It doesn't take a warning printed on the side of a cigarette package to convince the staff of the Federal Trade Commission's cigarette testing laboratory that smoking is hazardous to your health.

None of the seven employes smokes. The lab's director, Harold Pillsbury, did, but quit shortly after he opened the FTC lab.

The reason is simple, Pillsbury said. His crew determines how much tar, nicotine and carbon monoxide are in each of the 208 brands of cigarettes manufactured in the United States. Working every day with the residue of cigarettes is enough, Pillsbury said, to convince most people not to light up.

The FTC lab opened in 1966, shortly after the surgeon general linked smoking to health problems for the first time publicly. That report prompted Congress to pass the Federal Cigarette Labeling and Advertising Act, which authorized the FTC to make sure that tar and nicotine figures that had to be included in advertisements were based on the same standards.

At the time, however, the agency knew virtually nothing about testing cigarettes, and had to turn to the cigarette industry for help. Its first testing machine was designed by Philip Morris Inc., the No. 2 company in cigarette sales.

Even today, the tobacco industry and the FTC lab stay in close contact. The lab's current smoking machine--the first one wore out--tests 20 cigarettes at a time. Sixteen of the cigarettes are American brands, and the four others are made specially for the FTC by the industry. They are "control cigarettes," which contain a predetermined amount of tar and nicotine to monitor each test run.

To make sure that it gets a fair sample of each brand, the FTC hires a private company, at $25,000 last year, to try to buy two packs of each of the 208 brands at 50 sites around the country. That adds up to 416,000 cigarettes that are frozen for freshness and stored in plastic bags at FTC headquarters, Pillsbury said. Later, FTC employes pick 200 cigarettes at random from each brand and discard the rest.

The test cigarettes are put onto a blue-and-white, oblong testing machine that "smokes" them. The machine takes a two-second-long puff every minute until each cigarette is burned to a 23-mm length, which is the point at which the government figures a cigarette would start burning a smoker's lips.

Smoke from each cigarette is drawn through a small white pad and then into a chamber, where the carbon monoxide content is measured by a device called an infrared spectrophotometer.

The nicotine and tar are measured by removing the pad and mixing it with alcohol for 45 minutes. Then two more machines, called computerized gas chromatographs, are used to measure the nicotine and moisture content of the mixture.

Then some calculations are made to determine the cigarette's tar level, or all the residue that's left.

No cigarette industry official interviewed would say what impact the FTC test results have on cigarette sales, but there are signs that the twice-yearly rankings are important.

Last year Americans smoked 640 billion domestic cigarettes, according to Anne Browder, speaking for the Tobacco Institute, the industry's trade group. More than 50 percent of them were low-tar and new ultra-low-tar and nicotine brands.

By comparison, low-tar cigarettes accounted for only 20 percent of the market in 1978. "There obviously has been a trend toward low-tar and ultra-low tar brands," said a spokesman for R.J. Reynolds, the No. 1 company in cigarette sales.

Competition between low-tar brands is fierce. And two-thirds of the more than $1 billion the industry spent advertising in 1979 promoted low-tar brands.

The FTC caused an uproar when it released its latest ranking last December because it also revealed that R.J. Reynolds and Philip Morris had accused a competitor of developing a cigarette that could "trick" the FTC's testing machine.

Brown and Williamson Tobacco Corp., which makes the low-tar brand Barclay, in turn accused the FTC of "bureaucratic bungling and injustice" for making the industry fight public.

In its report, the FTC said Barclay's competitors claimed the cigarette's filter fooled the testing machine by allowing more air than usual to mix with the smoke.

One way to reduce "tar" delivery is to dilute cigarette smoke with air, the report said. In the Barclay filter, air travels into a smoker's mouth through four grooves in the filter. Barclay's competitors claim the grooves in the Barclay filter either collapse or become blocked when used by a smoker.

But the FTC's machine, they contend, doesn't crush the filter the way a smoker might, and thus doesn't block the grooves. The FTC said Barclay registers 1 milligram of tar and nicotine, among the lowest.

The FTC is investigating the matter, so controversial that FTC attorneys refuse to comment on it.

But the Barclay controversy is not the first challenge to the FTC testing program. The Tobacco Institute operates its own cigarette testing laboratory in Bethesda to "keep the FTC honest," Browder said.

In May, 1981, the institute challenged the FTC's carbon monoxide findings. The FTC investigated and found that a computer error had caused the tests to measure carbon monoxide levels 8 percent higher than they really were. The rankings, however, did not change.

"They watch everything we do," Pillsbury said.