The new United States trade treaty with the People's Republic of China will not be presented to Congress until the Chinese to a seperate understanding limiting the flow of their textiles here.
Carter Administration officials made that clear yesterday, at the same time expressing their satisfaction with the trade treaty which was initialed Monday by Commerce Secretary Juanita Kreps. They said the treaty opens up a new "framework" for expanded trade relationships.
In addition to the trade treaty, Kreps reached an understanding which will lead to negotiation of an aviation agreement Assistant Secretary of State Julius Katz said in an interview that charter operations "might well begin before the end of the year, if the Chinese are ready to accept them."
Katz also said that although "there is a lot of evidence" that the Chinese leadership has set new and more realistic targets for industrialization, "it would be wrong to swing in the other direction. There is going to be a significant increase in trade."
The textile problem may be settled quickly in conversations now being carried on by Michael B. Smith of Robert Strauss' Office of the Special Trade Representative. But after two ealier and difficult negotiating sessions in Washington and Peking, officials are hesitant to say when the issues will be resolved.
Chinese negotiators have accepted in principle the notion of an Oderly Marketing Agreement (OMA) that will set up two categories of limitations on U.S. imports of their textiles. One will impose "restraint limits" on a number of items: when imports reach a certain level, they must stop.
The other sets "consultation levels": when imports reach such level, then the two countries will discuss what to do about it.
The debate, as yet unsettled, is what goes in which category. The U.S. wants more items placed in the category that requires an automatic cutoff. U.S. industry sources appear to be most concerned about an inundation of cotton and blended fabrics, work gloves, and some apparel items.
Subject to the category restraints the form of OMA being discussed would place no upper dollar limit on the amount of Chinese textile imports, which amounted to about $180 million last year. That amount made the Chinese the 6th largest overseas supplier of textiles to the U.S. behind Hong Kong, Taiwan, Korea, Japan, and India.
Sources said that the Chinese, in their negotiations with the Kreps' team, were "not happy" with the prospect of a limitation on their textile exports, because it is one clearly definable area where they could quickly expand sales and enhance much needed reserves of foreign exchange.
But they have accepted a similar restraint in dealings with Canada, and are in the process of negotiating much the same arrangement with Common Market. Moreover, when the trade treaty becomes a fact, most favored nation status will give them beneficial tariff treatment, whatever the limits are on volume.
Once the trade treaty-the text of which has not yet been made available-is signed by both Governments, it will be submitted to Congress, along with a notification by President Carter that he is waiving the provisions of the Jackson-Vanik amendment, which otherwise would bar MFN status.
The President would say that the conditions spelled out in that amendment relating to non-market (Socialist) economies had been satisfied. Whether or not a similar waiver would be asked, so as to provide MFN status to the Soviet Union, is still to be decided. But the framework for legally conveying MFN status-a trade treaty-has existed since 1972, when a U.S.-U.S.S.R. trade treaty was signed but never became operative.
Katz said that the biggest obstacle that had to be overcome in reaching the trade agreement with China was the Chinese difficulty in dealing with what they considered "overly legalistic" language. Once some of the "verbiage" was trimmed away, Katz said, progress was more rapid.
He said that form the U.S. standpoint, the trade treaty will also give American exporters MFN treatment from the Chinese. As required by the 1974 Trade Act, the treaty also allows the U.S. to deal with sudden surges of imports that might threaten market disruption, sets up a disputes mechanism, provides for patent protection, and ways of facilitating business operations in China.