PERSPECTIVE ON THE SOVIET UNION : Let Reforms Take Hold Before Aid Flows : A study of the Soviet economy will help, but cautious guidelines for Western aid can already be drawn.

Western governments are justified in considering whether they can encourage far-reaching economic liberalization in the Soviet Union. The dominant impetus for reform will have to come from within the Soviet Union itself but, at least at the margins, the West may have a useful role to play.

What that role should be is a point of contention, however. Last week’s economic summit in Houston revealed fundamental disagreements among the industrial democracies about how to aid the Soviet Union. West Germany is eager to move ahead promptly with large-scale monetary assistance, in no small part to obtain Soviet acceptance of a reunited Germany within the Atlantic Alliance. Bonn has already proposed $15 billion in aid, with more than $3 billion to come almost immediately.

The other two leading economic powers--the United States and Japan--have been far more cautious. The Bush Administration is reluctant to provide any financial assistance until the Soviets adopt genuine market reforms and cut their military budget. President Bush has suggested that instead of sending money, Western countries should simply provide technical specialists to offer advice on how to set up a private banking system, a stock market and other institutions. The Japanese also are wary of supplying aid before reforms are implemented, an are reluctant to establish closer economic ties at all unless the Soviet Union agrees to give back the four northern Japanese islands that it annexed in 1945.

Having failed to reach a consensus on the matter, the assembled leaders agreed merely to sponsor a study of Soviet economic needs, while allowing individual Western countries, especially West Germany and France, to offer financial aid to Moscow on a bilateral basis. The proposed study is to be carried out by the International Monetary Fund, the World Bank and the Organization for Economic Cooperation and Development, in conjunction with the European Community, and is to be released at the end of the year. A separate group under the European Community’s auspices has already embarked on a study of the Soviet economy, which is scheduled to be completed by October. While both studies may provide some useful details, it is already possible to set forth some tentative guidelines for a collective Western economic strategy vis-a-vis the Soviet Union:

--The cautious approach espoused by the American and Japanese governments makes sense. The experience with Poland in the 1970s, when large infusions of Western aid induced the Polish government to avoid much-needed reforms, is worth bearing in mind. The unreformed Polish economy could not properly absorb imports of Western technology and the country was soon mired in economic decline as well as burdened with a huge foreign debt. That pattern could repeat itself in the Soviet Union if Western aid is not carefully timed and targeted. Already, imported Western machinery often sits rusting in crates after arriving in the Soviet Union.

--Despite the need for caution, the Bush Administration is wise to let the West German and French governments press ahead with large-scale financial credits. Both governments have strong political motivations to provide the aid and any heavy-handed American attempt to discourage them from doing so would be futile and counterproductive. What the United States might do, however, is to consult closely with the West Germans and the French to ensure that the assistance is targeted either to the fledgling private sector or to the decrepit Soviet transportation network.

--For some time to come, the bulk of Western aid to countries outside the developing world should still be directed to East European states such as Poland, Hungary and Czechoslovakia. Progress toward democratic systems and free-market economies is far greater in these countries than it is in the Soviet Union.

--Political issues such as Japan’s desire to regain the northern islands and the American demand for a reduction in Soviet military aid to Cuba are legitimate considerations. But these issues are best dealt with primarily behind the scenes, where a change of Soviet policy will not be as easily construed as a humiliating backdown.

--In the near term, the Bush Administration’s proposal to send technical advisers is a sound one, particularly if it includes specialists who can devise a pool of basic data about the Soviet economy. The lack of reliable statistics has been a great impediment to economic reform. In addition, it would be useful to provide Western technicians who can assist Soviet military factories in their conversion to civilian production.

If genuine market-oriented reforms do take hold, then collective Western assistance might then be appropriate. Such assistance, however, should be directed almost exclusively to the private sector, including cooperatives and joint ventures.

The IMF and the European Community are the appropriate channels for collective Western aid. Although the record of the IMF is mixed, it is the only international agency well-suited to deal with countries that are moving toward free-market systems. Moreover, the IMF has considerable experience in Eastern Europe. It will take time, of course, before Moscow is willing to divulge the kinds of information that the IMF would demand. But if Soviet leaders are sincere about wanting to adopt market-oriented reforms, they will almost surely agree to disclose more data than they ever would have in the past. Channeling some aid through the European Community would be a useful complement to the IMF, to avoid the appearance of relying too heavily on any single organization.

A coordinated Western strategy will not greatly ease the process of Soviet economic reform. The outcome of that process will ultimately depend on what the Soviet Union itself can accomplish. But at least Western governments will be able to do what they can to promote greater democracy and a free-market Soviet economy, not to mention a continued easing of East-West relations.