Clinton Rejects GATT Vote Deal : Politics: President says he will not back a tax cut on capital gains in exchange for Dole’s support of the global trade accord. He also opposes school prayer amendment.

President Clinton, still battling to secure congressional approval of a new global trade agreement, declared one potential deal off-limits Tuesday, flatly rejecting a Republican effort to link the trade accord to a capital gains tax cut.

Addressing for the first time the capital gains horse trade suggested by incoming Senate Majority Leader Bob Dole, Clinton expressed optimism that he would be able to reconcile his differences with the Kansas Republican.

But even if the two men come to terms, he said, the GOP-backed tax cut would not be part of the bargain.

“I disagree that there should be some deal cut regarding capital gains,” Clinton said during a news conference in the Old Executive Office Building adjacent to the White House. “I don’t think that’s the right thing to do.”

The pact, which would create a World Trade Organization as a successor to the General Agreement on Tariffs and Trade as the referee for the global trading system, “is an important agreement on its own merits,” the President said. By gradually reducing protectionist tariffs that limit commerce between nations, the expanded trade agreement would stimulate economic growth and job creation in America, he said.

“Everyone concedes it will lead to hundreds of thousands of jobs,” Clinton asserted.

With President Leonid D. Kuchma of Ukraine at his side, Clinton sought to delineate under what circumstances he would be willing to compromise with the new Republican leaders of the House and Senate, and under what circumstances he would resist.

He said that he would fight any move to pass a constitutional amendment providing for school prayer. Similarly, he promised to resist moves to repeal handgun purchase restrictions, the new ban on some assault weapons and the new law requiring companies to provide unpaid family leave to employees.

Clinton considers all three measures centerpieces of the first two years of his presidency. But all three face likely attack by the new Republican congressional majority.

The President expressed confidence that he and congressional Republicans would be able to cooperate on efforts to restrict lobbying practices, reform campaign finances and give states more flexibility over the federal programs that they administer.

Yet a compromise continued to elude Clinton on his most pressing legislative objective: approval of the GATT accord during a special lame-duck session of Congress set to begin Tuesday.

Unless the pact is endorsed by Congress before the end of the year, many trade specialists contend, the 124-nation agreement could unravel. Many signatory nations are awaiting the outcome of next week’s congressional debate before taking final action on the accord.

While the House is widely expected to approve the trade accord, its prospects appear dicey in the Senate. A White House vote count taken Tuesday indicated that 26 senators, including Dole, remain undecided. Another 14 were said to be leaning against the pact.

Although Republicans traditionally have supported tariff reductions, the politics of trade has become more polarized since Election Day. Clinton is trying to win the support of middle-of-the-road Republicans and Democrats while Dole holds back his own crucial backing.

Dole suggested Sunday that he would be more likely to support GATT if the White House agreed to an accounting change to make it easier for the Republicans to seek passage of a capital gains tax cut.

A longstanding GOP legislative objective, the capital gains measure would reduce taxes paid by investors, landowners, entrepreneurs and businesses on profits from sales of stocks, bonds, real estate and other assets.

By introducing the tax measure into the trade debate, Dole put Clinton in a political bind. Yielding on capital gains would cost the President support among his Democratic base while providing only questionable support from Republicans, a senior Administration official said.

So far, Dole’s suggestion has not produced a capital gains groundswell. Sen. Phil Gramm of Texas, who is expected to challenge Dole for the GOP presidential nomination in 1996, said that Dole’s effort to link the trade plan to the tax cut “is not a good pairing.”

Besides pressing the capital gains issue, Dole has suggested other concessions that might win his support for the trade accord. One would involve establishing a procedure for Congress to monitor the actions of the World Trade Organization.

Dole and a diverse group of opponents, ranging from conservative firebrand Patrick J. Buchanan to consumer activist Ralph Nader have expressed concern that the trade organization would be able to overrule U.S. laws that protect the environment, labor and public health and safety.

One trade official said that Dole seemed close to accepting a plan under which a group of retired U.S. judges would determine whether the global trade body treats U.S. interests fairly. If the judges believed that it did not, Congress presumably could vote to withdraw from the organization.

Administration officials said that more talks between Dole and a Clinton team including U.S. Trade Representative Mickey Kantor and Treasury Secretary Lloyd Bentsen would be needed before they would be convinced that they could count on Dole’s support. The Senate leader’s vote is considered critical because it would provide cover for other Republicans who are anxious about supporting Clinton.

Yet even as they worked toward reconciliation with Dole, White House officials suffered a setback when Sen. Robert C. Byrd of West Virginia, the Senate’s senior Democrat, said that he would try to use parliamentary procedures to defeat the trade plan--or at least delay it.

Senate Finance Committee Chairman Daniel Patrick Moynihan (D-N.Y.) said that he could count only 41 senators favoring or leaning strongly toward supporting the agreement. That would leave it 19 votes short of the 60 needed to win a crucial procedural vote.

Meanwhile, Clinton tried to clarify his view on school prayer, which he had muddied with remarks at a press conference last week in Indonesia. Saying that he was tired when he appeared to endorse a constitutional amendment making prayer or a moment of silence legal in schools, Clinton said that he opposes such an amendment as “inherently coercive.”

“I have always supported a moment of silence,” Clinton said. “When I was a governor, I supported the moment of silence legislation. I do not believe that we should have a constitutional amendment to carve out and legalize teacher- or student-led prayer in the classroom. . . . “

In a related development, a coalition of religious groups delivered a letter to Clinton opposing a school prayer amendment.

The organizations, which include Christian, Jewish and Muslim groups, said that the proposed constitutional change would weaken separation of church and state while drawing unnecessary attention to children who refuse to take part in the prayer.

Times staff writers Ronald Brownstein and Aaron Nathans contributed to this story.

* ‘CORPORATE WELFARE’: Labor secretary urges GOP to trim business tax breaks. A18

The GATT and the GOP

The GATT accord, signed by 124 nations, must still be ratified by the three trade giants--the United States, Japan and the European Union--before it can be invoked on Jan. 1. Approval from incoming Majority Leader Bob Dole is key in the Senate, where support is waning.

KEY PROVISIONS

* Import tariffs: Overall cut of more than 33% on these border taxes on thousands of products, including electronics, wood and metals. It’s expected to cut prices.

* Textiles: Phase out over 10 years of quotas that protect industrialized countries from cheaper Third World imports.

* Product dumping: Tougher restrictions on exporting goods at below-cost prices.

* Agriculture: Gradual cut of 36% on crop tariffs and crop export subsidies.

* Intellectual property: Clampdown on theft of copyrighted goods such as bootlegged films and music. Tougher protection of patents. Stronger rules against counterfeit goods, such as fake designer wear.

WHAT DOLE WANTS

* Capital gains cut: He wants to exchange his support of the trade pact for Administration backing of a capital gains cut.

* An out clause: Supplemental legislation next year that would allow the United States to withdraw from the World Trade Organization, the successor organization to GATT, if the WTO rules too often against the United States in trade disputes.

* Savings bond change: Dole wants to replace the guaranteed minimum 4% interest paid on U.S. savings bonds with a floating minimum.

Source: Associated Press

More on GATT

* A special package of articles on the GATT treaty has been adapted for the TimesLink on-line service by the editors of the National Journal. Included are reports by the House Ways and Means Committee on the bill, where members of the Southern California delegation stand, what party leaders say, and a look at the next foreign trade hurdles if GATT passes.

Details on Times electronic services, B4