THE Madrid peace conference will bring together parties who have warred for a generation and who appear more interested in close ties with America than in peace with each other. Accordingly, most analysts fear that the conference will constitute little more than a breakthrough to a deadlock. But in fact Secretary of State James Baker now has a better-than-even chance to persuade Arabs and Israelis to negotiate seriously.Success will require that the United States take an active part in the negotiations, providing essential assurances while pushing all the parties to confront their differences constructively. American negotiators must remember, however, that Israel can make necessary concessions only if it trusts American motives. Recent disputes over loan guarantees, Jerusalem, settlements, and overflights of Iraq may prove costly if they undermine Israeli confidence in America's intentions. No one expects the Middle East peace conference convening Oct. 30 to produce quick results. The initial plenary session will provide each side a forum to argue its position while assuring its citizens that it will uphold basic principles. Even the bilateral negotiations scheduled to commence in early November are unlikely to get off to a quick start. Instead, if all goes well each side will spend the initial meetings feeling out the other while each urges American support for its point of view. Clearly, Palestinians will take up President Bush's broad hints and insist on a settlements freeze as a precondition to serious negotiation. Israel will reject this approach, if for no other reason that ceding its rights in the West Bank and Gaza at the outset will be seen as determinative for the future. Thus, we can expect early proclamations that the negotiations have failed. But the US must insist that, irrespective of the differences that separate Arabs and Israelis, the process go on. American negotiators should remember that Israeli Prime Minister Menachem Begin only froze settlements in 1978 after the signing of the Camp David Agreements, not as a precondition for talks. THE most likely avenue for near-term success is the Israeli-Palestinian track, because Palestinians and Israelis have essentially accepted the same framework for negotiations. Both understand their purpose is to establish an interim arrangement providing for limited Palestinian self-government for five years in the West Bank and Gaza. Palestinian and Israeli exhaustion with the intifadah may prove the necessary catalyst pushing the parties to overcome difficult issues (land use, settlements, water) and r each an interim compromise. It is more difficult to be optimistic about the chances for near-term success on the Israeli-Syrian track. While Israel and Syria might be able to agree to security and political arrangements in Lebanon, thus far there has been no narrowing of the differences between them on broader issues. Unlike Egypt's Anwar Sadat, Syria's Hafez al-Assad has not articulated a vision of peace providing any assurance to the Israeli public that Syria has turned away from war. In contrast to Sadat's emotional visit to Jerusalem, Syrian Foreign Minister Farouq Sharaa emphatically declares that he will not even shake hands with Israeli Foreign Minister Levy. Because this Syrian approach will guarantee stalemate, the US must persuade Syria to go farther. Syria cannot be allowed to gain the improved ties with the West it seeks unless it pursues genuine peace. For its part, Israel will rule out withdrawal on the Golan Heights - previously used by Syria to shell the Galilee. But recent opinion polls demonstrate far more Israeli flexibility on the Golan than previously thought possible if Israelis believe genuine peace with Syria is on the horizon. Despite the enormous achievement which the Madrid conference will constitute, real success will more likely be measured in small steps including interim arrangements in the West Bank, Gaza, and Golan. The US must formulate a post-Madrid strategy ensuring the parties will have an interest in serious negotiations.