Free Trade Talks Are in Home Stretch : Commerce: A U.S.-Canada-Mexico accord could come as early as this weekend.

After a year of intense negotiations, U.S., Mexican and Canadian officials are close to sealing an historic North American free trade agreement that largely would break down existing economic barriers among the three countries.

Although the final accord will contain many exemptions and conditions, it is expected to transform centuries-old trade relations between the three nations and form a continent-wide free trade zone covering 360 million consumers and more than $6 trillion in economic output.

Trade officials said a conclusive agreement could be reached as early as this weekend, when the delegations convene for a high-level meeting in Mexico City. But they cautioned that a few more weeks probably will be needed to resolve remaining problems.

Bush Administration officials apparently hope a final accord can be reached before the Republican National Convention, which convenes in Houston on Aug. 17.

“There is a chance of an agreement this weekend, but I think it is a long shot,” said an Administration official involved in the talks. “I think there are just too many issues still on the table to do it that fast.”

Mexican officials were more optimistic. A source close to the Mexican side said the likelihood of an agreement this weekend is “only a little less than 50-50. I think that at least, they will be 99% done.”

U.S. officials cautioned that growing congressional resistance to a number of proposals on the table could delay a final pact. Several sources also said that the pace of the talks could be influenced by a renewed Democratic attack on Bush’s position on several controversial aspects of the proposed agreement.

House Majority Leader Richard A. Gephardt (D-Mo.), a leading Democratic spokesman on trade, plans in a speech Monday to denounce the Administration’s stance on environmental provisions plus workers’ rights and other labor-related provisions in the proposed pact.

Democratic presidential candidate Bill Clinton, who has supported the agreement, has expressed similar concern.

The Administration is especially sensitive to the environmental portion of the controversy because President Bush pledged in 1988 to be the “environmental President.”

Now there are fears among U.S. environmental groups and others that, once the free trade agreement is signed, corporations will flock to Mexico to circumvent stringent U.S. enforcement of antipollution laws.

Although Mexico has recently enacted tougher environmental laws, American critics said the Mexican government has been incapable of enforcing them. U.S. and Mexican negotiators have been discussing proposals that call for U.S. environmental experts to advise and guide Mexico in its enforcement efforts, but there has been no agreement on the extent of such U.S. intervention.

“The question is how much help the U.S. will give to them (on environmental protection), and how much in the way of government budget resources the Mexicans will be willing to devote to environmental enforcement,” said Fred Bergsten, director of the Institute for International Economics in Washington and a leading trade analyst.

In addition, Bergsten said, the Mexican government must find a way to handle the domestic political fallout that would likely result from any highly visible U.S. intervention into its pollution regulatory process.

But other issues affecting key industries remain unresolved as well.

For example, certain requirements for automobiles manufactured in the three countries remain an obstacle, sources said.

The powerful U.S. auto industry wants stringent requirements on what percentage of a car’s parts and labor must originate in one of the three countries before it can qualify for duty-free passage within the free-trade region. Such tough standards would block Japanese firms from using low-cost, skeleton assembly operations in Mexico to circumvent trade barriers against imports from Japan.

In addition, the level of tariff protection that will be allowed for a wide range of agricultural products remains a key issue, sources said. U.S. agricultural interests do not want Mexican farmers to be permitted to ship products duty-free while continuing to use pesticides that are banned in the United States--which could give Mexico a competitive advantage.

And U.S. negotiators complain that Canada, which already has a bilateral free trade agreement with the United States, has put up a surprising degree of resistance in several areas.

Even with so many details still on the bargaining table, key U.S. and Mexican negotiators stress, they remain committed to reaching an agreement as quickly as possible. In a meeting July 14 in San Diego, President Bush and Mexican President Carlos Salinas de Gortari urged their negotiators to meet this weekend to push for “an early and successful conclusion” of the talks.

With such top-level prodding, progress has been made in recent days on controversial provisions dealing with energy, for example.

Although the Mexican constitution forbids direct foreign ownership of Mexican oil fields, Mexico apparently has agreed to allow foreign investment in the industry under the sponsorship and control of the state-owned oil company.

Trade Dealing

Here is the status of several key issues as negotiators enter the final round of talks on a North American free trade agreement:

Key Issues Resolved

* Banking: U.S. and Canadian banks will be allowed to make limited investments in Mexican banks.

* Tariffs: Customs duties on thousands of products will be reduced immediately or over time.

* Energy: Mexico will allow foreign investment in its oil industry under the sponsorship and control of the state-owned oil company.

Key Issues Unresolved

* Environment: Extent of U.S. intervention in enforcement of Mexican environmental laws.

* Autos: Requirements governing duty-free passage of autos within the free trade region.

* Agriculture: Tariff protections on a wide range of agricultural products. Degree to which Mexican farmers can ship products duty free while continuing to use pesticides now banned in the United States.