Report could affect MFN

DETAILS of Beijing's attacks on Britain will be included in a report to US Congressmen in March, a move interpreted by local observers as likely to dim US-China trade relations.

In the clearest indication yet that the Sino-British row - which this week took a turn for the worse - could jeopardise China's Most Favoured Nation status, the US Consulate in Hongkong said work was under way on the report.

It is scheduled to be received by Congressmen about the time that MFN is being debated.

Under US legislation China's MFN status - which provides low tariffs on most Chinese imports - is tied to its performance on certain issues, with human rights playing a key role.

Political analysts said the report's findings on democracy in the territory were bound to be dragged into the MFN debate, especially under a president pledged to democracy abroad.

One political analyst said: ''I don't think somebody like Senator George Mitchell or Representative Nancy Pelosi could resist not bringing that up somehow in an attempt to win converts to their side.


''Who will bring it up and how is anybody's guess, but I don't see the people who want conditions [on MFN renewal] ignoring this particular issue.'' Mr Mitchell, the Senate majority leader, and Ms Pelosi have both suggested they will introduce legislation attaching conditions to China's MFN status, and that they will act sooner rather than later.

A spokesman for the US Consulate said: ''We are preparing a submission that will be incorporated into the report for Congress, and the basic parameters will be those set out in the 1992 US-Hongkong Policy Act.

''I suppose the [row] would have to be considered a development in democracy in Hongkong so it would be covered, but I cannot say how.'' The 1992 Act requires the US Secretary of State to put before the Speaker of the House of Representatives and the chairman of the Senate Committee on Foreign Relations a report on conditions in Hongkong of interest to the US.

These would include: The development of democratic institutions in Hongkong.


Developments related to the change in sovereignty over Hongkong.

Significant problems in co-operation between Hongkong and the US over export controls.


The nature and extent of Hongkong's involvement in multilateral forums.

The US Consulate spokesman did not rule out an impact on the MFN debate from the report's findings.

''It is too early to say whether these issues will be linked or not. It does not appear right now they are going to be, but it is a little early to know,'' the spokesman said.


Mr Roy Delbyck, a US lawyer specialising in trade, said the reporting requirement would be an additional irritant in what was already going to be a tough fight for unconstrained MFN status.

He said: ''It's going to be a tougher year. There's no question of that.'' The US-Hongkong Policy Act was passed at the end of last year.

Its first reporting period came at a time when Beijing was lambasting Governor Chris Patten's maiden policy speech in October, when he outlined his plans for enhanced democracy.


One analyst noted President Bill Clinton's support for the promotion of American democracy abroad, which was repeated during the campaign.

He added: ''Despite the best efforts of Mr Patten to keep the democracy issue out of the MFN debate, I don't think that's possible.''