SANTA BARBARA, Calif. (AP) _ President Reagan, signing a proclamation making April 11-16 National Productivity Improvement Week, said Wednesday that U.S. business efficiency must be increased to meet international competition.

Reagan noted that American business productivity growth has been declining since the mid-1960s, and said ''we must accelerate productivity growth in the service and other sectors'' of the economy.

Productivity is a measure of the efficiency with which the economy produces goods and services.

Overall non-farm productivity in the United States grew by only 0.9 percent last year, although manufacturing efficiency grew at a 3.3 percent rate.

''Good performance in productivity is especially necessary now that we are in world markets for most goods and services, and because many of our foreign competitors can target the U.S. market using state-of-the-art technology,'' Reagan's statement said.

''Our businesses and their individual leaders must continue their efforts to increase productivity by adopting new technologies and management innovations and by better strategic planning in the increasingly competitive international context,'' it said.