PERHAPS THE DIPLOMATS in Foggy Bottom decided to seek a negotiated settlement rather than face a probable defeat. But whatever the tactical justification, the decision to close a PLO information office in this city was wrong.

A campaign has been on in Congress to force the closing of this office and a similar one in New York attached to the PLO observer post at the United Nations. A bill has been introduced, titled the "Anti-Terrorism Act of 1987,'' but it has nothing to do with bombings, hijackings or assaults on innocent civilians. It is an assault on free speech, plain and simple, and some of the Senate's staunchest liberals have signed their names to it.

If the bill were actually directed against terrorism, it might be redundant -- since every possible act of terrorism is already illegal -- but at least it would be unobjectionable. Similarly, if the State Department were to impose sanctions against supporters of a foreign cause because they were shooting at passers-by out the window or using the building in illegal arms transactions, the department would come in for no criticism. But no one has charged that any of these activities is going on at the office just closed. Instead, the information center has been used to produce political propaganda, and whether you like what the group has to say or not, that is constitutionally protected activity.

A few months ago, Secretary of State George Shultz opposed the bill now pending in Congress, reminding legislators that "so long as that office regularly files reports with the Department of Justice on its activities as an agent of a foreign organization, complies with all other relevant U.S. laws and is staffed by Americans or legal resident aliens, it is entitled to operate under the protection provided by the First Amendment to the Constitution." Others have also pointed out that the same group of people who now staff the operation can simply regroup and call themselves something else. Will everyone be pleased, then, when the PLO's message is delivered from an office called "Americans for Justice in the Middle East" or "Citizens Helping International Refugees"?

The government has an obligation to move against organizations such as the PLO, the IRA, the Ku Klux Klan and the American Nazi Party as soon as an illegal act is committed. But it has a concomitant duty to protect the right of these organizations to be heard. No matter how offensive the message, speech is not a crime. No matter what the pressure from the Hill, the State Department should have stood its ground.