GALATI, Romania -- Ranks of hard-working women glance up from their knotting frames with a hopeful smile when a foreigner visits the Galati carpet factory. "Do you think he's coming to buy the factory or place big orders?" one woman whispers to another. Hope grows and the whispering spreads through the 50 women in the workshop. Their cooperative, SCCA Munca Si Arta Galati, is working at a centuries-old craft of hand-knotted carpet making for which Romania has been famed around the world. This country is one of the leading centers of hand-knotted Christian Oriental carpets. But the factory in Galati, a River Danube port 250 kilometers east of Bucharest, is deep in the doldrums as it battles with the new free market and its workers feel sour about the greed of the communists-turned-capitalists who prey on it. In microcosm the factory tells the sad tale of much of the Romanian economy during the painful transition that this Balkan nation of 23 million people is clumsily making from communist central planning to the free market. Low wages, rising material costs, dwindling foreign orders, the squeeze applied by unscrupulous middlemen, unclear policy or action on privatization, all contribute to the tragedy. Almost 1,000 women work in the cooperative for 45,000 lei ($27) a month, half the national average wage. They sit all day knotting intently at large upright frames. "The costs of raw materials, especially wool, are high, and we can only afford to pay low wages if we want to compete," said Mariana Rebegea, the cooperative's president. It is a labor-intensive, highly skilled and artistic craft. A woman working flat out produces 1.5 square meters of knotted carpet a month. A large carpet takes many months. "Sometimes I wonder why we all come to work every day. But everyone is so scared of unemployment," said the co-op's deputy president, Gheorghe Craciun. Rebegea said they had good and bad times, booms and slumps, both before and after Romania's 1989 anti-communist revolution. But now it is bad. "We have many problems," she said. One difficulty is stiff new competition from other countries with Oriental carpet-making traditions. "Iran, Iraq, Pakistan, China, are all competing," Rebegea said. "Their lower prices have helped ruin our market." Before the revolution, the factory expected about $70 per square meter sold abroad, but today it is $50 or $40, she said. "In addition, many of the people who worked in central government bodies or ministries controlling foreign trade in those days have now formed private companies as middlemen and are ripping us off," she said. "They set up deals secretly with foreign partners and conceal what they really earn from the exports, so we don't get a fair price for our work." Annual output was about 12,000 square meters in 1992 and 1993 but was expected to drop sharply this year.