Washington — During the crucible of Watergate, George P. Shultz stood out for his integrity -- his refusal to let the Nixon White House use the Internal Revenue Service (IRS) to punish the President's perceived enemies.
As treasury secretary with the IRS under his authority, Mr. Shultz could have yielded to White House urgings and become part of the Watergate scandal.
He did not. Today, as he prepares to step into the shoes of Alexander M. Haig Jr., the word ''integrity'' comes from leaders of both parties as they comment on the prospective secretary of state.
His convictions on international relations may be tested early in his new job , for -- on the basis of his own remarks as government official and businessman - Mr. Shultz dislikes trade sanctions.
So does Mr. Haig. President Reagan's application of sanctions to delay Soviet construction of a natural gas pipeline to carry fuel from Siberia to Western Europe is one reason Haig is leaving office.
The cost of sanctions, Haig argued, would be not only the loss of American jobs among US suppliers to the project, but the anger of West Europeans counting on the pipeline to provide both jobs and fuel.
Haig lost the battle. Administration hard-liners, led by Defense Secretary Caspar W. Weinberger, won. European firms, says the President, cannot sell to the Soviets pipeline equipment built under American license.
Europeans boil with resentment. Into this controversy steps George Shultz, who, as head of the giant Bechtel Corporation, lashed out against trade sanctions as ineffective.
''We start from the attitude,'' Mr. Shultz said when he was Nixon's Treasury chief, ''that countries pursue their best interests. We should expect this and the US should do the same.''
More broadly, Shultz and Reagan appear to share similar views about the relationship between US government and society.
''The center of gravity in US society,'' Mr. Shultz once said, ''is in the private sector. . . .The country would be better off if we had less government than we now have.''
Though not trained as a diplomat, Shultz won broad respect throughout Europe when, as US treasury secretary, he was central to the reform of the world's monetary system.
Because he is an economist, Mr. Shultz -- who holds a PhD in industrial economics from MIT -- brings strength to the job of secretary of state at a time when economic problems do much to shape the diplomacy of nations.
Before becoming treasury secretary, Mr. Shultz served as secretary of labor and later director of the office of management and budget in the Nixon administration.