Sen. Jim Sasser (D-Tenn.) accused the Reagan administration yesterday of living in "a dream world of completely free and unfettered trade" while other governments are helping their industries flood the U.S. market.

As a result, he said in the Democrats' radio response to the president's regular Saturday broadcast, 4 million jobs have been wiped out, the U.S. trade deficit has ballooned to $150 billion, and U.S. agriculture has been thrown into "its sharpest nose dive since the Great Depression."

As a first step, Sasser called on the president to act to protect the U.S. shoe industry, which he said is "literally withering on the vine due to a surge in footwear imports that reached 75 percent of the domestic market in 1985."

He said the International Trade Commission voted, 4 to 1, "that the footwear industry deserves and needs relief," but the administration has vacillated.

"If the president fails to act here, where the evidence of import damage is unimpeachable, we will, in effect, be declaring unilateral disarmament in the intensifying battle for world trade."

"Far more is at stake here than the fate of a single industry," said Sasser. "Frankly, we are dealing with the credibility of our entire system of trade law, with the viability of our most basic American industries."

" 'Free trade' really does not exist in the modern market," Sasser said, declaring that "virtually every government in the world" except the United States "seeks to assist its domestic industries with subsidies, with currency manipulation or with quotas," but President Reagan "has no trade policy."

He said the trade deficit leaped from $28 billion in 1981 to a projected $150 billion in 1985, making the United States a debtor nation and threatening its manufacturing base, agricultural industries and a wide range of businesses.

"Our main export right now is the jobs of American workers," Sasser said.