EVEN in the case of Cuba the Cold War should be over. The island is no longer a problem to us or others. Cuban troops are out of Africa. Cuban support for revolutionary groups in Latin America is finished. Cuban-Russian military ties are no longer a matter of concern. None of this, however, has resulted in any change in U.S. policy. The administration has moved the goal posts and now says only after Cuba has a market economy and has held fully democratic elections can there be any change in our approach. Congress hasn't seemed to notice the change either. It is considering a bill that would allow the president to impose sanctions against Canada, Britain and other major friends and allies unless they reduce their economic relations with Havana. Elizardo Sanchez and Gustavo Arcos, Cuba's leading human-rights advocates, oppose the legislation, which is sponsored by Rep. Robert Torricelli, Democrat of New Jersey, and endorsed by the administration and Gov. Bill Clinton of Arkansas. The two Cubans argue that the measure would stir up Cuban nationalism and help President Fidel Castro rally support. And to no gain because the legislation would not work. Why would we want to complicate relations with vital friends and trading partners over an island of little importance? Does this make sense? Of course not. But it's an election year and the bill is the brainchild of the ultraconservative -- and ultrarich -- Cuban-American National Foundation. It doesn't matter that the organization, which speaks for a minority of Cubans in the United States, has misjudged the island for a long time. (For example, in February, Jorge Mas Canosa, the head of the foundation, assured an audience at the Heritage Foundation that the Cuban economy would collapse by summer. It hasn't.) What matters is that Mr. Mas Canosa's foundation has lots of money to put in campaign coffers. For example, Federal Elections Committee records indicate that foundation members have contributed substantially to Mr. Toricelli. Increasingly, the organization defines our policy toward Cuba. Ronald Reagan said the best way to bring about reform in South Africa was through constructive engagement. He was right. George Bush says the same of China, which has a worse human-rights record than Cuba. It is only when the subject is Cuba that Mr. Bush insists isolation is the best course. In fact, our policy toward China and Cuba is flawed. Constructive engagement means using carrots and sticks to encourage foreign governments to move in the desired direction. We have a full relationship with China: trade, credits -- the works. Those are the carrots. We should not try to isolate China, but if its leaders do not begin to halt repression we should limit certain aspects of our relations. Removal of carrots amounts to applying sticks. Unless we apply them, our policy is one-sided and encourages wrongdoing. Our policy toward Cuba is equally one-sided. But here the problem is an absence of carrots: no diplomatic ties, trade -- anything. We need not rush to put all that in place. But we should at least indicate to Castro that we are willing to begin a dialogue and gradually expand relations if Cuba improves its human-rights record. That is what Mr. Sanchez and Mr. Arcos, who have spent years in Cuban prisons, have urged. The United States could help most, they say, by reducing tensions and offering some carrots. That, they believe, is the key to the creation of a climate for peaceful change. Unfortunately, the administration seems determined to avoid anything as subtle as carrots and sticks. It prefers the blunderbuss -- even one, as in the case of the Torricelli bill, aimed squarely at our own foot. Wayne S. Smith, chief of the U.S. interests section in Havana from 1979-1982, is director of Cuban studies at Johns Hopkins School of Advanced International Studies.