YOU CAN say one important thing in favor of the new steel agreement with Europe: it resolves a damaging quarrel between the United States and Europe at a time of too many quarrels between them. But that's about all you can say.

The steel agreement extends the European cartel into the United States. It is a classic market-sharing deal, offering the Europeans a little over 5 percent of the total steel sales here and no more, regardless of price or quality. The American interest would have been better served by going ahead with the duties the U.S. government was about to impose to offset the subsidies on some of the European steel. That's fair enough, and the administration says its policy is fair trade. But what's fair about shutting out German and Dutch steel that the United States government itself has already ruled to be not subsidized?

The European Common Market has pushed its own steel producers into a cartel because it cannot resolve the disparities in efficiency, and levels of subsidy, among the 10 countries' producers. American duties to counterbalance subsidies would have kept out steel from some countries -- Britain and Italy, chiefly -- while letting in steel from others. That would have skewed the delicate internal balance among the Europeans. That's why the Common Market preferred a fixed quota in the American market. As for the Reagan administration, it caved in because it was under pressure from both steel companies and unions to hold down foreign competition whether it was subsidized or not.

The United States is now drifting into a split policy that favors government-enforced market-sharing in international trade, in contrast with its hands-off rule toward the domestic industry. Since that's an invitation to the American companies to keep raising wages and prices, it's inflationary -- but that's not the worst of it. Protection never saves jobs; it only redistributes unemployment. Joining the world steel cartel will freeze American imports of raw steel at negotiated levels. But as long as foreign steel is cheaper, it will continue to enter the country in the form of finished parts and machinery. As long as American steel is more expensive, American exports of machinery -- a major source of jobs and earnings for this country -- will be more expensive, and sales will fall.

President Reagan presented the steel agreement as a triumph of diplomacy. It resolves several political strains -- short-term, but painful -- at a cost that this country will be paying for a very long time.