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TRADE OFFICIAL SAYS CHINA DESERVES FAVORED STATUS

China deserves most-favored-nation trading status, despite U.S. anger over China's theft of intellectual property, widespread weapons sales by Beijing and the killings in Tiananmen Square two years ago, U.S. Trade Representative Carla Hills said Friday.

She scored China for what she called that country's "theft of intellectual property" - or use of patented ideas - but said any attempt to strip China of most-favored-nation trading status would only hurt the United States, without bringing reforms in China."And then we look at our disappointment over Tiananmen Square, with the weapons that they sell, we totally disapprove," she said. "We are very, very irritated with China right now and for some very good reasons."

But U.S. traders and investors stand to lose $10 billion annually if China loses most-favored-nation status, while investors from countries like Japan and France would step in to take over their place, Hills argued.

"Are there other levers to pull without shooting ourselves?" she asked.

On June 4, the second anniversary of the massacre of pro-reform demonstrators in Beijing, Senate Democratic leader George Mitchell, D-Maine, proposed a measure that would renew MFN status for China only if Beijing met certain human rights benchmarks.

Some 100 countries have the status, which allows them to sell goods to the United States at the lowest tariff level.

Asked if she would take over the position of attorney general, which Richard Thornburg is leaving, Hills responded: "I have no intentions of moving from this position so long as my service here pleases the president."

In a wide-ranging press conference, the trade representative declined to comment on speculation that the United States would set up a separate trade agreement with Boris Yeltsin when he comes to Washington next week.

"I really can't comment because I don't know what's going to transpire in the future. It's an evolving situation," she said.