NOW THAT the Senate has passed its trade bill, the real decisions on American trade policy lie with the conference that is about to begin. Both the Senate's version and the one that the House passed earlier carry an outrageous amount of bad and mischievous baggage. But, fortunately, the worst mistakes in each are omitted in the other. That will give the conference great latitude -- if it chooses -- to write quite satisfactory legislation.

The most objectionable parts of both bills are the anti-Japanese provisions -- those that, in one veiled manner or another, blame the Japanese for the competitive failures of American industry. They threaten Japan with punishment if it doesn't bring its exports down or, alternatively, buy more American goods. Congress is expressing a wave of anti-Japanese emotion that does it no credit. Even the sponsors of these provisions acknowledge that Japanese trading practices have very little to do with the American trade deficit and the loss of American export markets. Japan's protection of its own market is deplorable, but no one disputes the reality that Japanese protectionism accounts for only a minute fraction of the United States' trade deficit. Nearly all of it arises from the Reagan administration's mismanagement of the American domestic economy and its enormous budget deficits. But it's easier and more satisfying to go after Japan than the budget deficits.

And yet even these parts of the emerging legislation are not beyond redemption. The Senate's counterpart is less offensive than the original House language, the famous Gephardt amendment. The conference committee has an opportunity to refine it further. Improving the bill, rather than trying to pump it up as a partisan issue, ought to be the administration's strategy.

President Reagan has been doing a lot of heavy breathing about a veto, but killing this legislation is not an attractive prospect for him. If it were, the conference committee's job would be infinitely easier. It could simply stuff in all the lobby-pleasers and special-interest handouts, with assurance that none of them would ever actually find its way into law. But there is one thing in both bills that the president needs badly -- the authority to engage in the round of world trade negotiations that is now getting under way. That is where, among other things, the serious work of reducing Japan's trade restrictions is going to be done. If President Reagan vetoes this bill, the United States will be powerless to participate in the trade talks, and they will collapse. Mr. Reagan would become the first American president since World War II to fail to carry forward the job of expanding trade and trading rights that have been crucial in the rise of the world's prosperity over the past generation.

If Mr. Reagan can't get adequate legislation this year, he is unlikely to get it next year in the midst of an election campaign. The conference committee has a responsibility to produce a passable bill. Mr. Reagan can't afford to give it the easy out of an assured veto.