A House subcommitee yesterday virtually ignored the Reagan administration's proposal to tighten controls on the flow of Western technology to the Soviet Union. Instead, it drafted its own bill denying the president some of the sweeping powers he requested.

In its second day of marking up legislation to renew the Export Administration Act, the House subcommittee on international economic policy and trade omitted the most controversial administration proposals to limit the flow of Western high technology products to the Eastern bloc.

The markup is expected to be finished early next week and the bill is scheduled to go to the full House Foreign Affairs Committee Thursday, where the subcommittee version is expected to be reported to the floor.

While differences between the House and the administration over curbs on trade with the Soviet bloc have not taken on the proportions of the current debate over President Reagan's policy in Latin America, the foreign affairs subcommittee's action on East-West trade is shaping up as a major challenge to the White House.

The administration appears to be faring better in the Senate, which one staff member said has more "security-concious people of both parties" than the House.

President Reagan's proposal has created a massive rift with Western European nations, who--in exceptionally strong language for diplomatic exchanges between close allies--protested that the administration bill violates international law and is "unacceptable in the context of relations with friendly countries."

The issue threatens to disrupt the western economic summit in Williamsburg over Memorial Day weekend.

The internal debate over the renewal of the Export Administration Act, moreover, brought into the open sharp differences between hard liners, who pressed for the strongest possible controls to stop the flow of technology to the Soviets, and more moderate members of the administration, who insist America's security is better protected by promoting international trade to speed the country toward economic recovery.

Despite complaints by American exporters and the 10-nation European Economic Community that the bill goes too far in restricting trade with the Soviet bloc, some of President Reagan's supporters are pressing for even stronger legislation to protect national security.

The administration proposal, introduced April 5 after months of internal debate, would allow the president to place curbs on all imports from any country that goes against American sanctions by trading with Communist countries. The proposal also calls for the extraterritorial extension of presidential authority in national security cases to foreign subsidiaries of American companies, making them bound by U.S. law as well the law of the country in which they are incorporated.

These provisions have been eased by the House subcommittee, which is approving a bill sponsored by its chairman, Rep. Don Bonker (D-Wash.).

The administration's version, nonetheless, has excited opposition within the EEC, which has sent two diplomatic messages to the State Department within the past six weeks. The latest message was handed to Assistant Secretary of State Richard T. McCormack Thursday by Sir Roy Denman, the EEC's ambassador to Washington, and West German Ambassador Peter Hermes, representing the country heading the community's Council of Ministers.

The EEC concerns over the current proposal are an outgrowth of President Reagan's attempts last summer to impose sanctions on European companies working on a natural gas pipeline from the Soviet Union to Western Europe. The president ordered penalties--later lifted--on companies for following orders by the European nations in which they are based to honor existing contracts despite American trade controls.

This extraterritorial reach, the EEC said in the first of its two diplomatic complaints, "enables the president to impose export controls for reasons of foreign policy adopted by the United States, but not necessarily shaped or shared to the same extent by friendly countries."

The EEC, furthermore, said administration attempts to ease objections by adding a "contract sanctity" clause are too limited. The 270-day period allowed by the clause for the movement of goods already covered by a contract is too short for industrial products, though it is probably long enough to cover most agricultural contracts, the EEC said. The clause is further undermined, the EEC said, by provisions that allow the president to override it in cases of national security.

"It is in the interest of both parties that disputes over U.S. export controls should be avoided in the future" to prevent the "considerable political disruption and commercial damage" that arose from the pipeline dispute, the EEC diplomatic complaint said.