Libya (search) could benefit from plans to scrap its weapons of mass destruction program, even while the Bush administration continues to list the country as a supporter of terrorism, the State Department said Tuesday.

Spokesman Richard Boucher (search) said that Libyans will meet with U.S. and British officials on Friday in London on "how to move ahead" toward improved relations. Part of that could include the lifting of some restrictions on commerce between the nations.

"We've seen a couple of weeks of action on the removal and verification," Boucher said. "It's appropriate to have a political dialogue on what lies ahead."

"The situation with Libya has fundamentally changed."

The United States has been working with the Arab nation on dismantling its nuclear and missile programs, including receiving thousands of pounds of parts for storage and conversion. Last month, a U.S. cargo plane carrying 55,000 pounds of nuclear and missile parts arrived in Tennessee from Libya.

"As the Libyan government takes these essential steps and demonstrates its seriousness, good faith will be returned," Boucher said.

In December, Muammar al-Qaddafi (search) said his country would seek to end development of nuclear and other weapons of mass destruction. In return, he is seeking the favors that the Bush administration has offered to other nations helping fight the war on terror.

Since the announcement, U.S. officials have met several times with the Libyan leader, who has delivered documents about the nation's nuclear program and ordered the demolition of chemical munititions.

"The world can see that Col. Qaddafi is keeping his commitment," White House spokesman Scott McClellan said last week. "As they take these essential steps and demonstrate its seriousness, its good faith will be returned and Libya can regain a secure and respected place among the nations."

However, McClellan said the shipments were "only the beginning of the elimination of Libya's weapons."

Libya, one of seven nations branded by the State Department as a state sponsor of terrorism (search), is seeking to get out from under the burden associated with the sanctions that go along with such a designation.

Boucher said that U.S. and British experts meeting with Libyan delegation in London will schedule another onsite survey and the delivery of more weapons parts. He added that as Libya cooperates, some steps toward more normal relations can be taken even before the designation is lifted.

"I think the United States has indicated that we do have flexibility as Libya moves forward, that we're able to move forward on some of the issues that Libya might be concerned about. So we'll look at the various aspects of our policy," Boucher said.

He also suggested that other countries on the list may want to learn the lesson from Libya's cooperation.

"Others should learn from that example, that they get more for their people and more for their nation and more for their security by living in harmony with other countries rather than developing these kinds of threats," he said.

We've always made clear, I've always made clear from this podium that our goal is not to keep people on the list, but rather to take them off ... We've made clear to those countries over various discussions what they need to do, and we've made clear that as countries do take those steps to end their relationship with terrorism that we would be prepared to take countries off the list."

The Associated Press contributed to this report.