BRITAIN's diplomat-statesman Lord Carrington chairs tomorrow's peace conference in The Hague to mediate the ever-hotter civil war in Yugoslavia between Serbs and Croats.What the conference really needs is 50 Lord Carringtons. Some 200 unarmed European Community observers begin fanning out through the republic of Croatia today as a result of a cease-fire agreed to by the Yugoslav republics, most notably Serbia, on Monday. But since the cease-fire lasted only two hours - followed by fighting, casualties, and Yugoslav Army jets firing on Croats - these peace-monitors must watch where they travel. Lord Carrington is to conduct a two-month process of arbitration. But what are the chances of such a process settling the main issue in Yugoslavia - the desire of Serbia's President Slobodan Milosevic to enlarge his borders and incorporate Serbs living in Croatia and perhaps Bosnia? In the past month, hatred between Serbs and Croats has grown exponentially. The federal Army is occupying large chunks of Croatia on what is now clearly Serbia's behalf. We once suggested Croats could give up some land for peace. But only by democratic consensus. The Croats do not want to do so. This is their right - and they show a willingness to fight to protect their borders against an expansionist Serbia. The West must respect this right, though how and whether to support Croatia, which is woefully outgunned, if Serbia increases its attacks is a complex and vexing question. If current peace efforts fall through, the question will loom larger. Currently Yugoslavia is under an arms embargo. New fighting by Serbia does not show good faith. EC monitors must find out to what degree Croats are provoking a fight. But the EC and the United States condemned last week the fact that federal soldiers are fighting alongside the Serbs. Did Milosevic agree to a cease-fire to stop the West from redrawing Yugoslavia's borders and isolating Serbia? Possibly. Milosevic raises historic fears about Serbians living in Croatia. This is politics. Does he worry about Serbia's brutalization of Albanians in Kosovo, the province he annexed two years ago? The EC peace talks depend on Serbia's desires for peace.