Accord Reached on NAFTA Enforcement : Trade: Resolution of environmental and labor issues clears the way for Clinton to seek congressional approval.

The United States, Mexico and Canada reached agreement Thursday night on an enforcement plan for the North American Free Trade Agreement, clearing the way for President Clinton to seek congressional approval of the pact this fall, Administration officials said.

The officials declined to give details, but apparently daylong telephone negotiations between Washington, Mexico City and Ottawa resolved the impasse over U.S. demands that violations of environmental and labor standards be punishable by trade sanctions.

U.S. officials scheduled a news conference for this morning to announce the agreement.

Canada had been the main stumbling block, rejecting the U.S. demand for trade sanctions, either penalty tariffs or quotas.

Six days of negotiations in Washington between top U.S., Canadian and Mexican trade officials that ended Monday had been unable to resolve the dispute.

NAFTA, which would take effect Jan. 1, would drop trade tariffs among the three nations, creating the world’s largest free-trade zone, with 360 million consumers and annual production worth $6.4 trillion.

The Administration, under pressure from such key lawmakers as House Majority Leader Richard A. Gephardt (D-Mo.) and Sen. Max Baucus (D-Mont.), chairman of the Senate Finance subcommittee on trade, has insisted that the threat of sanctions is necessary to win congressional approval of the trade agreement.

The debate over sanctions grew out of Clinton’s campaign pledge to seek changes in the agreement without reopening the package President George Bush had negotiated.

Clinton endorsed NAFTA over the objections of key political aides, labor union allies and some environmentalists. But he demanded new side agreements to ensure enforcement of pollution and labor laws in each of the three countries to lessen the risk that U.S. companies would shift jobs to Mexico to take advantage of lax regulations there.

Some key members of Congress want the United States to be able to use sanctions--duties or import quotas--to satisfy environmental critics who fear that lax enforcement of Mexican laws will lure investment south of the border.

But Canadian Prime Minister Kim Campbell had rejected such sanctions as a way of enforcing the labor and environmental standards.

“Our position is that they’re quite unnecessary,” Campbell said. “We have the provisions in our own courts if there were to be any judgments or any fines levied as a result of failing to observe our own laws.”

As pressure mounted, the Canadian government ordered a clampdown on comment from officials.

Mexico has also opposed the sanctions. On Wednesday, news reports said that a government internal document showed Mexico viewed the NAFTA negotiations as at a “breaking point” over sovereignty issues.

Concern about the talks hurt stocks in Mexico, which is relying on passage of NAFTA to bolster its economy. The key 37-share Bolsa index fell 31.21 points, or 1.72%, on Thursday.