Under heavy pressure from the United States, Thailand has agreed to grant patent protection to pharmaceuticals for the first time, but it is not clear whether this will be enough to ward off U.S. trade retaliation.

The U.S. trade representative has until March 16 to decide whether to proceed with a so-called Section 301 petition for unfair trade retaliation, which was initiated by the American pharmaceutical industry.Sources here do not expect Thailand will be targeted for retaliation but will be kept on a priority watch list to maintain pressure on a number of other intellectual property issues.

U.S. government and industry representatives here welcomed the new Thai law, even though it falls considerably short of their original demands.

"We feel this is a significant step in the right direction," said Doug Sheldon, chairman of the American Chamber of Commerce committee on intellectual property, and a former Pfizer International Corp. executive.

There have been several attempts to pass similar legislation since Washington put pharmaceutical protection on the bilateral agenda. These attempts all have been mercilessly flayed by powerfully-vested local interests.

"There was a sigh of relief among a lot of us who care about Thailand - that it move in the right direction, that it not get caught up in the (nationalistic) emotionalism of the issue," said Mr. Sheldon.

Industry analysts here contend the new Thai law will grant patent holders protection less favorable than they were offered by a new Chinese regulation.

Specifically, there is still no so-called pipeline protection, which prevents infringement of a company's patent while it is still being developed and working its way through the regulatory process. The agreement with China grants such protection.

U.S. industry officials here also are not content with overly broad provisions for compulsory licensing. These are powers the government reserves for itself to break exclusive patent rights. The industry wanted these powers limited to declared national emergencies and sought adjudication for violations of competitive law. The effect of the current language will depend on subsequent commerce ministry regulations, executives said.

The new law also is not clear about whether importing drugs will be considered "working the patent," another requirement to continuing exclusive patent rights. It appears the ministry will decide this on a case-by-case basis.

If patent holders are deemed not to be preserving their patent through imports, the government could force them either to produce the drugs locally or to license competitors to make them.

A government pharmaceutical patent committee - charged to make sure there is adequate supply of needed medicines at reasonable prices - has been made a ''little less intrusive," one source who followed the process said. Most importantly, the committee is authorized only to monitor, not control, prices.