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Summit issue: can US force foreign firms to join US trade sanctions?

''E.T.'' is the latest irritant in transatlantic relations, and it has nothing to do with the winsome visitor from outer space. E.T. stands for extraterritoriality, and it translates into a question: Does President Reagan have authority to reach across national frontiers and impose sanctions on United States and non-American firms on foreign soil?

Without exception, allied governments say ''no.'' Mr. Reagan says ''yes'' - if those firms are transferring sensitive United States technology to the Soviet Union through trade channels.

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Europeans had hoped the issue would disappear, when Reagan - after patient persuasion by Secretary of State George P. Shultz - lifted sanctions he had imposed on companies, US and foreign, involved in building the Soviet natural gas pipeline from Siberia to Western Europe.

Now the issue has resurfaced in broader form. The White House wants to revise the Export Administration Act of 1979 to strengthen the President's hand to limit the flow of US technology to Eastern Europe. Two aspects of the administration's proposal trouble Western governments:

* Reagan seeks authority to impose sanctions on branches of US companies incorporated in foreign countries, if they sell embargoed US technology to the Soviet bloc.

* The President also would gain the right to restrict imports from all countries, including US allies, that violate Washington's ban on the sale of US technology.

Such import restrictions, says Tom Niles, deputy assistant secretary of state , ''would apply only to a very narrow range of sensitive security issues.''

The administration bows to allied opinion on the question of sanctity of contract by excluding from sanctions those contracts signed before a presidential export ban was put into effect. This concession also makes a bow toward US businessmen, who claim that without contract sanctity foreign buyers will regard them as unreliable suppliers.

Reagan is unlikely to get all the authority he seeks when the final bill emerges from Congress. Nonetheless, some elements of extraterritoriality will likely remain embedded in the act.

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''East-West trade issues have been the problem child of the economic summit process in the last couple of years,'' a top French diplomat says. ''As for the Export Administration Act, no European nation - and, in fact, few if any US trading partners - accept the United States position.''

''Japan,'' says Yoshio Okawara, Japan's ambassador to the US, ''shares European concerns about the extraterritorial aspects of the (act's) revision.''

''No one,'' says Canadian ambassador to the US Allan Gotlieb, ''takes the doctrine of extraterritoriality quite as far as the United States. We do not think international law supports the (Reagan) approach.''

The disagreement is rooted in differing US and European perceptions on how best to handle commercial relations with the Soviet Union and its communist allies.

For Japan and the nations of Western Europe trade with the communist bloc is big business, much more so than is the case with the US.

At a time of soaring unemployment in Europe, governments are loath to shut off export orders to Moscow simply to satisfy President Reagan's foreign policy objectives.

They might be more ready to do so, if they agreed with the President on the dangers ensuing from the transfer of technology from West to East. Allied leaders hold that truly sensitive technology already is blocked from export, through the surveillance activities of COCOM, a coordinating committee set up by the allied powers.

Some officials within the Reagan administration take a similar point of view. However, buttressed by Defense Secretary Caspar W. Weinberger and national security adviser William Clark, Reagan himself adopts a harder line.

Critics in and out of Congress who would limit Reagan's authority to impose economic sanctions point to a recent report published by the Office of Technology Assessment, an agency of Congress.

The report concluded that the two most recent presidential sanction efforts - President Carter's grain embargo and Reagan's pipeline sanctions - may have hurt the US economy more than they injured the Soviets.

The US share of the Soviet grain import market dropped from 70 percent before the embargo to little more than 20 percent today. The pipeline fracas disrupted the alliance, but scarcely slowed progress on the pipeline itself.

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