KALIMPONG, India, (Dec. 29) IPS - Situated close to the high Himalayan passes straddling India's northeastern border with China, this quaint town is waiting for the trade caravans to start trundling again.

Shut off after a short but bloody conflict between the world's two most populous nations three decades ago, the cross border trade looks set to be revived with both New Delhi and Beijing fast cosying up to each other.

Kalimpong was once one of the two hubs of the thriving centuries-old commerce between India and Tibet which took mule pack trains across the frozen passes of Nathu La and Jelep La, more than 4,500 meters above sea level.

Besides the traditional barter of sugar, salt and spices for gold, silver and carpets, the trade also carried brought American cars and British motorcycles across the passes to China.

It drew entrepreneurs from distant parts of India who set up shops and warehouses at Yatung, a trading post deep inside Tibet.

But the 1962 Sino-Indian war forced them to abandon their goods and property in Tibet and flee to Kalimpong and Gangtok where they now run small businesses as they await for the border trade to reopen.

Still clinging to their Bank of China pass books issued by the Yatung branch of the Bank, they hope some day to recover their deposits if not compensation for the goods they lost.

Their hopes have been revived by the visit of Chinese President Jiang Zemin to India last month. The first Chinese head of state to travel to India, Jiang signed a landmark confidence building agreement with his hosts which commits both sides to slash troop deployments along their disputed border.

However, the Chinese stopped short of recognizing the annexation of Sikkim by India in 1975, without which Indian officials say it will not be easy to restart the cross-border trade.

Beijing stands to gain by transporting goods across India. At present China uses transit facilities offered by Burma for its exports. But with India's eastern port of Calcutta a mere 600 km from Tibet, the revival of the cross-border trade at Nathu La will dramatically slash the distance Chinese goods have to travel. Calcutta is 500 km south of Kalimpong.

If a border settlement is reached, the Chinese would be keen to use Calcutta port once again for the export of their goods to third countries, say government trade officials here.

The local traders think that if the passes were reopened, it could also spell prosperity for the vast hinterland served by Calcutta port, including the landlocked Himalayan kingdoms of Nepal and Bhutan, and the whole of Tibet.

They recall the days when China actively promoted the border trade with a Chinese Resident Commissioner stationed in Kalimpong and telegraph lines all the way to Lhasa.

The telegraph lines and the trade offices in Kalimpong and Yatung were set up by India's colonial British rulers after signing a trade accord with Tibet a century ago.

It was this treaty which formed the basis of the subsequent trade agreement between independent India and China in 1954.

"The trade was highly profitable and all payments were made in silver coins or ingots," remembers Hariprasad Gupta, an old trader in Kalimpong.

In return, Indian traders supplied flour, sugar, tea, kerosene, cotton and cigarettes. Indian traders could travel as far as Gyantse in Tibet using passes issued at Kalimpong. They would return with musk, wool, carpets and even gold.

Octogenarian Lal Chand, now settled in Gangtok recalls how as young man he had hitch-hiked all the way to Lhasa and was surprised at the warm welcome he got in the Forbidden City even though he did not have proper travel papers.

Chand remembers that in the 1950s, some Indian firms even began exporting American cars and British motorcycles to China. "Dodges, Chevrolets and Enfield motorcycles would be taken over in a knocked own condition and re-assembled in workshops on the other side of the border," he says.

The traders in Kalimpong also recall how just before the 1962 border conflict, there was a sudden surge in the movement of goods and they were paid handsomely to transport large shipments of rice and other goods from Calcutta port.

It was only later that they realized that the Chinese were using the mule-pack route to stock up for the approaching war.