George P. Shultz, in the initial hearing on his nomination to be secretary of state, yesterday called for the United States to reconcile its competing interests in the Mideast by urgently addressing the "legitimate needs . . . of the Palestinian people."

Shultz' presentation, which unveiled attitudes and ideas he brings to the highest diplomatic office, was unusual in its emphasis on the Palestinian question and in its notably balanced approach to U.S. interests in the security of Israel and "wide and ever-strengthening ties with the Arabs."

"The crisis in Lebanon makes painfully and totally clear a central reality of the Middle East: the legitimate needs and problems of the Palestinian people must be addressed and resolved--urgently and in all their dimensions," Shultz said in his opening statement.

When Sen. Rudy Boschwitz (R-Minn.), a strong supporter of Israel, said he found that statement on the Palestinians disturbing, Shultz responded by invoking the dangers of having "a capable, energetic people with no place to go."

The nominee went on to say, with fervor, "We've just got to come to our senses . . . shake everybody and say, 'Come on, we've got to do better about this, we've got to get active.' "

In almost seven hours of testimony before the Senate Foreign Relations Committee, Schulz did not depart in major fashion from any of the main lines of foreign policy established in the first 18 months of the Reagan administration, whether in the arena of U.S.-Soviet relations (including the grain embargo and gas pipeline issues), arms control, Central America or China policy.

At the same time, he left an impression of potential change by describing the world, its problems and his role in their resolution with strikingly different emphasis and tone than did his predecessor, Alexander M. Haig Jr.

There was little of the political electricity that crackled through the prolonged nomination hearings for Haig in January, 1981. In contrast to Haig's claim to be the unchallenged "vicar" of U.S. diplomacy, Shultz described foreign policy as a presidential responsibility, and said, "My job is to help the president formulate and execute his policies."

Shultz refused to be drawn into a discussion of troubles that brought about Haig's resignation, saying at one point to a persistent senator, "Don't ask me about it. Ask him Haig ."

In response to criticism from Democratic senators of disarray and "flip-flops" in administration foreign policies, Shultz said the policies struck him from afar as "consistent and clear." Sen. Paul E. Tsongas (D-Mass.) called the nominee's performance "a remarkable example of damage control."

Despite some expressed misgivings about Shultz' views on the Middle East and about his recent employment as president of the Bechtel Group, a globe-girdling construction firm, there seemed little doubt that he will be endorsed promptly by the committee, probably as early as today, and confirmed by the Senate before the end of the week. The hearings are to end today.

Describing himself at several points as a tenured professor at Stanford University, a post he has held concurrently with his corporate job, Shultz displayed a professorial bent for general principles, sometimes verging on broad generalities.

At the same time, he did not back away, even under critical questioning, from positions and principles that he set forth. Particularly on the Middle East, he several times volunteered views on questions related to those under discussion, saying that "I want to be candid in my statements. I want you to know what I think going in."

According to an aide, Shultz showed his prepared statement to President Reagan in a White House conference Monday, when the two also discussed U.S. policy in the Lebanon situation.

Shultz backed the president's conditional approval of the dispatch of Marines to Beirut under existing circumstances. Shultz described the 30 days mentioned by administration officials as an "estimate" rather than a definite time limit.

Shultz said several times that he has not been in "the decision loop" regarding Lebanon until now, and announced that he had not been invited to participate in yesterday's White House briefing for congressional leaders on the troops issue because he is not secretary of state.

At one point he misspoke, saying that a formal request for the Marines has been made by the Lebanese government. An aide corrected the statement for reporters a short time later.

Shultz, who had substantial contact with the Arab world as secretary of the treasury in the Nixon administration and as head of Bechtel, did not back away from support for Israeli security, and went out of his way to call Israel "our closest friend in the Middle East."

His equal emphasis on the importance of the Arab nations, however, was a change from most statements by the Reagan administration and many leaders of earlier administrations. Shultz said the United States has "vital interests throughout the Arab world," specifically mentioning oil, and praised Arab civilization and the importance of the Arabs to the global future.

Shultz spoke with determination about the Palestinian question, which has often won lip service from U.S. administrations but usually has seemed too difficult for immediate priority.

He said the Lebanese crisis may provide "a chance for a breakthrough" on this and other Mideast issues, but also reported that he has no specific plan in mind for making good the opportunity.

The remark in Shultz' prepared statement that "representatives of the Palestinians" must participate in negotiations on their future drew repeated questions about the Palestine Liberation Organization.

Shultz was sharply critical of the PLO, hewing to the longstanding U.S. position that the PLO must recognize Israel before assuming a place in negotiations. But he said that if the PLO got off its "guerrilla kick" and met the political conditions, it would be "a different PLO" and thus could qualify to represent the Palestinian people.

Shultz was highly critical of Israeli settlements in the occupied West Bank, saying that they use much land and water in a crucial area, and that, "If we are going to meet the problems of the Palestinians, the terrain of the West Bank is going to be part of it."

He also volunteered his unhappiness about seeing elected mayors on the West Bank removed by the Israeli authorities.

Concerning the Soviet Union, Shultz said an important lesson of the 1970s is "that diminished American strength and resolve are an open invitation for Soviet expansion into areas of critical interest to the West and provide no incentive for moderation in the Soviet military buildup."

For this reason, he backed the U.S. arms buildup that began in the last part of the Carter administration and has been given additional impetus under Reagan.

Shultz went on to say, however, that, "The willingness to negotiate from that strength is a fundamental element of strength itself."

He added a little later that, "An approach to the Soviet Union limited to the military dimension will not satisfy the American people," and said that, in a period of transition of leadership in Moscow, "We must also make it clear that we are prepared to establish mutually beneficial and safer relationships on the basis of reciprocity."

Shultz defended and approved Reagan's decisions to order economic sanctions against the Soviets, on long-term grain sales and U.S. commercial participation in the planned Soviet-Western Europe natural gas pipeline, even while saying that the use of trade as a political weapon is generally undesirable.

The justification for these departures from general principles, in Shultz' view, were "overriding considerations" flowing from the martial law crackdown in Poland. He limited his support to this relatively narrow ground, and rejected any idea that the United States is or should be engaged in broad "economic warfare" against the Soviets.

In his prepared statement and in several of his comments, Shultz gave greater emphasis to economic and political issues than to military questions. The change in priorities at least rhetorically underlines the shift in the U.S. diplomatic leadership from Haig, a career military man, to Shultz, a veteran labor negotiator and economic figure.

In keeping with administration policy, Shultz rejected the call for a freeze on U.S. and Soviet nuclear weapons production. He approved of Reagan's decision to observe the provisions of the unratified SALT II treaty on strategic arms as long as the Soviets do the same. Concerning Central America, Shultz took a position supportive of El Salvador and other embattled nations and highly critical of Cuba, whose actions he called "reprehensible" in that region and in Africa. He rejected the idea of an improvement in relations until there is a change in Cuban activity, but said, "If they change, we can change."

The "military dimension," including an arms flow from the Soviet Union, Cuba and "apparently through Nicaragua" to guerrilla forces, is an important part of the Central American problem, Shultz said.

He added that economic and social conditions are also a fundamental part of the problem which must be addressed. In that connection, he called for implementation by Congress of the administration's embattled Caribbean Basin program.

Under questioning about U.S. policy toward Taiwan and China, Shultz said he approved of the continued supply of "defensive arms" to Taiwan, and pledged to carry out the provisions of the Taiwan Relations Act. At the same time he called for continued development of U.S. relations with China as a matter of "great importance."

Shultz did not say specifically how he would resolve the dispute between the U.S. and China about the continued arms supply to Taiwan, however.

He spoke of the importance of reducing trade imbalance and trade frictions with Japan and of encouraging that nation to "step up a little more" its defense outlays. He balanced these statements with praise of Japan's effectiveness as a trading nation and recognition of the fact that its "no war" constitution was recommended by the United States.