Hurdles Ahead for Trade Agreement : Commerce: ‘Breakthrough’ pact is wide ranging, but it does not include agriculture and service sector.

The new trade agreement that President Clinton hailed Wednesday as a “major breakthrough” opens the way for progress on an issue considered critical for the world’s economic future.

But it also is carefully limited in scope and must clear several more hurdles before it takes effect.

The agreement, under which the world’s leading industrialized countries pledged to cut tariffs and grant greater access to their markets, covers a range of manufactured goods.

But it does not cover agriculture or the service sector, two of the most contentious areas still dividing the world’s leading trading nations.

Indeed, forging agreements on these areas that extend beyond manufactured goods has been the central focus of the current round of trade talks, which began more than six years ago.

Moreover, the agreement worked out Wednesday must be approved by developing nations.

Besides the Group of Seven industrialized countries participating in the current Tokyo summit, more than 100 others are also taking part in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), of which Wednesday’s deal is a part.

“They’ve got to go out and try to sell it to 103 other countries,” observed C. Michael Aho, director of economic studies for the Council on Foreign Relations.

Clinton conceded Wednesday night that “there are difficult negotiations ahead.” But he insisted that the deal reached earlier in the day “breaks the log jam” that has prevented completion of the Uruguay Round for the past seven years.

Failure to complete the Uruguay Round--that is, to conclude a new worldwide trade agreement--could open the global economy to a wave of protectionism as countries compete to shelter domestic industries with tariffs not forbidden by existing agreements.

Despite the remaining obstacles to a final agreement, officials of other nations taking part in the Tokyo summit were equally upbeat Wednesday about the prospects for success.

“This is an exciting day for world trade and good news for the world economy,” Leon Brittan, the European Community trade commissioner, told reporters.

The deal concluded Wednesday morning would slash tariffs on industrial goods in four ways:

* Tariffs are to be eliminated entirely on a number of manufactured products, including pharmaceuticals, construction and medical equipment, and beer. With some exceptions, they are also to be ended on steel, furniture, farm equipment and spirits.

* Tariffs on chemical products are to be harmonized at low rates by the participating countries.

* Peak or maximum tariffs are to be cut by as much as 50% on textiles, ceramics, glass and apparel, according to U.S. Trade Representative Mickey Kantor.

* Tariffs are to be cut at least 33% in five other industries--scientific equipment, wood, paper, non-ferrous metals and electronics, Kantor said.

Kantor said the deal represents “the largest tariff cut in history.” And he quoted an economic forecast that holds out the prospect of 1.4 million new jobs in the United States over the next 10 years.

But details of this economic forecast make clear that this jobs figure is based not on the market-access deal made Wednesday but on completion of the entire Uruguay Round.

Kantor declined to say what concessions the United States made in recent days to achieve the agreement. “There are no winners or losers here,” he declared. “We all won. This is not a zero-sum game.”

But it appeared that the United States gave some ground. American officials were reportedly reluctant to open the way for deep cuts in textile tariffs because of fears that any reductions they grant could be extended to all other countries, such as China, which enjoy most-favored-nation trading privileges.

American officials said one of the key factors opening the way to an agreement was Japan’s last-minute agreement to drop its tariffs on imported liquor and spirits. “When the Japanese agreed to contribute distilled spirits to the zero category, that, indeed, was a very important moment in these discussions,” Kantor said.

Treasury Secretary Lloyd Bentsen said that, with the market-access agreement reached Wednesday, “the prospects of meeting the December deadline (for completion of the Uruguay Round of GATT) are brighter than ever before.”

But Clinton Administration officials acknowledged that they must now try to settle the particularly divisive trade dispute over agricultural subsidies. France has made clear it is determined not to cut back on the subsidies that protect its farmers. Kantor said trade negotiators will renew work on settling the agricultural disputes Monday in Geneva.

Even with Wednesday’s market-access agreement, independent specialists warned that completing the Uruguay Round of the GATT talks will still be particularly difficult because it is unclear whether other countries will be willing to approve the deal.

“The worst time to try and conclude trade liberalizing measures is when you’ve got widespread recession and unstable governments,” explained Aho last week. “And we have unstable governments in several of these countries.”

Meanwhile, in Washington, the Motion Picture Assn. welcomed the tariff agreement and said it hoped it would encourage progress in negotiations on services trade, which would include American exports of movies, television shows and videos.

The EC wants to exclude such “audiovisual services” from GATT agreements so as to give EC countries the option of controls and quotas on entertainment and cultural attractions. The United States, which enjoys a $3.5-billion annual trade surplus in entertainment attractions, understandably wants to ban quotas, which now restrict American films and television shows in some countries.

American trade experts generally were impressed with the scope of the agreement on manufactured products but noted that time is short to reach agreements on agriculture and the many services industries before the Dec. 15 Uruguay Round deadline.