The United States and China yesterday signed a long-awaited trade agreement in Peking, which if ratified by Congress would grant China most-favored-nation status.
The most significant impact of the agreement would be to grant China the lower tariff rates applicable to most other U.S. trading partners.
Commerce Department officials estimated that if the agreement is ratified, the total two-way trade between the two countries - estimated at $1.1 billion this year - could double next year and run to about $5 billion in 1985. At that time, the United States would have a favorable balance of about $2 billion.
Commerce Secretary Juanita Kreps called the signing of the agreement a major step in the rapid normalization of relations between the two countries.
American Ambassador Leonard Woodcock and Chinese Foreign Trade Minister Li Qiang signed the formal papers - which already had been initialed May 14 by Kreps and Li Qiang - in the Great Hall of the People on Tienanmen Square.
Under terms of the 1974 Foreign Trade Act, the agreement must be approved by both houses of Congress; approval is expected.
Washington experts said that tariff duties on the top 10 Chinese exports to the United States, now averaging 24 percent, would drop to about 5.5 percent under the most-favored-nation status.
Government officials said they assumed President Carter would quickly submit the treaty to Congress for its approval, along with an executive finding that China qualifies for most-favored-nation status under the Jackson-Vanik amendment to the 1974 Trade Act. That amendment prohibited granting most-favored-nation status to socialist countries with restrictive emigration processes.
The administration has not yet indicated whether it plans to move to grant most-favored-nation status to the Soviet Union at the same time. The question of whether to proceed with the Chinese trade agreement independent of the Soviet situation has caused deep divisions inside the administration, according to informed sources.
Some officials, including Secretary of State Vance, are known to feel that it would be a grave diplomatic error to grant trade concessions to the Chinese that are withheld from the Soviets.
An effort to grant the Soviets a "waiver" to the Jackson-Vanik amendment in recognition of recent liberalization of emigration restrictions could provoke a sharp flight in Congress.Indicative of the problem is the fact that Rep. Charles A. Vanik (D-Ohio) faovrs a waiver for the Soviets, while Sen. Henry M. Jackson (D-Wash.) opposes one.
The trade treaty with China is the most significant step yet taken in a dramatic process that began on Jan. 1, 1979, when the two countries re-established full diplomatic ties after a 30-year break.
Since then, Treasury Secretary W. Michael Blumenthal visited Peking for ceremonies that reopened the U.S. Embassy, and initialed an agreement on U.S. property claims against China, and Chinese counterclaims on assets frozen in the United States.
The claims-assets deal, a critical prelude to the trade treaty, was later signed by Kreps in China. Under that arrangement, the Chinese are to pay $80.5 million to liquidate all earlier claims.
Despite expectations for a quick jump in trade between the two countries, some of the euphoria about longer range prospects has evaporated in recent months, as the Chinese cut back their modernization goals to more realistic proportions. But government officials and private businessmen nonetheless envision a very substantial trade volume between China and the United States and other Western countries.
Much depends on China's ability to absorb imported technology, and a willingness by rich Western countries to lend and on China's willingness to borrow large amounts of money.
In recent years, the major U.S. exports to China have been agricultural products such as wheat, corn, and cotton. There also have been some sales of manufactured goods, including oil drilling equipment. The Chinese exports have been concentrated in such things as white cotton shirting and various other textiles, tin, feathers, fireworks, antiques and carpets.
But under the impetus of the trade agreement, the mix could change. China has enormous resources of raw materials such as manganese, nickel, and zinc, and in addition shows a capacity and skill for light industry. During Blumenthal's visit, he pointed out to the Chinese the potential for exports of bicycles.
Commerce Department officials yesterday cited the additional important potential sources of U.S. export sales: hotel construction, iron ore development, non-ferrous metals, petroleum, water transport, electric power, coal, transportation equipment including aircraft and helicopters, communications equipment, and other machinery.
Both countries agreed to help private businesses operate including assistance in establishing business offices, although the Chinese have a severe shortage of office space and hotel accommodations.
One sticking point in the negotiations has been Chinese resistance to a separate agreement limiting textile exports to the United States by specific quotas. When China refused to sign a textile agreement, the United States applied a quota unilaterally. Some congressmen have threatened to try to block the treaty unless the Chinese agree to such limits.
Apparently, the Chinese concluded that for now, it was more important to get most-favored-nation status that lowers tariffs on all goods including textiles. For example, the existing 17 percent duty on white cotton shirts will drop to 9,3 percent duty once the trade treaty goes into effect.
It is possible that the textile issue will be a subject of discussion when the Chinese minister of finance visits Washington next week for additional talks on a wide rantge of matters with Blumenthal. CAPTION: Picture, U.S. Ambassador Leonard Woodcock shakes hands with China's Li Qiang after singing the trade agreement. Xinhua via United Press International