A senior US trade official said that he is optimistic about Sino-US trade relations but also realistic about the challenges they face.

 "Our economies are growing increasingly interdependent every day. We meet more frequently with our Chinese counterparts and I believe that both sides understand the importance of making this relationship work," Deputy US Trade Representative Karan Bhatia told scholars and students at the Shanghai Institute of Foreign Trade yesterday.

Bhatia is scheduled to go to Beijing today for talks with his Chinese counterparts ahead of the US-China Joint Commission on Commerce and Trade (JCCT) meeting to be held in Washington DC early next month.

Bhatia said China deserves credit for making substantial reforms as part of its WTO commitments; and that US policy must be reoriented to deal with China.

"As mature trading partners, there is a long list of important issues on which we believe the US and Chinese governments need to make more progress," he said.

Market access, the protection of intellectual property rights, subsidies and transparency are some of the main issues, he said.

Bhatia said the Bush administration is committed to using co-operative bilateral mechanisms such as the JCCT to the fullest extent possible to resolve bilateral trade and economic issues. But he believes it is natural for the two countries to have a large number of issues on which they have differences.

Those, according to Bhatia, need to be addressed through such means as WTO dispute settlement proceedings. He refused to name specific issues in which the United States thinks it has a strong case at the global trade body.

Bhatia dismissed worries that a more vigorous enforcement effort would upset the bilateral relationship, or even lead to a trade war.

"My answer is no. Trade wars arise when you don't have dispute settlement mechanisms," he said.

Bhatia also warned about the threat of protectionism in both countries.

"In the US, there are those on both sides of the political spectrum who seek to close down the US market to China," he said.

In recent months, legislation has been proposed in the United States  such as imposing high tariffs on Chinese imports unless Beijing revalued its currency  that could have a serious adverse effect on Sino-US trade and investment.

In China, there are numerous voices calling for new policies and regulations to restrict market access to foreign firms, particularly in the services sector. There are also growing calls to provide protection and other forms of government support to domestic companies, said Bhatia.

He said the United States looks forward to overcoming new challenges and creating even stronger commercial and political ties in the years to come.

"If this is to be the Pacific century, both China and the United State will play important roles," he said.