BECAUSE THE European Community refused even to discuss its huge and damaging agricultural subsidies, the world trade conference in Brussels has failed. The conference was originally supposed to celebrate the completion of the four years of negotiations that were to reform international trade rules to meet current realities. Instead, it now leaves the whole process in danger of collapse.

There were many other obstacles presented by other governments. The United States' maneuvering on trade in services irritated the Europeans, among others. But talks on all of those subjects were making progress. European farm policy was the immovable rock that the ship struck, and on which it is sinking.

Why did the Europeans let it happen? They were preoccupied with their plans for greater unity in 1992. They were preoccupied by the revolutions in Eastern Europe. The Germans, who are the crucial voice, were particularly preoccupied by national unification and the new country's first election last week. But Europeans would be wise to reflect that their agriculture policy has now become the world's leading example of what's wrong with the present trading system.

In this country, here and there, people are beginning to suggest abandoning the present system on grounds that it's become too cumbersome and its adjudication procedures are too slow. They propose starting over again with purely regional agreements. But the quarrels would then be left to each country's courts and trade commissions working under national laws that, here in the United States and everywhere else, tilt sharply toward protectionism. That means less trade, not more.

As trade friction rises it will spill over into political tension, not necessarily minor. Most of the world has lived much more happily since World War II than in the years after World War I. One reason is that after 1945 the industrial democracies bound themselves firmly together economically in the most diverse and productive trading system ever known. If those countries now turn inward and let their trading relations come unraveled, the consequences won't be limited to wheat and automobiles.

The deadline for a finished agreement, set by the American law for ratifying it, is March 1. The European governments still have a few weeks to think again about their adamant stand on farm subsidies. Perhaps other Europeans will note that farmers are, after all, only 8 percent of their labor force, producing 3 percent of their economy's output. European manufacturers and industrial labor unions may want to consider more carefully the implications for them of declining trade. Europe's powerful banks and insurance companies were counting on the new agreements to help them expand abroad. That's now in jeopardy.

There's still a chance to rescue the trade negotiations. But there's not much time.