of NAOs are to be borne by each country.  NAFTA implementing
legislation authorized an annual U.S.  contribution to CLC of $2
million for each of fiscal years 1994 and 1995, but as of September
16, 1994, the Congress had not passed an appropriation for these
funds.  Department of Labor officials expect U.S.  total
NAALC-related expenditures for fiscal year 1995 to be approximately
$2.2 million, of which approximately $1 million will be for the U.S. 
contribution to CLC. 

Figure I.14:  Border Environment Cooperation
Commission Organization Chart


   ORGANIZATIONAL STRUCTURE OF THE
   BORDER ENVIRONMENT COOPERATION
   COMMISSION
-------------------------------------------------------- Appendix I:10

BECC is managed by a board of 10 directors appointed by the United
States and Mexico.  The EPA Administrator, Mexico's Secretary of
Social Development, and each country's commissioners from the
bilateral International Boundary and Water Commission are to sit on
the board.  Each country is to select three of the remaining six
directors representing (1) border states, (2) localities in the
border region, and (3) members of the public.  On an alternating
basis, each of the parties is to choose one of the directors as
Chairperson of the board of directors for a 1-year term. 

The General Manager and Deputy General Manager of BECC are to be
selected by the board and are each to be appointed for a term of 3
years.  They may be reappointed if the board chooses. 

The BECC Advisory Council is expected to provide advice to the board
of directors and the General Manager on issues related to BECC
activities.  The BECC Advisory Council is to consist of 18
representatives, 9 from each country.  They can be drawn from border
states, local communities, nongovernmental interest groups, and
private citizens.  Council members are expected to serve for 2 years,
may be reappointed, but will not be paid by BECC, other than
reasonable expenses incurred while attending council meetings. 

Figure I.15:  Status of BECC Staff and Budget


   STATUS OF BECC STAFF AND BUDGET
-------------------------------------------------------- Appendix I:11

Although BECC's board of directors had been appointed by each country
as of September 16, 1994, they had not met yet because of three
remaining issues between the governments of the United States and
Mexico, according to a State Department official.  First, the
nationality of the General Manager remains unresolved.  Second, the
level of government involvement in BECC operations has not yet been
resolved.  Finally, the two countries have not yet decided the extent
to which BECC proceedings will be open to the public. 

Once these issues are resolved, the BECC board is expected to hire
the General Manager and the Deputy General Manager.  The General
Manager is expected to be responsible for hiring support staff for an
office to be located in Ciudad Juarez.  State Department officials
estimate that the number of staff positions could be approximately 15
to 20, but final levels are to be determined by the board once the
General Manager is in place. 

The U.S.  contribution for fiscal year 1995 BECC expenditures is less
than authorized by the Congress.  NAFTA implementing legislation
authorized an annual U.S.  contribution of $5 million, beginning in
fiscal year 1994.  Recently, the Congress appropriated funds for the
State Department's budget, of which $1.51 million for fiscal year
1995 is expected to be used as the U.S.  contribution for BECC
operations.  Mexico is expected to match this amount. 

Figure I.16:  North American Development Bank
Organization Chart


   ORGANIZATIONAL STRUCTURE OF THE
   NORTH AMERICAN DEVELOPMENT BANK
-------------------------------------------------------- Appendix I:12

NADBank has two components.  It is managed by a board of the bank,
which oversees the operation of NADBank and approves its budget and
all financial operations.  Its members are the U.S.  Secretaries of
the Treasury and State and the Administrator of EPA; and Mexico's
Secretaries of Finance, Trade and Industrial Development, and Social
Development.  The board, which plans to meet at least annually, held
its first meeting in San Antonio on June 17, 1994.  NADBank and its
support staff are to be located in San Antonio. 

NADBank has a second component, called the Community Adjustment and
Investment Program (CAIP).  It will utilize up to 10 percent of
NADBank capital to provide services in both countries, which need not
be in the border region.  The United States plans to set up an office
for this program, called the "CAIP window," in Los Angeles. 

The United States is establishing two committees to assist in meeting
the objectives of CAIP:  the CAIP Advisory Committee and the CAIP
Finance Committee.  The Advisory Committee, which is required to have
nine members drawn from a diverse group of nongovernmental interests,
is expected to provide guidance on criteria developed for
CAIP-sponsored financial assistance.  It originated in NAFTA
implementing legislation.  Advisory Committee membership is currently
being considered by the President, according to Treasury officials. 
The Finance Committee, composed of specified government officials,
will establish procedures for the endorsement of loans, guarantees,
or grants supported by the CAIP window.  It was created by executive
order of the President. 

Finally, the United States must also create an ombudsman position, by
presidential appointment, to provide a channel for public input on
the operation of CAIP, as well as to perform programmatic audits. 

Figure I.17:  Status of NADBank Staff and Budget


   STATUS OF NADBANK STAFF AND
   BUDGET
-------------------------------------------------------- Appendix I:13

As of September 16, 1994, no NADBank staff had been hired.  NADBank's
operations are to be run by a Manager and Deputy Manager.  At the
first board meeting in June 1994, the board appointed a management
search committee to seek qualified applicants for the positions. 
However, a Treasury official told us that the decision to hire a
Manager has been on hold while the governments resolve the
nationality of the BECC General Manager position, since the
governments agreed they should be of differing nationalities. 
Treasury hopes that the Manager will be hired by mid-October.  Once
in place, the Manager is expected to hire support staff.  Treasury
officials anticipate that the initial staff level will be between 10
and 12 and may increase eventually to around 25. 

The number of staff for two CAIP components has not yet been
determined.  First, no decision has been made as to the number of
staff at the CAIP window in Los Angeles.  Also, Treasury officials
stated that the number of staff constituting the ombudsman office has
not yet been determined because the position is still being
developed. 

NADBank will not require separate appropriations for its operational
funding, according to Treasury officials.  On October 1, 1994, the
first installment of NADBank's capital shares was expected to be
contributed by the United States.  The United States and Mexico are
expected eventually to contribute a total of $450 million.  Treasury
officials stated that NADBank plans to use earnings on this capital
to fund staff and office supply expenses.  Office space is being
provided by San Antonio.  No budget has yet been completed to itemize
anticipated operating expenses. 

Figure I.18:  New Free Trade Commission Working
Groups


   NAFTA ORGANIZATIONS HAVE
   INCREASED, BUT THE IMPACT IS
   EXPECTED TO BE MINIMAL
-------------------------------------------------------- Appendix I:14

The number of FTC working groups has increased since the completion
of NAFTA negotiations.  The three countries' trade ministers have
created four new working groups.  Two working groups, one on
subsidies and countervailing duties, and the other on dumping and
antidumping duties, were created on December 2, 1993, in a joint
agreement by the ministers.  Two other working groups, on government
procurement and on services and investment, were announced at the
first official meeting of FTC on January 14, 1994, using authority
granted FTC under NAFTA to establish new committees and working
groups. 

USTR officials believe that these working groups and any other new
committees established by FTC will have a minimal impact on existing
staff and budget resources.  FTC committees and working groups were
intended to formalize communication channels among the United States,
Canada, and Mexico via their government agencies.  As a result, while
many new committees and working groups were created in NAFTA, they
are staffed by current government experts; funding for these
committees will be drawn from existing agency budgets.  Many of the
committee members served as NAFTA negotiators and will lend expertise
in their areas of specialization as needed, according to officials. 
Participation in these groups is expected to amount to less than 5
percent of the participants' time on average, according to USTR
officials. 

CEC, CLC, and the board of NADBank also have the authority in their
charters to create new committees and working groups as they see fit. 
As of September 16, 1994, none had used this authority to do so,
according to U.S.  government officials. 

Figure I.19:  Proposed NAFTA Coordinating
Secretariat


   A PROPOSED NAFTA COORDINATING
   SECRETARIAT MAY REQUIRE NEW
   STAFF AND FUNDING
-------------------------------------------------------- Appendix I:15

The trade ministers from the three NAFTA countries have proposed a
new NAFTA organization that is expected, if implemented, to require
additional staff and budgetary funding from the United States.  The
United States, Canada, and Mexico have agreed in principle to create
a third trilateral organization in Mexico City, which is expected to
be called the NAFTA Coordinating Secretariat.  NCS was not included
in NAFTA, but was proposed at the conclusion of negotiations for the
other NAFTA-related agreements.  NCS was agreed to by the United
States and Canada in order to provide balance, according to
government officials.  They explained that the government of Mexico,
like the United States and Canada, wanted to host a NAFTA
organization. 

Negotiations to formally establish NCS were prolonged due in part to
disagreement over the number of permanent staff to be assigned from
each country, unresolved differences about the specific functions of
NCS, and the need to obtain appropriation authority from the U.S. 
Congress.  As of September 16, 1994, the three countries had yet to
issue a formal agreement on the NCS structure or role, according to
USTR officials. 

Figure I.20:  Anticipated NCS Role and Resource
Needs


   ANTICIPATED ROLE OF NCS
-------------------------------------------------------- Appendix I:16

U.S.  government officials believe that NCS will be responsible for
providing official translations for NAFTA documents, storing official
NAFTA documents, preparing an annual report, and serving as a
clearinghouse for NAFTA trade data.  NCS' role may become broader,
however, since Mexico negotiated for more expansive functions for
NCS, according to U.S.  government officials. 

NCS may have a permanent staff of approximately 15 people, although
it is not clear how long NCS will take to fill these positions.  The
United States initially wanted to keep NCS small, with about 5 total
staff, but Mexico pressed to have an NCS whose staffing was
comparable to CLC's, at about 15 staff.  U.S.  government officials
expect that the Director of NCS will come from the United States. 

USTR officials could not provide an estimate of the potential NCS
annual budget, though they did expect it to be shared equally by the
three countries.  The U.S.  Congress had not authorized funding for
NCS as of September 16, 1994. 


NAFTA FREE TRADE COMMISSION
COMMITTEES AND WORKING GROUPS
========================================================== Appendix II

Free Trade
Commission:                                           Meetings
committees and                          Participatin  as of 9/  Authorization
working groups        Lead agency       g agencies\a  16/94     source
--------------------  ----------------  ------------  --------  ----------------
Committee on Trade    USTR              11            3/10/94   NAFTA article
in Goods                                                        316

Committee on Trade    USTR              6             None      NAFTA annex 300-
in Worn Clothing                                                B, section 9.1

Committee on          USDA and USTR     2             None      NAFTA article
Agricultural Trade                                              706

Advisory Committee    USDA and USTR     1             None      NAFTA article
on Private                                                      707
Commercial Disputes
Regarding
Agricultural Goods

Committee on          USDA and USTR     5             3/24/94   NAFTA article
Sanitary and                                                    722
Phytosanitary
Measures\b

Continuation of       USDA and DOC      3             None      CFTA article 708
U.S.-Canada Free                                                groups\c
Trade Agreement

Committee on          USTR              9             3/14/     NAFTA article
Standards-Related                                     94        913
Measures                                              4/14/
                                                      94
                                                      6/15/94

Land Transportation   DOT               7             6/22/94   NAFTA article
Standards                                                       913(5)
Subcommittee

Telecommunications    USTR and NIST     4             4/13/94   NAFTA article
Standards                                                       913(5)
Subcommittee

Automotive Standards  DOT               5             None      NAFTA article
Council                                                         913(5)

Subcommittee on       USTR              6             6/94      NAFTA article
Labeling of Textile                                             913(5)
and Apparel Goods

Committee on Small    DOC and SBA       3             6/22/94   NAFTA article
Business                                                        1021

Financial Services    U.S. Department   3             4/22/94   NAFTA article
Committee             of the Treasury                           1412

Advisory Committee    To be decided     2             None      NAFTA article
on Private                                                      2022(4)
Commercial Disputes

Working Group on      Treasury          8             2/28/     NAFTA article
Rules of Origin                                       94        513


Customs Subgroup      U.S. Customs      None          3/23/     NAFTA article
                      Service                         94        513(6)
                                                      7/94


Working Group on      USDA and USTR     2             None      NAFTA article
Agricultural                                                    705(6)
Subsidies

Bilateral Working     USDA and USTR     1             None      NAFTA annex
Group on                                                        703.2(A) (25)
Agricultural Grading
and Quality
Standards

Working Group on      U.S. Department   2             3/29/94   NAFTA article
Trade and             of Justice                                1504
Competition

Temporary Entry       INS               5             3/22/     NAFTA article
Working Group                                         94        1605
                                                      6/29/94

Working Group on      USTR              6             None      NAFTA article
Emergency Action                                                2001(2)(d)

Working Group on      USTR and U.S.     2             3/23/94   FTC Ministers
Government            Department of                             Meeting 1/14/94
Procurement           State

Working Group on      USTR and          3             3/30/94   FTC Ministers
Services and          Treasury                                  Meeting 1/14/94
Investment

Working Group on      To be decided     6             None      Joint statement
Subsidies and                                                   12/2/93
Countervailing
Duties

Working Group on      To be decided     6             None      Joint statement
Dumping and                                                     12/2/93
Antidumping Duties
--------------------------------------------------------------------------------
Legend

CFTA Canadian Free Trade Agreement
DOC U.S.  Department of Commerce
DOT U.S.  Department of Transportation
INS U.S.  Immigration and Naturalization Service
NIST National Institute for Standards and Technology
SBA Small Business Administration
USDA U.S.  Department of Agriculture

\a "Participating agencies" reflects preliminary expressions of
interest received by USTR from agencies wanting to participate in
NAFTA committees and working groups. 

\b The proposed Subcommittee on Pesticides has not been formally
established under this committee. 

\c CFTA established eight working groups for agriculture-related
issues. 

Source:  USTR. 


MAJOR CONTRIBUTORS TO THIS
BRIEFING REPORT
========================================================= Appendix III

GENERAL GOVERNMENT DIVISION,
WASHINGTON D.C. 

Curtis F.  Turnbow, Assistant Director
Kurt A.  Burgeson, Evaluator
William J.  Gorman, Adviser
Rona Mendelsohn, Evaluator (Communications Analyst)
Kim Wheeler, Publishing Adviser

LOS ANGELES REGIONAL OFFICE

Patrick Gormley, Issue Area Manager
Anthony Moran, Evaluator-in-Charge
