Summit Agrees to Soviet Aid Study : Diplomacy: Seven nations will send a team to assess Moscow’s needs and help it build a market economy. Farm subsidy issue unresolved.

The United States and its major allies, seeking common ground on the issue of aid to the Soviet Union, agreed Tuesday to send an international team of experts to study that nation’s failing economy and find ways to help Soviet President Mikhail S. Gorbachev move toward a free market system.

At the same time, U.S. officials made it clear that, while President Bush continues to reject direct financial aid to Moscow, the final communique to be issued at the conclusion of the economic summit today will pose no obstacle to West German plans to give such assistance.

In effect, this resolution of the issue fits the pattern of this summit: finding areas of broad agreement while allowing individual nations to go their own way on specific points.

“The President has said at almost every opportunity he supports President Gorbachev in his reform efforts. We want to be of help. Other countries want to be of help,” said Treasury Secretary Nicholas F. Brady. “They may do it in different ways.”

The announcement on aid to Moscow came as negotiators for the seven summit participants met late into the evening in a quest for compromise language on the question of eliminating farm subsidies, an issue that has created an impasse in the current global trade-liberalization talks known as the Uruguay Round.

The United States wants the seven leaders to call for a speedup in efforts to complete the talks, but serious divisions exist over how far the summit leaders should go in ordering farm subsidies reduced. U.S. officials said President Bush intended to hold out for firm language on the issue and, as negotiations headed into the wee hours of this morning, they expressed optimism about the chances for success.

The U.S. effort had received a modest setback Tuesday when West German Chancellor Helmut Kohl, who on Monday had backed Washington’s position on the issue, bent in the face of heavy pressure from European Community President Jacques Delors. But West German officials said Kohl still intends to press for a compromise that would satisfy Washington.

The summit leaders also agreed Tuesday to explore providing World Bank loans to help China reform its economy. But they denied that in considering such financial aid, they are using a different standard to judge China and the Soviet Union.

The Soviet Union is not a member of the World Bank.

The summit nations, which at last year’s annual meeting in Paris supported World Bank loans for China but solely for “basic human needs,” declared that in light of “positive developments” in that country, they will explore whether other World Bank loans “would contribute to reform of the Chinese economy, especially loans that would address environmental concerns.”

Aid to China and the Soviet Union, among the most important and controversial issues being debated here, were addressed in a Political Declaration on Securing Democracy that the leaders issued Tuesday. The two topics dominated Tuesday morning’s summit session, with the leaders spending the first half-hour discussing China, the next hour talking about the Soviet Union and the last 1 hour and 15 minutes discussing trade.

The summit leaders ordered their commission on the Soviet economic situation to make its report by year’s end. The panel will include analysts from the World Bank and the International Monetary Fund, as Washington had proposed, as well as representatives from the newly formed European Bank for Reconstruction and Development and the Organization for Economic Cooperation and Development (OECD), which the Europeans had wanted to head their own efforts.

The work will be coordinated by the IMF, consulting closely with the 12-nation European Community, which has authorized its own study of the Soviet economy and is drawing on the resources of the European Bank and the OECD in that endeavor.

The four European members of the economic summit--Britain, France, West Germany and Italy--also are members of the European Community. Besides the United States, Japan and Canada are the other participants in this week’s summit.

Brady said he had no idea what kind of aid to the Soviet Union might be recommended by the economic summit’s study team, but he pointed out that Bush has approved technical assistance to the Soviets while opposing direct financial aid.

A French spokesman said that during Tuesday’s summit discussions, President Francois Mitterrand stressed that it is important that the offering of any aid to the Soviets not be “vexatious.”

Asked what Mitterrand meant, the spokesman said: “We must remember the Soviet Union is a sovereign country that could easily be humiliated. And that kind of humiliation must be avoided.”

Both Mitterrand and British Prime Minister Margaret Thatcher insisted that the European Bank be included in the study of the Soviet economy, fearing that Moscow might balk at the idea of being subjected to scrutiny solely by the World Bank and the IMF, which normally devote themselves to untangling the economies of small Third World debtor nations. The Soviet Union is a member of the European Bank.

Although Bush went along with including the European Bank and the OECD, sources said the United States earlier had sought to limit the study team to representatives of the IMF and the World Bank because Washington has more influence over those institutions.

In their political declaration, the summit leaders welcomed the Soviet Union’s moves toward a democratic political system and toward reforming its economy along free-market lines, and committed themselves to working with that nation “to assist its efforts to create an open society, a pluralistic democracy and a market-oriented economy.”

“Such changes will enable the Soviet Union to fulfill its responsibilities in the community of nations founded on these principles,” they declared. “We are heartened by indications that a constructive dialogue is under way between the Soviet government and the Baltic states, and we urge all sides to continue this dialogue in a democratic spirit.”

The declaration, which said that “Europe is at the dawn of a new era,” also hailed the “profound and historic changes sweeping the Continent,” and said the London Declaration on a Transformed North Atlantic alliance issued last week at the 16-nation North Atlantic Treaty Organization summit in London provides a new basis for cooperation among former adversaries in building a stable, secure and peaceful Europe.

On China, the declaration cited recent positive developments in that nation but suggested that prospects for closer cooperation would be improved if Beijing would renew political and economic reform, particularly in the field of human rights. And the summit leaders agreed to maintain sanctions put into place at last year’s summit, as modified in response to developments over the past year.

Democrats and some Republicans in Congress have accused the Bush Administration of favoring China over the Soviet Union in extending aid to the former even though it has remained a repressive regime while the Soviets have moved toward democracy and freedom.

Rejecting that criticism at a press conference where he discussed the summit’s declaration, Secretary of State James A. Baker III noted that the summit nations still have sanctions against China and said, “The idea that somehow we are treating them (China) more liberally than we are the Soviet Union, I think, just doesn’t wash.

“From the standpoint purely of the United States,” Baker added, “we have laws on the books that constrain what we can and cannot do insofar as the Soviet Union is concerned and, indeed, what our private sector can and cannot do.”

Moreover, he said, the United States should “not lose sight of the fact that . . . there are no nuclear missiles targeted on the United States by China, as far as we know. So there is a different situation. . . .”

Some of the Administration’s critics said Tuesday that they felt the language of the summit resolution on China was not as damaging to their position as they had expected.

Instead of opening the way immediately for new loans to China, they said, the allies agreed to preserve for now the current policy of allowing loans only for “basic human needs.” At the same time, the summit’s communique clearly laid the groundwork for the World Bank to begin making other kinds of loans to China.

“It’s obviously a careful compromise,” said former U.S. Ambassador to China Winston Lord, who has argued in the past that the Bush Administration was too eager to ease its sanctions against China. “I don’t think we ought to be loosening up now, and I don’t think it does loosen up too much. We’ll have to see how it plays out in practice. Now, if this turns out to be a cover for everyone rushing ahead, I think that would be unfortunate.”

So far, Japan is the one nation here that has declared itself. For several days, Japanese officials, including Prime Minister Toshiki Kaifu, have been saying that Japan will go forward with its own loans, no matter what the allies decide.

Rep. Nancy Pelosi (D-San Francisco) criticized that position Tuesday.

“Japan is taking a short-term, unenlightened view of China for short-term gain,” Pelosi said.

Like Lord, Pelosi also said she viewed the summit communique as something of a compromise. “The doors were not just flung open for loans to China,” she said. “But if they just use this as an excuse for new loans, I can see further battles ahead in Congress.”

Times staff writers Art Pine and David Lauter in Houston and Jim Mann in Washington contributed to this story.