The port of Baltimore is finally receiving the Christmas gift it has yearned for all these years: peace on the waterfront and goodwill among workers, employers and the state port agency.

This year, picket lines are out. Christmas parties and dinners are in.

A week ago, the three top leaders of the dockworkers union in Baltimore -- Richard P. Hughes Jr., Edward Burke and Horace Alston -- all had dinner at the Center Club with Adrian G. Teel, executive director of the Maryland Port Administration, and Maurice C. Byan, president of the Steamship Trade Association of Baltimore Inc. Other participants at the dinner party included the deputy port director and members of the Maryland Port Commission.

"It was great," said Mr. Hughes, leader of the clerks of Local 953 of the International Longshoremen's Association.

Mr. Hughes welcomed the way the union leaders were treated: as equals rather than foes. "It looks like we're going to be part of the decision-making process, which is all we ever wanted," he said.

In view of the troubled history of the port in the last few years, it is remarkable that the dinner at the Center Club took place at all. That those taking part might have actually have had a good time is little short of astonishing.

The dinner in this bastion of Baltimore's power elite lasted more than three hours. While that could simply be an indication of slow service, Mr. Byan said the participants seemed to enjoy each other's company. "It was a very friendly dinner," he said.

Mr. Teel agreed. The dinner was intended as a show of appreciation for what labor and management have accomplished in the last year. "I thought it was very productive," said Mr. Teel, maintaining that he felt "no tension whatsoever."

During the three previous Christmas seasons, relations with the union were not so cordial. The groups represented at the Center Club were locked in what often seemed like an economic battle to the death of the port.

First there was a bitter dispute in 1988 over jobs at a new state-owned rail yard. The next year, labor and management, prodded by the state, spent the Christmas season in negotiations that culminated in a three-day strike. And last year, yet another set of difficult contract talks produced a two-day strike in December.

"We've had some rough Christmases," said Mr. Burke, president of Local 333 of the International Longshoremen's Association, the largest dockworker's group in the port. In the last three years, he said, "Everybody kind of tore each other up on both sides of the table, even on the same side of the table."

That troubled history left behind a legacy of hostility and suspicion. And if anyone at the dinner might have felt uncomfortable, it would have been the head of the state port agency, Mr. Teel. After all, it was the drive by the state to force changes on both management and labor that underlay all three disputes.

Mr. Teel, however, was still the chief administrator of the Anne Arundel County government when all that was going on. As a newcomer to the port, he has escaped blame for what has happened between the state and the union.

Moreover, he has laid aside the state's most fearsome hammer -- the threat of a state takeover of the piers. This less-intrusive stance has helped to reduce suspicions and to put labor leaders at ease.

Mr. Burke said he initially felt that Mr. Teel's lack of waterfront experience would be a handicap. He has come to see that as an advantage. "He didn't come in with any preconceived ideas," Mr. Burke said.

And what pleases Mr. Burke the most is that Mr. Teel has not attempted to force management and the union to submit to the dictates of the state.

Mr. Teel has not presented himself as "the savior of the port of Baltimore," Mr. Burke said, nor has he attempted to "tell me what's best for my men."

For his part, Mr. Teel said he has tried to open the lines of communication and to understand better the goals and constraints of union leaders so he can look for common ground. "I want to know their conerns, to be able to understand their desires, why they need to do certain things. You can't do that from a distance," he said.

There has been lots of wishful talk during the last four years about how labor relations were improving. But there always seemed to be a crisis lurking just over the horizon, ready to blast those hopes right out of the water.

This time around, however, Mr. Burke sees more reason for optimism. "Everyone respects the others' turf," he said.

John T. Menzies III, the chairman of the private-sector port committee, thinks the current climate has to do with sheer fatigue. "Over the last few years, labor and management have exhausted themselves in terms of their willingness to fight," he said. "We've had a real catharsis. People are tired of it."

Fatigue may have produced a truce, but a genuine alliance has begun to develop out of the wreckage wrought by the fighting. Mr. Hughes, the leader of the ILA clerks who were at the very center of the fighting, says that despite the losses in jobs sustained by his members, he is ready to work with the state to promote the port.

It was "self-evident" that the port had reached a crossroads, he said. "The port could go down and be in a position where it could not recover."

He said he enjoys good rapport with Mr. Teel and is willing to help him promote the port to bring more cargo here and create more jobs. Already he has seen some encouraging signs that the port is reversing its decline. "We're going the other way now," he said.

Mr. Menzies said Mr. Hughes has been exhibiting enthusiasm for joint marketing efforts by the port agency, management and the union. "He's been pushing us to go out and sell the port," Mr. Menzies said.

Not everything is roses, of course. At a Christmas party held last week by Tartan Terminals, a stevedoring company, longshoreman Shelton Robinson, a member of Local 333, was happy to be in a buffet line rather than a picket line. But he said he felt his local, whose members load and unload ships, has lost a lot in the last three years without gaining much in return.

For example, management rather than the union now has the power to decide when weather conditions make it too dangerous to continue working on a ship, and he believes management is abusing that power. "Nobody's knocked a ship off yet, and they've had some terrible downpours. You know they're not to going to knock it off, no matter how hard it rains," he said.

Many of the longshoremen in the port feel that for years they have made concessions to management in the hopes of getting more work. In part because of the constant fighting, the ships and the cargo continued to flee the port, leaving many of the longshoremen disenchanted and resentful.

"That was a lie they told to us, if we work in the rain we get more work. So we was lied to," Mr. Robinson said.

But steamship lines do seem to be noticing a difference in the labor climate. Loy K. Atkins, a official at Star Shipping (NY) Inc. who attended the party Tartan held for its longshoremen, said he has seen a change for the better.

"When I first came here, I felt like they didn't really care," he said of the dockworkers. Of late, he has witnessed a change in attitude in the men who unload his company's ships. "The last ship [Star had] here, the productivity was outstanding. They're willing to work," he said.

Baltimore still has problems. Its inland position 150 miles from the mouth of the Chesapeake means many ships on tight schedules will never come to Baltimore because they cannot afford the 10- to 12-hour trip up the bay.

But what of those other companies tempted by the rich cargo base in the Baltimore-Washington area, with a population of more than 6 million and the highest median household income in the country?

For them, the extra cost of bringing their ships up the bay could be outweighed by the potential of capturing more cargo and increasing revenues and profits.

But while the lure is there, for many in the industry the uncertainties of coming to Baltimore have simply been too great because of the uncertain labor climate.

"What you have is a world of very risk-averse customers," Mr. Menzies said. "If there's some question about Baltimore's ability to do the business, they'll stay away."

With labor peace, workers, employers and the port agency have to show if Baltimore can grow and prosper again, as it did for generations. As Mr. Burke put it, "If we can't do it now, we're never going to do it."