U.N. Ambassador Andrew Young, leading the first official U.S. trade delegation to Africa, combined commerce with diplomacy this week by urging African leaders to embark on a course of normalization of their relations with Israel.

In what is one of his last official acts since his resignation over his unauthorized meeting with an official of the Palestine Liberation Organization, Young is telling African government officials and businessmen that U.S. companies are interested in doing business in Africa but that they are unsure how to go about it.

In raising the Israel issue, Young was trying to set the Africans on a conciliatory course six years after most of them broke diplomatic ties with the Jewish state in the wake of the 1973 Arab-Israeli war.

In a stopover in the Cape Verde Islands yesterday before reaching Monrovia. Young suggested to Cape Verdean President Artistides Pereira that African states should begin a dialogue with Israel about normalization of relations.

Young said he feels that Pereira, whose country was freed from Portuguese rule after years of fighting, has the credentials to convince other African leaders that it is time to normalize relations with Israel.

"He siad he wanted to talk it over with Guinea-Bissau, Angola and Mozambique first before doing anything on it," Young said. Cape Verde, Guinea-Bissau, Angola and Mozambique were all former Portuguese colonies.

"He was receptive to the idea of talks [with Israel] so I think the idea could go somewhere," Young added.

Young again criticized official U.S. policy toward the Palestinians today, saying it "did not make sense." He said his seven-nation African tour was designed to achieve a better understanding between U.S. businessmen and the needs and opportunities of Africa.

The 23 businessmen on the trip include senior executives and presidents of such companies as Westinghouse, International Harvester, General Electric and Motorola. Representatives of several minority-owned firms such as Tabu Productions from Los Angeles, TAW Machine Leasing Company from New York and International Business Service from Washington, D.C., are also on the trip.

At a pre-luncheon meeting, Young told the Liberians that other trade delegations from the United States had not visited Africa because American businesses have not seen Africa as a market. "Americans tend to hear of fighting in Zaire and think that applies to all of Africa," Young said.

The United States, Young added, also has the largest domestic economic market "in the history of mankind" and its industry has not had to look overseas for sales.

"But today, we put ourselves in a trade deficit with the rest of the world when we don't trade," he said. The United States imports $8 billion in raw materials from Africa, Young said, but exports only $6 billion in manufactured goods to Africa.

Young said they will discuss not only what consumer goods African nations may want from the United States but also the purchase of industrial equipment and technical assistance.

Liberia, a small West African country founded by freed American slaves in the 19th century,has been stymied in its development efforts because of an unhealthy dependence on one major export commodity -- iron. Iron exports, which supplied two-thirds of the country's $468 million export earnings last year, have provided declining amounts of revenue because of competition from Brazil and Australia and a recession in steel production world-wide.

The country also exports rubber, tropical hardwoods, coffee and cocoa.

With a high illiteracy rate of 76 percent and a small population of 1.7 million, Liberias has had difficulty attracting the foreign capital it feels it needs for development.

There have been no foreign investments in the country in five years and several large companies have left, complaining that corruption and the bureaucratic maze of government regulations made it unprofitable to operate here.

But the government has recently established a duty-free industrial zone where manufactures can import raw materials and distribute finished goods without being taxed.

The Liberians are hoping that the new port facility and government reform measures now under way, will attract American companies to locate here as an industrial headquarters for the West African region.

Clarence Parker, an aggressive Liberian businessman and head of the Liberian Investment Commission, told the visiting Americans that Liberia has many problems that were high-lighted during the April "rice-riots" here.

The riots, Parker said, "focused our attention on rising expectations" in Liberia. They were sparked by the government's announced proposal to raise the price of 100-pound bags of rice, a food staple here, by 30 percent up to $22 a bag. The average take-home pay here is $80 a month.

More than 40 persons were killed during the riots and hundreds injured. Damage has been estimated at $60 million, only half of that recoverable through insurance claims.

Liberia's present economic pinch was exacerbated by the $100 million it spent to host the 16th summit of the Organization of African Unity in July.

And Liberia, Parker continued, has not been able to meet rising wage demands sparked by Liberia's 15 percent inflation rate, nor develop extensive road and communications networks that would spur development.

An experiement with government-run industries has been a failure, Parker said. "We feel that private sector investment is the best avenue to development," he told the American businessmen.

Young, who followed Parker, said American business is "willing to be partners in that development but we don't exactly know how. That is why we're here now."

After Liberia, the trade mission will go on to Ivory Coast, Nigeria, Cameroon, Kenya, Tanzania and Senegal.