President Clinton's statement that countries might be subject to sanctions if they fail to meet basic working standards created new complications at the World Trade Organization meeting in Seattle today as delegates worked toward a Friday night deadline to come up with a deal for a new round of trade talks.

Clinton left Seattle after a 33-hour visit under heavy guard as anti-WTO demonstrators continued to give police trouble today. This city remained tense and under siege today, with its downtown boarded up and sealed off and its police force facing growing criticism from local residents.

Just before his departure, Clinton signed a bill banning extreme conditions of child labor. During the ceremony he cited Brazil, Pakistan and Guatemala as among the places where the United States wants to stop child labor.

Labor unions welcomed both statements. But the one about sanctions infuriated business leaders and was opposed by the European Union. It also conflicted with the long-stated positions of many developing countries, which worry that labor rules would be used to keep their goods out of industrialized countries.

"Clinton has opened up a deep, deep rift with the developing countries," said Robert Litan, director of the economics program at the Brookings Institution, who is attending the conference. "It seems to be a hasty capitulation to domestic political concerns. . . . It will make it more difficult to get agreement."

"I don't think we're in a damage-control situation at all," U.S. Trade Representative Charlene Barshefsky said today. She denied that the U.S. position had changed.

"We are opposed to any notion of sanctions," said Anthony Gooch, a spokesman for the European Union. The EU favors cooperation on labor issues between the WTO and the International Labor Organization, a United Nations body.

Clinton's statement on sanctions could give developing countries reason to stonewall the creation of a "working group" on labor conditions, which the Clinton administration has proposed.

Labor conditions in poor exporting countries have been a major issue for demonstrators who have turned out to protest the work of the WTO in recent days. They continued their protests today, as several hundred people marched on a local jail in defiance of police bans on demonstrations, demanding release of some of the more than 500 people who have been arrested.

Police today imposed tighter restrictions on entering downtown, which is brightly decorated for the holidays but ghostly. Some community leaders began publicly questioning the police department's leadership, and Mayor Paul Schell wearily pleaded for calm in a midday speech broadcast live on local television.

He also apologized to Seattle residents who have been caught in the cross-fire of the disturbances but pleaded for their patience and understanding. And he urged peaceful protesters to respect police rules.

"This is not business as usual," Schell said. "People have to understand that. . . . There are a lot of angry people in our city today, but we need to start talking terms of peace."

By afternoon, police said they had tallied more than 500 arrests in the past few days, most for forms of disorderly conduct, and hospitals have treated dozens of people for an assortment of minor injuries. No one has been seriously harmed or killed, officials said.

But a city that fought hard for the past two years to host the international trade conference and that extols its vibrant, progressive spirit--some dub it the Paris of the Pacific Northwest--now seems shaken, even shattered by the rough course of events.

"There's a lot of disbelief," said Lucinda Payne, a director of Seattle's downtown business association, which represents 2,500 merchants. "People feel blindsided by what has happened."

As they took to the streets again, many protesters began criticizing Seattle's police almost as much as the trade conference that brought them here. Leaders from labor unions and environmental groups held a news conference this morning to denounce police tactics, saying they are not making distinctions between peaceful protesters and unruly mobs.

Later today, a local television station aired footage from the nighttime clashes in the city's Capitol Hill neighborhood that showed a police officer kicking a man in the groin and firing a rubber bullet at him at close range even as the man was walking backward with his arms spread.

Police Chief Norm Stamper said that he was "troubled" by some reports of officers' conduct, but he adamantly defended how the department has handled the protests, saying it is working against "overwhelming odds." Mayor Schell also praised police for showing "extreme discipline and patience." City officials said that police fired tear gas at demonstrators in the Capitol Hill neighborhood only after some protesters in the crowd charged some officers and ignored repeated demands to disperse.

This afternoon's protest march, though, proceeded mostly in peace along the edge of downtown, under close police watch, then began circling the King County Jail, where some demonstrators are being held as they awaited processing.

During his visit, Clinton repeatedly said that he agreed with many of the goals of the peaceful demonstrators, who say they want better working conditions and more attention to the environmental impact of trade.

At present, the WTO trading rules do not require labor standards. But in recent weeks, Clinton and other administration officials have repeatedly called for formation of a working group to look at how labor conditions might be worked into rules.

Administration officials, however, have been vague about just what it meant. The implication is that it might lead eventually to a system in which the WTO would set basic standards on such things as pay and worker safety and rights to unionize. A country could complain to the WTO that another country was breaking these rules and the WTO might authorize sanctions against it. But administration officials have avoided saying that.

In an interview with the Seattle Post-Intelligencer, which circulates in a strongly unionized city, Clinton went that extra step. The labor working group should define what core standards were "and then they ought to be part of every trade agreement, and ultimately I would favor a system in which sanctions would come for violating any provision of the trade agreement," Clinton said.

The statement fell on deaf ears among Third World governments. They see the labor-standards issue as the work of unions in industrial countries that are worried about losing jobs. "This could be used as a way to protect markets," said Gideon Ndambuki, Kenya's minister of planning.

Also against the labor standards are U.S. companies. Howard Lewis of the National Association of Manufacturers said: "As recently as two weeks ago, senior government officials told us not to worry, that the proposal for a study group on labor was not the first step toward sanctions for countries that don't abide by international labor standards. Now we learn that this is exactly what they had in mind. . . . It will confirm the worst suspicions of the developing countries."

Members of the U.S. delegation at the meeting were unhappy over this new complication. Some jumped forward to clarify: "What the president was simply saying was that, through the multilateral process, in the future one would also need to think about how to have accountability and enforcement" on labor standards, said Gene Sperling, Clinton's economic adviser.

In a ceremony signing the child-labor measure, Clinton said: "The step we take today affirms fundamental human rights. Ultimately that's what core labor standards are all about. Not an instrument of protectionism or a vehicle to impose one nation's values over another, but about shared values, the dignity of work, the decency of life, the fragility and importance of childhood."

Staff writer Steven Pearlstein and special correspondent Khiota Therrien contributed to this report.