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Wednesday, 11 April, 2001, 14:14 GMT 15:14 UK
Q&A: Can US-China trade survive the crisis?

As tensions continue between the United States and China over the downed US spy plane, BBC News Online examines whether international trade could be used by the US to put pressure on Beijing to return the plane.

How important is trade between the US and China?

China's trade with the United States has been increasing rapidly in the past decade.

The United States is China's biggest trading partner.

And China has replaced Japan as the country with the largest trade deficit with the United States.

The rapid expansion of Chinese imports has been of concern to US unions, who fear that jobs in many basic industries like clothing, toys, and household goods may be at jeopardy.

Why does trade matter to China?

The expansion of foreign trade has been the driving force behind China's rapid economic growth since 1975.

China's fast-growing export industries have provided employment for millions of workers and helped absorb surplus population from the countryside.

China hopes that this expansion - and further foreign investment in export industries - will help raise living standards, which have already doubled since China began to open up to the West.

What leverage does the United States have?

At the moment China is not a member of the World Trade Organisation, which sets out the rules governing the world trading system - although it is poised to join soon.

That means the US would not be breaking WTO rules by imposing trade sanctions on China.

However, as part of a deal with China agreed last year, the US Congress abolished the parts of a US law that had permitted the Washington administration to impose trade sanctions on China if the Beijing government violated human rights.

So China currently enjoys what is called "permanent normal trading relations" with the United States, meaning its goods have to be allowed into America on the same terms as other countries.

Could the US block China's WTO membership?

The United States has already agreed the terms on which it will accept Chinese membership in the WTO.

However, it could argue that China has not met the terms of the agreement and therefore should not yet be admitted to the organisation.

Other countries are also worried that Chinese promises to dismantle its vast system of state subsidies to industry will be difficult to implement.

And under WTO rules, all WTO members have to agree before China can join the organisation.

Washington therefore has a certain amount of leverage to hurt Chinese export industries.

What could China do?

Although China exports more to the United States than it imports, it could also be dangerous for US companies if a trade war developed between the two countries.

Many US companies are hoping to sell goods and services in China, especially after the WTO agreement comes into force.

But China could use formal or informal means to ensure that more European rather than US firms get lucrative contracts for everything from commercial aircraft to mobile phones.

The damage to an already battered US industry could be enormous.

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