Since U.S. economic aid and other manifestations of improving U.S.-Soviet relations have been based on continuing Soviet reform, President Bush needs to do more than reproach Mikhail Gorbachev.

In the wake of the repression of Lithuania the United States should suspend the summit meeting in February, terminate the $1 billion in agricultural credits and cancel the planned waiver of the Jackson-Vanik restrictions on most-favored-nation trade status.Bush should also foster direct ties with Soviet republics that hold genuinely free elections and adopt far-reaching market reforms.

While Gorbachev and some Western leaders may reject explicit linkage of the Baltic question to other East-West issues, linkage exists as a political reality. Western public opinion, particularly U.S. congressional opinion, will turn cold so long as Moscow tries to keep the Baltic states on a short leash.

Too often in debate about U.S. policy toward Lithuania, Estonia and Latvia, the issue has been framed as a choice between granting full diplomatic recognition to democratic governments or doing nothing - a false dilemma.

The United States should undertake diplomatic steps short of full recognition that would advance Baltic independence and increase in Moscow's calculus the international political costs of coercive policies.

First, the United States should adopt a Baltic relations act basically similar to the Taiwan Relations Act of 1979, which governs relations with Taiwan in the absence of diplomatic relations. The primary objective of the act would be to establish with each Baltic state unofficial diplomatic liaisons similar to the American Institute of Taiwan and its Taiwan counterpart in the United States.

These institutes, nominally independent of the U.S. government, would upgrade U.S.-Baltic relations and serve as the point of contact between the United States and Baltic leaders.

Second, the United States should sponsor the Baltic states as members of international economic organizations, such as the General Agreement on Tariffs and Trade (GATT). After all, GATT has managed to juggle the competing claims of China, Taiwan and Hong Kong, and its charter accommodates membership by governments with less than full sovereignty.

The key GATT membership requirement is that a government control its economy. The Baltic states have that power under Moscow's Declaration of Baltic Economic Autonomy in 1989 and have taken substantial steps in wresting control of enterprises from Soviet ministries, as well as negotiating independent trade pacts with other Soviet republics.

In any forthcoming U.S.-Soviet economic pacts the United States should insist on provisions that recognize the international legal standing of the Soviet republics and permit more liberal economic relations for reformist republics, such as the Baltic states, than for the rest of the Soviet Union, particularly in the areas of technical assistance and foreign investment.

Bush is now obliged to pursue policies that make Gorbachev understand that he faces a choice between an isolated Soviet Union mired in poverty and paralyzed by national hatreds and a new Soviet confederation that can join the community of nations and achieve prosperity commensurate with its great natural wealth.