TEXT: The European Union's 15-year-old embargo on arms exports to China is likely to be lifted by the middle of this year. The Europeans are looking forward to lucrative deals and strengthening of trade with China. The new Chinese leadership sees it as a major boost to its prestige and military ambitions. But the United States strongly opposes sales of European weapons, which could threaten US troops on their missions in Asia. VOA's Jela de Franceschi explores the ramifications of China's growing military buildup in the Far East.

TEXT: At the center of the latest transatlantic discord is Taiwan - the island that has virtually been independent the last fifty years, over Chinese objections. Beijing views it as a renegade province that has to be re-united with the mainland and regularly threatens to use force if the island declares independence. China has several hundred missiles aimed at Taiwan.

This military threat, up to recently, has been offset by U-S protection and by the military capacity of Taiwan itself.

But China has been rapidly modernizing and upgrading its military forces. Its defense budget this year will rise over 12.5 percent to about $30 billion dollars. Analysts say the real numbers are probably much higher.

David Shambaugh is director of the China Policy Program at the George Washington University. He says the balance of power in the Taiwan Strait is clearly moving in Beijing's favor.

/// SHAMBAUGH ACT /// It has shifted in the air force, in the submarine force. It is now shifting in the surface- naval combatant force; it has shifted in the combatant naval air force. It has certainly shifted in the electronic warfare and now in the information warfare. So Taiwan is already in an inferior military position compared to the mainland. /// END ACT ///

Professor Shambaugh says the gap with China is also widening because of Taiwan's declining defense budget and its undue reliance on U.S. military protection in case of a showdown with Beijing.

A new concern for the U.S. and Taiwan is EU's almost certain decision to lift its arms embargo on exports to China.

The United States is resolutely opposed to lifting the ban, which could help China attain advanced military systems from Europe. President Bush voiced his alarm at the recent NATO summit in Brussels.

/// BUSH ACT /// There is deep concern in our country that a transfer of weapons would be a transfer of technology to China, which would change China-Taiwan relations. /// END ACT ///

In the Wall Street Journal, Henry Hyde, the powerful chairman of the House of Representatives' international-relations committee, wrote: EU security policy toward China is on a collision course with America's extensive security interest in Asia.

The U.S. Congress has threatened to retaliate with restrictions on technology transfers to Europe. In turn, Europeans call the 15-year-old embargo an outdated rule and relic of the Cold War. But in an effort to ease U.S. concerns they have promised tough new arms export guidelines.

John Bruton is EU ambassador in Washington.

/// BRUTON ACT /// Many in Europe want to replace the arms embargo -- which only covers certain categories of lethal weapons -- with a much more comprehensive code of sales of arms that would include software and technology not covered by the existing embargo. To put it in place in consultation with the United States in order to achieve much better controls of arms sales that could upset the balance of power in the Far East. /// END ACT ///

It could not be a worse time for Europe to offer China military aid, says David Lampton, director of Chinese Studies at The Nixon Center in Washington. The Taiwan government is considering changes in its constitution that may further separate the island from the mainland. China in turn has just adopted a law allowing its forces to intervene should Taiwan declare independence. That as well as pure miscalculation, says Mr. Lampton, could spark war.

/// LAMPTON ACT ONE /// Many in Taiwan believe China is a paper tiger. Some people in China believe that if it were to attack Taiwan, the United States would not respond. That is probably a grave error. In the United States many people don't take seriously enough China's commitment not to let Taiwan go independent. So there are many opportunities for misjudgment. /// END ACT ///

A US-China confrontation means high-tech weapons sold by European could be used against American troops, says Mr. Lampton. He also suggests a grim nuclear scenario.

/// LAMPTON ACT TWO /// Once a conflict begins, it could escalate uncontrollably. You could have one party trying to prevent it going nuclear but the other responding to the prospect of losing by escalating to the nuclear level. A conflict of two nuclear powers is a situation that has never existed before. In all of the years of the Cold War the Soviet Union and the United States never came into direct conflict. This would be an unparalleled circumstance. /// END ACT ///

China will become a significant military power with or without European arms sales, say analysts. There's no need to hurry the process along.