US normalises trade with China

China's biggest export - its highly competitive, low-cost labour force

After years of carrot-and-stick games with trade terms, the US has finally granted China permanent status as a normal trading partner.

President George W Bush signed a proclamation setting the decision in stone from 1 January 2002 at his ranch in Texas.

The move follows a Congressional vote last year ending an annual ritual of confirming trading rights, despite strong opposition from human rights groups and unions.

In previous administrations, normal trading - confusingly dubbed "most favoured nation" status despite referring to the vast majority of trading partners - was contingent on advances in human rights, or concessions on import opportunities to China.

But China's accession to the World Trade Organisation, which brings a package of market-opening concessions, sealed the switch to unconditional relations.

The deal under which China joined the WTO was at least as good as any the US has negotiated itself, according to both the US administration and Congress.

Tariffs in China on US-made goods are set to fall from an average of 25% to 9% by 2005, with duties on farm products dropping to 14% from 31%.

Open up

In a statement, the White House said the proclamation marked "the final step in normalizing US-China trade relations, and in welcoming China into a global, rules-based trading system".

It also pointed to what it said could be billions of dollars in new trading opportunities for US companies.

Aircraft maker Boeing, for example, said it was delighted.

"It's a great moment for us, because it allows a normal steady relationship with a huge market," said a spokesman for the company.

China's trade surplus with the US currently stands at $80bn a year.

But next year could be less rosy for China, its officials have admitted.

Foreign Trade Minister Shi Guangsheng told the China Daily newspaper that foreign trade could be in a "grave situation... shrouded with uncertainties".

"A declining world economy could have a worse impact on China's foreign trade than the 1997 Asian financial crisis, he said.

Despite predictions that trade will reach a record $500bn in 2002, export growth could slow to 5% - slower than the forecast import growth of 8% after this year's breakneck 27.8% expansion.