THE current debate in Washington over the merits of various bills sanctioning China for human rights violations must seem painfully arcane to China's pro-democracy activists - including the 200-odd Chinese students who defied government threats of "severe punishment" and gathered at Beijing University to commemorate the second anniversary of China's military crackdown in Tiananmen Square on June 4.In Washington, President Bush marked the second anniversary of the Beijing massacre by lobbying influential senators to renew China's most-favored-nation (MFN) trading status without attaching any human-rights conditions. Meanwhile, China's major trading partners, which had responded to the June 1989 crackdown by suspending preferential credits, technology transfer, and other benefits, have gradually restored normal economic relations with China. It is not too late to change course. In the coming weeks, key debates - both in Washington and at the annual summit of the Group of Seven (G-7) major industrial nations - will provide an opportunity to hold forth economic inducements for China to make concrete progress on human rights. The case for reversing the trend toward business-as-usual is compelling. Human-rights conditions in China, far from improving, have continued the downward slide begun with the 1989 massacre. Despite the release of a few prominent protesters, unknown activists continue to receive sentences, following secret trials, that are harsher than any of those known to the outside world. Individuals involved in the 1989 democracy movement are being sent to labor camps without even the semblance of procedural rights. In addition, China has been using prisoners undergoing "reform through labor," including those convicted of "counterrevolution," to enrich its foreign exchange coffers by producing export goods. The chief arguments against the application of meaningful sanctions are not persuasive. Consider the claim - most prominently associated with the Bush administration - that such measures can have no positive effect on China's behavior. The evidence, quite clearly, is to the contrary. The only positive actions the Chinese government has taken on human rights since Tiananmen have come in the face of key sanctions decisions, as when Beijing released more than 200 prisoners during last year's MFN debate, and when it allowed physicist Fang Lizhi and his wife to leave China last June as the G-7 prepared to evaluate its China sanctions policy. This year, two prominent democracy leaders were released as the annual MFN debate began anew. These various releases may seem like cosmetic gestures, but they make clear that China is prepared to respond constructively to avoid threatened sanctions. In the US, Congress is now in an ideal position to promote improvements in China by attaching human-rights conditions to renewal of China's MFN status, which represents $15 billion of annual sales for a country with foreign exchange reserves totaling about $28 billion. Congress should wield the MFN weapon carefully in a way that neither weakens leverage by cutting off trade privileges immediately, nor attaches conditions for renewal that are so general as to make them impossible to implement. Instead, renewal of MFN should be made subject to highly specific conditions. China should, for example, be required to unconditionally release all those on a list of individuals known to have been imprisoned for nonviolent political activities, and human-rights organizations should be allowed to verify their well-being. Congress should also require meaningful assurances that China has stopped using prison labor to produce products exported abroad. Another condition might well be permission for specific Chinese nationals to leave China to take up overseas invitations. While the US should play a leadership role in renewing international pressure on China, its efforts will be most effective if taken in concert with other major countries and institutions. China is a past master at "playing the barbarians off against the barbarians." This phenomenon was evident when Japan took the lead in resuming business with China, prompting other countries to follow suit for fear that the Japanese would corner the market. It is thus most crucial that US action be coordinated with China's largest trading partner and its second-largest foreign investor. Like MFN for the US, Japan's extensive subsidized financing program for major construction, investment, and export projects is a powerful tool in the effort to effect human-rights improvements. In addition to developing an appropriate set of conditions for the renewal of MFN treatment, Congress should urge the administration to seek the commitment of Japan and the other G-7 countries to use their economic leverage in a concerted manner to help bring about change in China.