Clinton to retreat over trade deal with China

PRESIDENT CLINTON appears close to granting China a one-year extension of its trading privileges with the United States, while serving notice that they will be withdrawn in 12 months if Peking fails to improve its human rights record and respect international trade and non-proliferation accords.

The position, which was still being fine-tuned between the White House and members of Congress yesterday, would represent a partial retreat from promises by Mr Clinton during the presidential campaign to demand immediate progress on human rights before renewing China's trade status.

Since taking office, the President has come under intense pressure from the business lobby to continue to give China the Most Favoured Nation (MFN) status which America grants to almost all its big trading partners. Fearful of what the withdrawal of MFN might do to the economy of Hong Kong, Britain has also argued forcefully for its maintenance. Although Mr Clinton would enact the one- year extension by presidential decree, he is likely to be sensitive to any objections raised by Congress. It seems probable, however, that his approach will win general approval.

Both the White House and Congress will none the less be wary of appearing lenient just as fresh anti-Chinese rioting has erupted in Tibet. Any conditions laid down for renewal of MFN in a year's time are certain to include specific reference to improving human rights in Tibet. Also likely to feature is a demand for Peking to account for all political prisoners, including those held after the 1989 Tiananmen uprising, and Mr Clinton will ask for access to be given inside China to human rights organisations such as the Red Cross.

More general stipulations would also be attached regarding the commitments already made by Peking towards opening its markets to US imports and curbing the spread of nuclear technology under the international non-proliferation treaty. Washington has been concerned by recent reports of Chinese hardware being exported to Pakistan.

Withdrawal of MFN would result in an increase of between 2 and 10 per cent on Chinese exports to the US, affecting items like toys and clothing. Business lobbyists warn that any retaliation by Peking could jeopardise American exports to China worth dollars 8bn ( pounds 5bn) a year. Hong Kong, point of transit for 80 per cent of China's exports, could see economic growth cut by half, British officials say.