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Secretary of State James Baker's speech last week to the American-Israel Public Affairs Committee may have angered Israel's prime minister and some, though not all, American Jewish leaders. Further, if it is matched by appropriate policy actions, the speech should help put the United States relationship with Israel on a more healthy footing than it had been under the Reagan administration.

The speech brought out into a highly visible public forum one of the dirty little secrets in the U.S.-Israeli relationship: The United States fundamentally disagrees with Prime Minister Yitzhak Shamir over the need for Israel to withdraw from the lands occupied in 1967. When asked for a reaction to the speech, Shamir called Baker's advice "useless."

The fact that this disagreement exists is by no means new. And Baker couched his reference to it in an even-handed speech that also spelled out clear demands of the Arab parties to the conflict with Israel.

But in the context of the key administration speech at the organization's annual convention, Baker's reference to the difference over land-for-peace is a major departure. In previous years, after all, the faithful had grown accustomed to hearing Cabinet members reassure them that nothing so good had ever happened for American national interests as the growing ties with Israel.

In 1987, Secretary of State George Shultz led the convention in a chorus of "PLO, hell no!" Last year, Frank Carlucci, then the secretary of defense, assured one and all that Israel's participation in the Strategic Defense Initiative made a major contribution to United States security.

If that was the sliced bread that organization had gotten used to, the Baker speech gave them some real policy meat to chew on. Yet, for an organization that recently paid the price of losing support from the left in its pursuit of good relations with the Republican Party, this new fare must have seemed hard to digest.

By speaking as and where he did, Baker drew a clear, public line in the sand for Israel and its supporters.

He reversed the erosion of the American position on land for peace that occurred under President Reagan, when Jewish settlements in the territories went from being deemed "illegal" to merely "unhelpful." And he quashed the notion held by many Israelis that Washington considered the strategic tie with Israel too important to sacrifice in a dispute over the occupied territories.

The Israelis frequently bring more pragmatism to their view of Middle East issues than do some of their supporters in the diaspora. They tend to judge others by their actions as well as their words.

A key test for the Bush administration, therefore, will be whether it signals to the Israelis that a failure to resolve the dispute over land for peace will have substantial policy consequences.

Few people are suggesting, at this stage, that Washington cut the $3 billion in aid it gives to Israel annually. But it would make no sense, either, if Baker's firm and even-handed rhetoric were matched by the donation of more strategic goodies, like last year's award of a $1 billion contract to supply United States forces with heavy mortars.

What Israel needs from the United States is not to have more policy disputes swept under the carpet. What it needs is firm and realistic support, in which United States interests are clearly defined and acted upon.

The Bush administration might also, at an appropriate time, consider such actions as cutting that portion of the aid devoted to repressing the Palestinians or reconsidering whether a Palestinian state is necessarily against American interests.

The administration should also continue to hold out its vision of a future in which Israel can turn its energies away from crushing its neighbors and back toward peaceful economic development.

HELENA COBBAN is a guest scholar at the Brookings Institution.

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