The United States overwhelmingly dominates the world's computer software market but faces eventual Japanese competition and the threat of foreign laws that would effectively strip away copyright protection, according to a newly released Commerce Department analysis of the global software industry.

In its "Competitive Assessment of the U.S. Software Industry," the Commerce Department estimates that U.S. companies held a 70 percent share of the $18 billion worldwide software market in 1983, making the U.S. software industry 10 times larger than the Japanese or French software industries, the next largest.

Fueled by the rise in U.S. demand, the global market for software will grow 30 percent annually to an estimated $55 billion by 1987, the report projected. Should the United States be able to keep up its strength in producing and marketing "packaged software" and resist inroads by foreign competition, the U.S. software industry could reap revenue of close to $14 billion by 1987, the report said. That would represent a global market share of close to 75 percent.

As the price of computer hardware has declined, software -- programs and instructions that tell computers what to do -- has increasingly been viewed as the key to success in the industry.

Historically, the strength of the U.S. software industry can be traced to factors including the worldwide dominance of U.S. hardware manufacturers such as International Business Machines Corp. who packaged software with their machines.

However, the report points out that many countries, notably Japan and Brazil, are considering changing intellecutal-property laws to gain cheaper access to U.S. software through such mechanisms as compulsory licensing.

"That is the immediate concern, that there will be the legal expropriation of software by foreign countries," said Timothy O. Miles of the Commerce Department's Office of Computers and Business Equipment, who helped prepare the report.

The report recommends that the United States move aggressively to promote existing copyright laws as the best form of software protection and that it "strongly protest proposals by nations which seek to establish special legal systems outside copyright law." It also said that, to prevent widespread software "piracy" by nations that permit illegal copying of software, the United States "should consider trade sanctions. . . ."

Late in the decade, Japan may become the "least-cost producer" of software because of its investment in "software engineering tools" and the higher productivity of Japanese computer programmers compared with their American counterparts, the report noted.