SPACE : Federal Agency Drafting Policy to Aid Faltering Satellite-Launching Industry : Firms compete with subsidized foreign rocket makers. Europeans want curbs on entering U.S. market eased.

Sometime after Christmas, but before the spring thaw, the small staff of an arcane White House agency will finish work on a document that will help chart the future of America’s beleaguered commercial space industry.

The National Space Council, which was activated two years ago by President Bush to set goals for space exploration and development, is drafting a comprehensive policy that will seek to improve the fortunes of the faltering $1-billion-a-year commercial space industry.

BACKGROUND: American rocket builders are waging a tough fight to maintain their stake in the international space market. Their foreign competitors include China and the Soviet Union, as well as Ariannespace Inc., a French company whose research costs are underwritten by the European Space Agency.

Among the problems the Space Council will address:

--How to stave off foreign competition, especially from countries that heavily subsidize launching operations.

--How the U.S. government can change the way it buys goods and services from the Big Three domestic rocket builders to help them hold down their costs and make them more competitive in the international market.

--How to promote and channel private investments into space facilities, such as launching bases, that until now have been financed and operated exclusively by the U.S. government.

CURRENT SITUATION: So far, American rocket builders--McDonnell Douglas Corp., General Dynamics Corp. and Martin Marietta Corp.--have been helped by the refusal of the U.S. government to launch any of its satellites on foreign rockets. The United States has also placed severe restrictions on the launching of privately owned U.S. satellites by foreigners.

But the Europeans, in a round of trade talks that began in September in Paris, are urging the U.S. government to loosen the rules--a move that the United States is resisting.

Ultimately, the Space Council wants to encourage free trade among space-faring countries once the playing field is leveled, according to those familiar with the agency. As a result, the council’s new commercial policy is likely to call for a series of trade accords that would spell out rules for accounting for government-financed research and development.

For nations such as the Soviet Union and China, the trade agreements would have to include a mechanism for assigning realistic prices to government-sponsored launching operations.

Until then, the bets are that the United States will not loosen its prohibition against the launching of government satellites on foreign rockets.

“We are interested in reducing and eliminating the subsidies” other nations provide, said Stephanie Lee Miller, who heads the U.S. Transportation Department’s Office of Commercial Space Transportation.

“We’re very interested in establishing a set of . . . guidelines with our foreign trading partners so that we’re all observing the same principles in the trade markets,” she added.

The United States and the European Space Agency have begun to do just that in the Paris talks that began two months ago. They are scheduled to continue in Washington after the first of the year.

OUTLOOK: Industry leaders and some members of Congress are pressuring the National Aeronautics and Space Administration to act more like a private company in its dealings with rocket makers.

That would mean contracting with rocket makers to provide launching services, not just rockets. It would also mean reducing complex government specifications and turning more control of routine launchings over to private industry. Proponents suggest that those changes would reduce costs and increase the competitive position of the American rocket industry.

Another concern that the Space Council is expected to address is the need to encourage private investment to expand the country’s space facilities.

Rocket makers launching private satellites for their clients now pay for the use of government launching pads at Cape Canaveral, Fla., and other sites. In the coming years, experts say, those facilities must be expanded to meet the needs of a growing commercial space industry.

The government is unlikely to have the money to do it, so a way must be found to allow commercial space enterprises to assume part of the responsibility. Beyond that, the Space Council is expected to examine suggestions that the government encourage private investment in projects such as the space station and the moon-Mars mission.