AN INTRICATE DANCE has been going on between the administration and the steel industry over the past month. Because of slack economies abroad, the foreign mills shipped very large amounts of steel into the United States throughout 1977. Much of it came in at remarkably low prices, taking customers away from the American producers. The American companies vehemently claimed that it was being sold below cost, which is illegal.

In early December the administration brought out a plan to calculate a reference price for each imported product. That price would represent the most efficient foreign producer's cost of manufacturing it and shipping it here.Any imports brought in below that price would automatically invite legal penalties. After the announcement of the plan, the steel companies began to announce price increases, most of them around 5.5 per cent. Then, last week, the administration brought out the actual schedule of reference prices. As it turns out, it permits most of those price increases - but nothing more.

The steel companies are doing a good deal of grousing about the schedule, but they are not hysterical about it. The reaction constitutes evidence, of a rough and unscholarly sort, that the administration has probably put the reference prices in just about the right range. If the companies were any happier, the rest of the country would have reason to suspect that the government had given away too much in the way of future steel price increases. But too much corporate anguish might portend another wave of mill closings.

The American mills do not have to meet the exact price of the imports. Most of their customers are willing to pay a premium to get domestic steel, considering it an investment in security of supply. The reference prices for imports, plus the importers' fees, will average somewhere around $340 a ton. This average is inexact, for it takes in hundreds of kinds of steel fashioned into thousands of mill products; most products are custom-made, or close to it. But this approximation serves to illustrate the point. The present domestic prices now average about $350 a ton, and a 5.5 per cent increase will put them right up against the ceiling that the import reference prices implicitly set.

If the American mills go beyond those increases, they will be undercut once again by imports. If they don't, they have a reasonably good chance to recapture some of their lost customers. The Treasury's plan is ingeniously contrived to discourage inflation. To be sure, it has certain hazards. Enforcing these prices is going to be a very complex business, and the regional impacts will be uneven. Since the most efficient foreign producer is Japan, reference prices on the West Coast will be lower than in the rest of the country. But the domestic industry will get what it demanded: protection from predatory pricing.

It is also true that the industry has paid heavily for this protection - more heavily than perhaps it has yet realized. Reference prices are, in effect, price controls. If the American steel producers want higher prices in the future, beyond the slow movement of world markets, they will have to argue the case in terms of rates of return, need for expansion, and that sort of thing. The steel industry is now well on its way to becoming a regulated industry, like the utilities. That is hardly a welcome change. But the principle here is a necessary one. Industries that want government protection from competition will have to accept close public supervision of their financial management, their payrolls and their profits.