PERSPECTIVES ON HOUSTON SUMMIT - Our Strings Can Pull Soviet Union Forward - Europeans have opened the door on aid to Moscow. If Americans don’t walk in soon, we could be locked out.

Although there have been no parades or peace treaties, it is clear that the Cold War is over--and that we have won.

Now, will the reward be an expanding economy, new foreign markets and global stability? Or will the end of 40 years of confrontation bring layoffs, recessions and uncertainty? The answer depends largely on what happens in Houston this week, when the leaders of the Group of Seven industrial democracies meet to set the rules of engagement for the new economic order.

At the economic summit, the victors will address how to help the vanquished join the community of free nations. In the absence of American leadership, West German Chancellor Helmut Kohl and French President Francois Mitterand will step forward to propose an emergency aid package to speed the Soviet Union’s transition from a Marxist command economy to a free market, and from authoritarian rule to democratic pluralism. Kohl has also announced $3 billion in bilateral loans. Canada provided $500 million in credits during President Mikhail S. Gorbachev’s visit in late May. Even British Prime Minister Margaret Thatcher’s government, which is openly skeptical over changes in the Soviet Union, now concedes that it is not a question of whether we assist the Soviets, but when and how.

While President Bush talks about change, our economic competitors are investing their money. Unless we move soon, we could be left in the rear guard or on the sidelines.

What should be the American response? We should start by recognizing our interest in seeing economic reform succeed in the Soviet Union. Only when that nation has moved toward a market economy and democratic values will it step forward as a full partner in the new global economy. Nothing is more exciting than the prospect of a prosperous Soviet market of 289 million consumers eager to buy Western goods. By contrast, nothing is more dangerous than a shaky, bankrupt superpower hiding behind thousands of nuclear weapons.

A package of economic and technical assistance to support economic freedom and democracy in the Soviet Union is the surest path toward the long-term peace we have sought through four decades of Cold War.

Such a package would not include blank checks. Without fundamental reform in the Soviet Union, foreign aid only reinforces existing inefficiencies. Instead--and working with the other industrial powers--we should provide assistance that encourages, reinforces and validates real Soviet change. All Western aid must have strings attached, strings that draw the Soviets forward to responsible international behavior, free markets, reduced military spending and respect for human rights.

While Gorbachev may back away from a head-first plunge into a market economy, viewing a radical reform program as too dangerous or destabilizing to adopt overnight, it is nonetheless essential that the Soviets take at least some measured steps in the free-market direction. Moscow should proceed with monetary reform to rebuild faith in the currency, set up commercial banking institutions to channel savings into new private enterprises, break up large government monopolies and back away from central planning. It should also allow free-market forces to set virtually all prices, controlling only ultra-sensitive products like fuel, rent and food.

Such reforms would create the momentum toward economic freedom. The West should match these actions, step for step, with:

--Loans, food assistance and export credits to relieve short-term dislocations in the Soviet economy.

--Full membership in Western economic and financial organizations.

--Technical assistance, financial support and political-risk insurance for U.S. investors in joint ventures--especially in regions where liberal reformers are in power--to foster a Soviet private sector.

--Preferential tariff rates and relaxed restrictions on non-military high-tech exports as soon as the Soviets enact liberal emigration policies and abandon coercive pressure on the Baltic states.

The unavoidable truth of our time is that communism is dead. The unanswered question is whether it will be replaced by democracy and free enterprise--opening up new markets for our goods and creating new jobs for our workers--or something alien and chaotic, perhaps even a misshapen replay of communism’s past failures.

The Europeans have opened the door. If we do not enter, we could be locked out of new opportunities generated by exports to a reviving Soviet economy. Our leadership in this, the first grand cooperative enterprise of the post-Cold War era, will set the tone for continued U.S. leadership in the decades ahead.

The stakes could not be higher. The threat could not be more real. Fifty years from now, the 1990s will be remembered as the time when America reinvented itself once again, and in so doing led the world into a new era of peace and prosperity. That is, if we have the vision to see the change in the course of history and the courage to adjust our course to meet it.