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HARMING TRADE TIES WITH CHINA WOULD BE TRULY FOOLHARDY FOR U.S.

ALTHOUGH CHINA HAS WARNED Washington not to "smash its own feet with a rock," sanctions will be announced next week.

The Clinton administration feels it must do something about Chinese copyright piracy, which costs the U.S. film, software and music industries anywhere from $1.5 billion to $2.3 billion in lost earnings every year.Relations will, of course, plummet, aggravating already tense disputes about human rights, China's threats against Taiwan and its export of nuclear components to Pakistan. But Beijing will also get the message that it has to live up to the copyright agreement it signed in March 1995.

It clearly has not. China's announcement that it had closed down seven factories producing pirated compact disks was offset by this week's discovery of many more, previously unknown, plants reproducing American software, videos and music.

The International Federation of the Phonographic Industry, for example, says 88 percent of the 40 million CDs that come out of China are illegal copies.

Every dip in Sino-American relations is bad for business. Last month, Boeing complained of losing an order for 33 jetliners because of the standoff with China over Taiwan. The deal was won by the rival Airbus Industrie consortium of French, British, Spanish and German companies.

Even so, Boeing still has a 70 percent share of the Chinese aviation market, compared to 60 percent worldwide. This illustrates the importance of American technology to China's modernization drive as much as it illustrates China's value as a customer to U.S. manufacturers.

Simply put, both sides need each other too much to engage in a full-blown trade war. And whatever Chinese feathers are ruffled by copyright sanctions will be smoothed by Washington's renewal of China's most favored nation trading status.

Revoking MFN would raise tariffs on Chinese-made products from an average 6-8 percent to 40-50 percent, rates established in the 1930s under the highly protectionist Smoot-Hawley law. Chinese footwear, toys and clothes would become prohibitively expensive, forcing U.S. importers to buy elsewhere, and the Chinese would, of course, retaliate in kind.

China currently sells three times more goods to the United States than it buys, another source of friction with Washington. But the $34 billion trade deficit will be quickly erased - even reversed - if American firms capture a share of China's infrastructure buying over the next 10 years.

The World Bank estimates that China will spend $750 billion in the next decade on aircraft, power generation, telecommunications, computers and other high-tech imports. To deny American busi-ness-men a crack at that market is something no politician, Democrat or Republican, would want to be held responsible for.