A COMMITTEE under China's State Council has been set up to draft a proposal for comprehensive tariff reductions in preparation for the country's re-entry to the General Agreement on Tariffs and Trade (GATT). Gu Yongjiang, leader of China's GATT negotiating team, said the country's return to the world trade body would exert a positive impact on Hong Kong's economy. Long Yongtu, secretary-general of the Chinese negotiating team, said the lowering of tariffs would result in the competitiveness of some Chinese products being threatened by foreign imports. ''We will have to make a decision as to what products to protect and what products to sacrifice,'' said Mr Long, who is also the head of the Department of International Trade and Economic Relations under the Ministry of Foreign Trade and Economic Co-operation. He stressed that China would under no circumstances give up a whole industry, such as machine building or petrochemicals. ''There will be particular products in different industries which should be protected and which need not be protected. Every government ministry would be asked to make a recommendation,'' he said. Mr Long said the process was still going on because it was complicated. But he said the advantages and disadvantages of GATT membership should not solely be judged on how many products were sacrificed. ''The most important thing is that the whole process of seeking re-entry to GATT helps speed up our reform in economic system and foreign trade regime,'' he said. It was expected that current import tariffs level would be halved in order for China to qualify for membership to the world trade organisation, said Mr Gu, who is also Vice-Minister of the Foreign Trade and Economic Co-operation Ministry. He told a conference in Hong Kong that China's GATT membership would bring more opportunities for the development of the territory. Trade between the mainland and Hong Kong had seen a consistent and sharp increase, he said. Statistics showed bilateral trade was worth US$58.05 billion last year, up 17 per cent over 1991. Re-exports occupied a significant position in the trade. About 80 per cent of Hong Kong's total exports are from China. A senior US official said yesterday that negotiations with the mainland over key areas such as market access and intellectual property rights had been somewhat frustrated by the Chinese belief that the United States was not staunchly supporting its admission into GATT. The US agreed to support China's application in return for commitments on the bilateral relationship, and feels it has done so. ''China has been less than co-operative responding to questions from the US and Europe about its own trade regime,'' the official said.