IT'S THE SEASON for protectionism in Con gress. Unemployment is high, several important industries are in trouble, and an election is coming. Blaming foreign competition for lost jobs is always a congenial formula and, unlike other explanations, it avoids all the painful questions about economic performance here at home.

The Senate Finance Committee has now reported a de-fanged version of Sen. John C. Danforth's trade reciprocity bill. Reciprocity is a poor guide in trade. Instead of using the American example to open foreign markets, it would invoke the worst foreign examples to close American markets--with the inevitable effect on American jobs and prosperity. While the committee's bill is largely innocuous, there is a real danger that, on the floor, it will be amended back into its original form--or worse.

As an example of what's worse, there is the effort in the House Commerce Committee to prohibit the sale of foreign cars unless they contain certain proportions of American-made parts. It's known as a local content rule, and its purpose is to legislate all those Toyotas and Datsuns off the American scene. That's one way to meet foreign competition--the way that will do the greatest harm to the economy.

This kind of legislation rides on a wave of arguments that American industry has somehow lost its ability to compete on even terms with Japanese and European producers, and has to be saved by pulling up the drawbridge. That is rubbish. The American economy as a whole remains highly competitive. Some industries have lost ground, but many others--heavy machinery, chemicals, foodstuffs--have gained. True, the United States buys slightly more from other countries than it sells them. But that is the result of the highly profitable American habit of investing abroad.

There is a massive net flow of foreign profits-- about $50 billion last year--into this country. If the United States tried to limit its merchant imports to its exports, there would not be enough dollars in the world to accommodate that river of incoming profits. As a result, the dollar's exchange rate would rise even higher than its present very high level--making imports here cheaper than ever, and American goods more expensive and harder to sell abroad. American interest rates, by raising the value of the dollar, have contributed greatly to the price advantages that imports currently enjoy. That won't be remedied by passing bad laws to discriminate against foreign cars.