Final answer:
To establish the Northwest Territory, states had to cede western lands, following the guidelines set by the Confederation Congress in the Northwest Ordinance of 1787.
Step-by-step explanation:
To establish the Northwest Territory, states had to cede western lands. The Confederation Congress facilitated this process through the Northwest Ordinance of 1787, which outlined a plan for the settlement of new territories and the admission of new states into the Union. It established that territories with fewer than 5,000 white adult males would be governed by officers appointed by Congress, and once a territory reached 60,000 white male inhabitants, it could draft a constitution (upholding certain rights such as religious freedom and forbidding slavery) and apply for statehood. This ordinance also barred slavery in the Northwest Territory. Therefore, states had to cede western lands in order to establish the Northwest Territory, which was an essential step towards the expansion of the United States and the establishment of a system to admit new states.