By Peter Humphrey

HONG KONG, Jan 22 (Reuter) - A dispute over the future of civil liberties in Hong Kong moved into the diplomatic realm with Britain and the United States warning China to respect a treaty pledge to preserve basic freedoms.

The quarrel flared after a Beijing-controlled panel last Sunday proposed scrapping Hong Kong laws on civil liberties and elections, including part of its Bill of Rights, when China takes over Britain's last important colony five months from now.

London and Washington issued stern warnings to Beijing, while China declared it was an internal affair and Hong Kong's future leader attempted to dampen the dispute.

The controversy is the latest over Chinese plans to scrap liberal political arrangements that Britain has introduced in Hong Kong in recent years.

China is also moving to install an appointed provisional legislature in place of the elected Legislative Council on July 1, and to block a lenient British law that would exclude China-style crackdowns on peaceful dissent and protests.

China's opponents say these steps fly in the face of commitments on allowing Hong Kong to keep its freedoms after it becomes a Special Administrative Region (SAR) of China.

The United States said on Tuesday it was deeply concerned about attempts to water down civil liberties in Hong Kong, and it called for reconsideration.

``We are deeply concerned over any attempt to weaken civil liberties and basic freedoms in Hong Kong,'' State Department spokesman Nicholas Burns said.

Hong Kong's post-colonial leader, Tung Chee-hwa, who takes over from Governor Chris Patten on July 1, called for calm.

``I think we are being too dramatic,'' Tung told Hong Kong radio. ``It is a very complex issue,'' he said, adding that he would make a fuller statement on the affair on Thursday.

Britain's minister for Hong Kong, Jeremy Hanley, summoned the Chinese ambassador in London to protest. A Foreign Office spokesman said the proposals were without justification.

He said the Bill of Rights was consistent both with the 1984 Sino-British Joint Declaration, which is the treaty governing Hong Kong's handover, and with the Basic Law, the territory's post-handover constitution promulgated by China.

The issue was being hotly debated in Hong Kong newspapers, where some analysts predict a backlash if China rolls back basic freedoms in the capitalist territory of 6.3 million people.

``The Preparatory Committee's decision, if carried through, will certainly add to the number of political trials that greet the birth of the SAR,'' wrote political analyst C.K. Lau in the South China Morning Post.

``Should the outcome of those trials be politically unpopular, more and not fewer demonstrations and rallies are likely. This will be bad for Hong Kong's international image at a critical time.''