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SCMP Reporter

CHINA'S Communist Party General Secretary Mr Jiang Zemin said yesterday that disputes between China and the United States could be settled through dialogue.

  ''When that proves impossible we can put them aside for the time being while seeking common ground,'' said Mr Jiang.

  His conciliatory message came in an interview with broadcaster CNN.

  He added: ''If MFN is revoked, both sides will suffer. For the United States it would mean a loss of at least 100,000 jobs and more expensive consumer goods.''   Those sentiments won't be lost on US President Mr Bill Clinton who is expected to make a personal pledge to force China to compromise on its arms sales and improve its human rights record in return for renewal of China's Most Favoured Nation (MFN) status.

  The pledge comes in the form of an executive order.

   According to observers, Mr Clinton will attach a set of conditions to the MFN renewal by means of the order, which is a binding directive with the President responsible for its execution.

    Mr Clinton has until June 3 to make his decision.

  The use of an executive order is seen as a tough stance by Mr Clinton over China's MFN status.

  ''It's likely that the President will attach conditions for the renewal of China's MFN status by means of an executive order. If not, the Congress will not be satisfied,'' said Mr Joe Massey, a former chief trade negotiator on China.

  Signals from Washington suggest Mr Clinton will retain this year's MFN, but will impose conditions on next year's renewal.

  It was widely believed that in order to minimise the potential damage to US-Sino relations, Mr Clinton would impose limited conditions on China.

    ''The conditions will be rather specific and narrow. Mr Clinton will say something like China should permit international organisations to visit the prisons and the factories,'' Mr Massey said.

  Mr Geoff Lewis, regional economist with Smith New Court, predicted that the conditions would focus on nuclear technology and missile exports. He also said it would be fairly specific on arms proliferation and human rights.

    Mr Lewis believed that if the conditions were not onerous, China would confine its displeasure on any changes to MFN to verbal attacks, while being prepared to meet a number of US concerns.

  ''A trade war is not in the interests of either party. Ultimately, China needs continued access to the US markets, and will be ready to compromise,'' he added.

    However, an official of China's Ministry of Foreign Economic Relations and Trade said China would definitely retaliate if the MFN status was renewed with conditions.

  He did not reveal details of any likely retaliatory actions but said: ''The buying orders made during the recent trade delegation may not go ahead.''      If conditions are applied to MFN status, under which the administration will be required to be satisfied that China has improved its human rights record and reduced arms sales, it would jeopardise up to US$7.5 billion in US exports to China this year.

   This has caused concern in the US business community, where the overwhelming sentiment is that morality is a luxury the US can rarely indulge in these days of persistently high unemployment.

  The recent withdrawal of Levi Strauss from China because of that country's human rights record is not seen as the beginning of a trend.

   In fact, a report by the International Business and Economic Research Corporation, which is funded by business, says that removal of MFN status or applying conditions to it will provoke Chinese retaliation and risk up to 171,000 US jobs this year.

  Hardest hit immediately would be US exports of aircraft, fertiliser, wheat and telecommunications.

  In the report's worst-case scenario, Boeing, McDonnell Douglas and their suppliers would suffer the most.

  Boeing could lose $5 billion in sales.

   McDonnell Douglas has been selected for co-production of a ''trunk aircraft'', which calls for firm orders for 40 aircraft, valued at about $1 billion.

  China is the largest market for US fertilisers - exports last year were $629 million - and it is usually the largest or second largest importer of US wheat.

   Billions of dollars will be at stake as China modernises its telecommunications market, where AT & T is already a leading participant.

  Former US Senator Mr Adlai Stevenson is one of many in business hoping conditional MFN can be avoided.

   As head of a US-Chinese joint venture to design, build and operate commercial telecommunications systems in China, Mr Stevenson is aware what is at risk.

  The joint venture - the China America Telecommunication Company - has a contract to build a $20 million prototype. Conditional renewal or loss of MFN status ultimately could cost the group participation in China's $20 billion telecommunications equipmentmarket.

  In the face of a possible change in MFN status, Beijing appears to have reviewed its foreign policy towards the US.

  According to a Chinese press report, Chinese leaders, including Mr Deng Xiaoping, Mr Jiang Zemin and Mr Zhu Rongji, have expressed the view in internal meetings that China has to eliminate its reliance on the US market.

  Hongkong's business community has been lobbying persistently in support of the renewal of MFN without conditions.

  Last Friday, the US and Hongkong Economic Co-operative Committees, led, respectively, by the former chairman of the US Federal Reserve Board, Mr Paul Volcker, and by the group chairman of the Hongkong Bank, Sir William Purves, said unconditional renewal would serve both US and Hongkong interests.



Clinton's MFN dilemma