THE AMERICAN steel industry is on its way

back to the courtroom, once again seeking protection from foreign competition. The chairman of U.S. Steel said the other day that his company is going to sue a long list of European producers, and other steel companies have been talking about similar action. The Commerce Department says it will shortly bring charges of unfair trading against five foreign governments, but the companies object that the government's case is too narrow to provide the relief to which they claim they are entitled.

The troubles of the American steel industry are longstanding, and the present episode has been set off by the rise earlier this year in the international value of the dollar. Tight monetary policy, imposed for domestic reasons, has made the dollar rise against other currencies. That, in turn, has made foreign steel more competitive here, and the domestic companies have been losing sales.

A high dollar brings substantial benefits to this country--notably a decline in the inflation rate because of the lower prices of imports. But the advantages and disadvantages of currency swings are never evenly distributed, and steel has been for years among the most vulnerable of American industries. Why? Because the companies let their wages get too high. Because basic steel-making technology is now widely disseminated around the world, and countries that once bought American steel are now making their own and shipping it here. Because the economics of transportation has changed, making a lot of the older inland mills irremediably unprofitable.

The American steel companies complain bitterly of foreign subsidies and dumping, but the evidence is rarely clear-cut. The larger explanation of their troubles is the steady expansion of international commerce--American imports have doubled in proportion to American production over the past decade--and the fact that competitive pressures keep rising. If the dollar were to decline, the American steel-makers would get temporary relief while the shrieks of distress from the European producers increased. There is now more steel-making capacity in the world than the world needs.

The future American steel industry can be healthy, but only on a smaller scale than the present one. Its productivity will have to be higher. It will probably be centered on the Great Lakes, with direct access to water and ore. That kind of an industry won't need protection. For the rest, protection will help only at severe cost to the rest of the economy.