President George W. Bush said Thursday he will lift key trade sanctions against North Korea and remove it from the U.S. terrorism blacklist, a remarkable turnaround in policy toward the communist regime he once branded as part of an ""axis of evil.""

The announcement came after North Korea handed over a long-awaited accounting of its nuclear work to Chinese officials on Thursday, fulfilling a key step in the denuclearization process.

Bush said the move was ""a step closer in the right direction"" although he made clear the United States remains suspicious about the communist regime in Pyongyang.

"Today is a postive day, it"s a positive step forward. There"s more work to be done and we"ve got the process in place to get it done in a verifiable way," Bush said in the White House Rose Garden.

"The United States has no illusions about the regime,"" Bush said. Specifically, Bush said the U.S. would erase trade sanctions under the Trading With the Enemy Act, and notify Congress that, in 45 days, it intends to take North Korea off the State Department list of nations that sponsor terrorism.

North Korea"s declaration falls short of what the administration once sought, and the White House already has come under criticism from some conservatives. Bush said there was still a long way to go.

(From news reports)