Drama from Central America; import from China

Central America produced the most dramatic foreign policy news of the past week; China the most important. In Central America the drama came from the forthcoming summit meeting between opposing leaders in El Salvador's long civil war. In China, the Communist Party leadership proposed a sweeping semi-capitalist economic reforms.

The sudden move by El Salvador's tough and enterprising President Jose Napoleon Duarte to hold talks with his chief rebel opponents on Oct. 15 sent several messages.

It indicated that his military situation has probably improved over what it was last spring. It showed he felt strong enough to brook the ire of his right-wing opponents. It gained him further admiration from the neighboring Contadora states, most important, Mexico.

In addition, it almost certainly will aid his already improved standing with the United States Congress. And it may defuse one of the main issues which Walter Mondale obviously intends to use against President Reagan in their foreign policy debate Oct. 21.

But despite this impact, most specialists in Salvadorean affairs do not expect the local summit meeting in the village of La Palma to lead to any immediate breakthrough that would end the long civil war. They believe the most that can be expected at this stage is agreement to meet again at a later date.

Although it predates El Salvador, Barbara Tuchman's 1966 history, ''The Zimmermann Telegram,'' provides an interesting guide to the subject of how to end a war and make peace. It recounts the many sensible - but failed - attempts to end the Franco-Prussian War. In every war, as in every street brawl, this thesis goes, outsiders can often see the elements needed to bring about peaceful settlement. But more than logic is needed to stop the brawlers.

To be blessed with success, a peacemaker must combine: skillful timing, persistence, patient efforts to gain the confidence of both sides, and an ability to make both leaders realistically aware of the extent of future losses and the promise of future gains if they cease hostilities.

In this case, the person trying to cut the Gordian knot is one of the embattled leaders, albeit one with a flair for action. His action may be intended as much to influence future moves of the outside mediators - the four Latin American nations in the Contadora group - as it is to change the perception his rebel opponents have of his government. His ultimate aim remains one of persuading all parties to agree on peace through free elections in El Salvador, not through a truce supervised by a national coalition government.

Meanwhile, China's Deng Xiaoping and his hand-picked economists have proposed a less-headlined but more important change in Peking: a set of semi-capitalist reforms in the largest communist country in the world.

It was a week of triple-headed reform activity from Peking.

First the government announced it would shift some 79 of 149 industry and agricultural sectors from a centrally controlled Stalinist model to a supply-and-demand market economy system next year. Sectors scheduled for liberalization included mainly consumer goods and perishable fruits and vegetables. Big volume, basic industries would remain under central control. Those include heavy industries such as fuel, fiber, machinery construction materials, and such agricultural staples as cotton and cereals.

If accomplished, this reform in the direction of a free-market economy would dwarf the minor experiment involving five industry sectors which the late Yuri Andropov ordered in the Soviet Union in July of 1983.

Second, Chinese President Li Xiannian told a visiting Romanian delegation that the Communist Party's Central Committee would meet soon to discuss a phasing out of price subsidies on food, housing, transport, utilities, and cloth - all basic items in the average worker's budget. Any such move would be considered an extraordinary step in the communist world.

Hungary has accomplished such a phasing out of subsidies as part of its move to an incentive, supply-demand economy. But the Soviet Union has shied away from it, reportedly because of fear of worker unrest.

To accomplish such an end of basic subsidies, Hungary had to coordinate the disappearance of such staples as ''penny bread'' with wage hikes for lower-income workers. Specialists in the communist economies say that for a society as large as either the USSR or China, the shift to a supply-demand system in such basic areas may take some time.

It will also require strong popular support for the government that attempts it. Deng's government may have won such support because of the success of its liberation of the farm economy from the waste and low productivity of the Stalinist system.

The third economic move of the week in Peking was concrete and symbolic. After a summit meeting between Deng and West German Chancellor Helmut Kohl, China signed an agreement with Volkswagen to produce its cars in Shanghai. It was the third such Western auto or truck production contract.

After that same meeting, Deng displayed his strategic savvy by urging Kohl and French President Francois Mitterrand to continue their efforts to build a strong, united Europe. Deng indicated that he hoped that would eventually mean Eastern as well as Western Europe.

Peking's method of counterbalancing the power of the USSR has changed noticeably since the two communist giants split a quarter of a century ago. In recent years, Deng has emphasized a strong Europe on Moscow's West flank and a kind of tacit strategic umbrella from the US to allow China to divert more of its budget into economic modernization along Japanese-American-European lines.

Deng's economic modernization success and his emphasis on a strong Europe on Moscow's other flank should strengthen his regime's hand in the next round of Sino-Soviet talks scheduled to begin Oct. 18.

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