The Reagan administration should consider easing diplomatic and trade restrictions with North Korea as South Korean President Roh Tae Woo has suggested.

Meeting with President Reagan a few weeks ago, Roh requested the measures to complement his plans to hold a north-south summit meeting and open trade between the two Koreas.Such moves on the part of the American government would be a first step to help defuse the time bomb that has been ticking since communist and United Nations forces signed an armistice 35 years ago.

The dream of some radical students in South Korea that the divided nation be unified is highly unrealistic. North Korea remains one of the more harsh, rigid communist states in the world, while South Korea is a center of capitalism and enjoys considerable freedom despite many political problems.

Yet there might be some rewards if the U.S. were to ease its highly restrictive American trade embargo, allow currency exchange, and remove diplomatic contact prohibitions.

Pyongyang, the North Korean capital, has felt increasingly isolated. The Soviet Union and China, for example, ignored North Korea's appeals for a boycott of the Olympics. The increasing openness in other communist countries and the gap between the industrial south and economically stagnant north may also serve as catalysts for change.

The north's leader Kim Il Sung may, for the first time in decades, appears to be more willing to talk than to send armed soldiers across the 48th parallel to reclaim the fatherland.

By the same token, South Korea's government, motivated by dissatisfaction at home, is moving away from the idea that isolating the north will somehow eventually bring peace.

Such a change is a healthy move away from the positions of earlier regimes that used the North Korean threat as an excuse for calling off elections, violating human rights, and imposing martial law.

While peaceful reunification may remain Korea's impossible dream, that doesn't mean the two neighbors can't work to co-exist peacefully despite their ideological differences. The United States should support such efforts.