As the visit to Beijing by US Commerce Secretary Donald Evans draws to a close, both sides will be able to claim some measure of victory. Mr Evans won a pledge to reduce the US$124 billion trade deficit that the US runs with the mainland and can tell those at home that he insisted on less interference by Beijing in the market. The US, for its part, promised to enter twice-yearly talks that could pave the way for China to be designated a market economy, an important distinction if the mainland is to escape the most punitive trade sanctions available to the US under World Trade Organisation rules in cases where there are disputes. In a US presidential election season, (and considering Mr Evans' heated rhetoric about unfair Chinese trade practices over the past year) these are signs of conciliation and progress. The next big test will come early next year, when global quotas on textile exports end. The mainland, with its low labour costs, will benefit greatly - and at the expense of the US as well as a number of other competitors. American consumers stand to gain from lower prices, but manufacturers fear the prospect of a flood of cheap clothing and fabric. The US has signalled it will not lobby to extend the quota system, but it has also not ruled out taking other steps to offset the changes. As things stand, there are a number of options open to the US, including tariffs to counter the effect of a sudden influx of imports from China, and sanctions if it is determined that mainland companies are selling at unfair prices. In the latter case, China's current status as a non-market economy is crucial, as it allows the US and European Union to compare its costs with those in, say, India, and makes it difficult for industries to prove that they receive no state subsidies. The 'anti-surge' rules and the non-market label are both elements of the agreement China signed when it acceded to the WTO in 2001. As the recent anti-dumping cases against the mainland and the potential for US textile sanctions show, they provide loopholes that can be tough for China, depending on how the rules are applied. As much as Mr Evans likes to proclaim otherwise, the US does have some discretion when it comes to imposing penalties under these provisions. Granted, the US is not obliged to enter into talks about China's market-economy status, as the WTO agreement is in effect for at least the next decade. Its decision to do so says much about the growing importance of the trade relationship and bilateral ties generally - as well as China's success in lobbying other trade partners on the matter. New Zealand and Thailand have already decided to treat the mainland as a market economy, while the European Union will make a preliminary decision by the end of this month. On the facts alone, both sides have strong cases to make. Many mainland industries still rely heavily on state direction and subsidies, but certain sectors - such as wooden furniture manufacturing, which is the latest industry targeted by American anti-dumping measures - are largely privatised. Because of the transitional nature of China's economy, any decision is bound to be both right and wrong, depending on which industry is being looked at. Mr Evans does not hold out any hope of an immediate change in market status for China, so the best hope for the immediate future might be some type of compromise - perhaps the designation of a few selected industries as 'market-oriented'. The election season will have passed by the time textile quotas are dissolved in January, but there is no telling how beholden a second Bush or a Kerry administration will be to influential protectionist elements in American industry. In the end, real progress in the Sino-US trade relationship will be evident when questions such as these are answered on the basis of the economic merits rather than prevailing political winds.