PRESIDENT REAGAN, launching his Middle East peace plan, asked Israel to freeze its settlements in the West Bank to create a climate for talks. Prime Minister Begin promptly announced eight new settlements, and the other day his government made another statement of Israeli settlement plans. The State Department came back with a sharp critique, and Israel responded to it, on Friday, with yet another affirmation of its stand.

In a sense, one can understand the contempt Mr. Begin shows for the Reagan freeze. For 15 years, American presidents have protested the settlements; for 15 years, Israel has ignored the protests; and for 15 years, the United States has done nothing about it. Earlier, Israelis who favored settlements were under a burden to show their policy would not roil relations with Washington. Now the burden is on Israelis who question the settlements to show that a continuation will be detrimental. Israel's ambassador in Washington, no dove, recently advised accepting the freeze, according to the Israeli press. Mr. Begin rejected the advice, and the ambassador was publicly chastised for his pains.

With good reason, the settlements issue is widely seen as the essential test of Mr. Reagan's credibility in offering his new peace proposals. How can he convey to the Israelis that he means business? So far he has emphasized the soft sell. That means he hopes to encourage other Israeli elements and parties to reach for the promise of his plan. Something of the sort is stirring in Israel, but it is slow and uncertain going. The argument that, as an Israeli minister put it on Friday, Mr. Reagan does not really expect Israel to change its policy, is a powerful card in the hands of Israeli rejectionists.

The minister added that "there is no reason now for any reaction," because Israelis are settling West Bank land "which is not privately owned, which is not tilled and which in no way affects the rights of the Palestinians living there." Meron Benvenisti, former deputy mayor of Jerusalem, has explained the danger and deceptiveness of this rationale. The trouble is not the announcement of "eight more dots" on the map but the steady shift of Israel's urban population to new subsidized housing blocks in precisely those untilled areas of which the minister speaks. The farming dots absorb few people. The housing blocks could increase the Jewish population from 25,000 to 100,000 by 1986--a number constituting a tremendous additional weight against political compromise.

The United States has been striving to draw moderate Arabs toward open acceptance of Israel, and some hints of progress have been recorded. From Israel, however, have come only continued avowals that no changes on basic issues will be made.

Always some Israelis say, as one diplomat said after the State Department announcement, that it is a "mistake" for the United States to criticize Israel publicly. The real mistake is to ignore that Israelis commonly pocket American discretion as consent. The administration should keep pushing. It should do whatever is required to ensure that Israel gives the president's plan a fair chance.