FURTHER shrinkage at General Motors had been anticipated. The giant automaker's announcement last week of plans to close 21 plants and eliminate 70,000 jobs in the next four years fits into a now pervasive pattern of downsizing among United States corporations.The reasons behind the paring are plain: Many US companies have been losing market share and must develop leaner, more efficient operations. Plans like GM's should bring better profits. That said, it's hard to put a positive glow on the GM move. The human costs are tremendous. Thousands of families face the prospect of losing supposedly secure income. The task of retraining, particularly for production-line workers, will be daunting. Opportunities to find equally lucrative jobs in manufacturing are scarce. And what does GM's decision say about the state of US manufacturing? Some analysts warn that the US is in danger of becoming a country where nothing is made - where the only "products" are services, music, and films. Long the country's premier manufacturer, GM has lagged behind even domestic competitors like Ford in its ability to build cars quickly and efficiently. While the quality of its products has improved since the early '80s, its manufacturing processes have remained clunky. Downsizing is GM's response to Japanese competitors who have eaten most deeply into its once dominant market share, and who set the pace for efficiency. Another kind of response will come from US politicians. Current trade policy may take a beating. Protectionism may start to sound good to many Americans. But it's not the road to take. Free trade holds the greatest potential for worldwide economic growth, and American companies are positioning themselves to profit from that growth. Free trade has to be mutual, however. Japan's automobile market is the world's second largest, and it's still virtually closed to foreign products. That has to change.