THE United States will dole out more than $16 billion in foreign aid this year. Yet, while American politicians congratulate themselves on their generosity, American protectionism is devastating dozens of third-world countries. Our trade policy seems custom-made to keep the third world barefoot and pregnant, forever reliant on US handouts.The US import quota on sugar has bushwhacked Caribbean farmers. Between 1981 and 1988, the Department of Agriculture slashed the amount of sugar that Caribbean nations could ship to the US by 74 percent. The State Department estimates that the reductions in sugar import quotas cost third-world nations $800 million a year. Many poor third-world farmers who previously grew sugar cane are now harvesting marijuana. The US quota on peanut imports is so strict that it allows each American to have the equivalent of only two foreign peanuts per year. The peanut quota hurts peanut farmers in Senegal, Brazil, and China. The beef import quota - which costs consumers almost $1 billion a year, according to the Agriculture Department - has throttled Argentine cattle ranchers. The cotton import quota - which limits imports to about 2 percent of the US cotton supply - chokes Egyptian, Pakistani, and Paraguayan farmers. The US imposes surtaxes on imports when government officials believe that foreign producers received a government subsidy. The US imposed a 1 percent surtax on Thai rice imports in 1986 - even though the US government was giving Americans farmers a hundred times more in subsidies than the Thai farmers were receiving. The US imposed a tariff surtax on Argentine wool in 1983, even though the Agriculture Department was giving American wool growers 25 times more in subsidies (150 percent versus 6 percent) th an Argentine wool growers received. Similarly, many third-world nations have been hurt by the US steel import quotas. In 1985, the US forced Venezuela and Mexico to reduce their steel exports to the US by 62 percent. Trinidad and Tobago have also been adversely affected. THE most harmful US trade barrier is the Multifiber Arrangement, the international treaty restricting textile trade. Bangladesh is one of the world's poorest nations and has received more than $7 billion in foreign aid since 1980. In the 1980s, clothing exports became that country's largest dollar earner. Shortly after Bangladesh became a significant textile exporter, however, the US slapped quotas on Bangladeshi exports. A Commerce Department official shrugged off criticism, noting that the danger of being hit with quotas was "something Bangladeshis could have ascertained before they began exporting to this country." In other words, Bangladesh should not even have attempted to earn a few dollars by helping clothe the American people. It is interesting to contrast the amount of foreign aid the US provides to foreign nations and the amount of clothing those nations are allowed to sell to the US. In 1989, the US provided $479 million in aid to the Philippines, yet allowed Philippine businesses to ship only 49,644 wool suits to the US. The US provided $300 million in aid for the new Polish government, yet dictated that Poland could ship only 24,408 wool dresses to the US. The US provided $40 million to Haiti, yet prohibited Haiti from ex porting to the US more than 87,600 women's wool coats. The US should simultaneously abolish all foreign aid to and all trade restraints on third-world nations. This would reduce the federal budget deficit, boost the American standard of living, and give new hope to tens of thousands of struggling entrepreneurs and farmers around the world. While American politicians lecture poor foreigners on "the miracle of the marketplace," we have offered them a mirage of a marketplace. Are Americans rich enough that we can afford to give Africans, Asians, and Latin Americans shiploads of handouts - yet so poor and fragile that we cannot allow them a chance to honestly earn a few dollars? Charity is no substitute for opportunity.