Iraq needs to know there will be consequences if it doesn't comply with weapons inspections, Secretary of State Colin Powell warned, adding that despite criticism the United States will stick to the "basic principles" of a tough new U.S. proposal in the United Nations.

Speaking to reporters Wednesday night on the sidelines of the Asia-Pacific Economic Cooperation forum, Powell said Iraq can't be allowed to "sit back and smile" if it fails to meet its obligations.

"This is not a new concept or new language," he said at a news conference.

The United States began circulating an Iraq proposal to fellow U.N. Security Council members on Wednesday, and the draft met with mixed reactions. Russia denounced language that could trigger military action, while French officials who had opposed earlier proposals appeared willing to negotiate.

The proposal, drafted with British support, would give weapons inspectors broad new powers to search and destroy and warns Iraq of "serious consequences" if it obstructs their work.

"We want to give (inspectors) what they need to do the job, and that job has to be the disarmament of Iraq," Powell said.

Earlier, in a meeting with college students, Powell said the United States always prefers to resolve conflicts peacefully. "We should try to avoid war whenever possible," he said.

Powell said President Bush would discuss Iraq and North Korea's nuclear weapons program with APEC leaders when he arrives for a summit here on Saturday.

The United States was joining other APEC members in sending a message to North Korea that "there can be no economic aid when we have this kind of behavior," Powell said.

Powell flew to Cabo San Lucas on Wednesday afternoon and went directly into a meeting with Mexican Foreign Secretary Jorge Castaneda.

The two appeared briefly to answer questions from college students, who asked how countries can prevent terrorist attacks that have become a focus of the meeting of Pacific Rim leaders.

Powell said it was important to raise living standards in order to eradicate the conditions that draw people into terrorist activities.

"When people see hope in the future, when they see an opportunity to make a living ... then there's no room for anger, there's no room for the type of terror activity we see," he said.

At the news conference, Powell also condemned the storming of a crowded Moscow theater by 40 armed Chechen rebels who threatened to blow up the building and their hostages if Russian security forces attacked.

"It's a tragic situation that shows us once again the kind of world we are living in," Powell said.

Powell and Castaneda talked about security along their common border and closer ties, Mexico's foreign department said from Mexico City in a statement. Powell did not comment on his discussions with Castaneda.

Last month, Powell asked the Mexican foreign secretary to support the U.S. stance on Iraq in the United Nations. Mexico, a U.N. Security Council member, has been lukewarm.

The two countries have also differed in recent months over migration. Mexico wants the United States to let more Mexicans cross the border and live there legally. The United States was considering a migration accord, but the Sept. 11 attacks derailed those efforts.

Powell said Wednesday he shares Mexico's concerns about migration, and that the United States realizes it needs foreign migrant labor to survive economically.

Bush and Mexican President Vicente Fox are scheduled to meet Saturday.