Under the title "International Terrorist Incidents," a chart in Outlook Sunday listed the number of incidents of Middle East origin in Western Europe for the first half of 1987 incorrectly. The correct number is eight. (Published 11/24/87)

THIS WEEK'S report on the Iran-contra affair was a reminder of the ability of terrorists to drive America crazy. For nearly a decade, the hostage-takers have been winning. They have kidnapped our citizens, driven our presidents to acts of desperation and folly, and paralyzed our political system in a seemingly endless cycle of bungling, cover-ups and recriminations.

More than a year of investigating the Iran-contra affair has taught us all something about how not to fight terrorism. Next time, our leaders undoubtedly will be wise enough to refrain from trading arms for hostages. But what other lessons does this fiasco teach? If we decide as a nation to say "Never Again!" to this disorderly approach to terrorism, what policies should we adopt instead?

We should begin by avoiding the erratic swings of the past few years. The Reagan administration got into trouble as it lurched from one ill-considered policy to another: It declared war against Iranian-sponsored terrorism in 1984, then shipped weapons to Tehran in 1985 and '86, and then lurched back toward war this year by sending a vast armada to the Persian Gulf. Somehow, there ought to be a balanced and sustainable policy that avoids these extremes.

The outlines of a sensible anti-terrorism strategy emerged last week at a symposium hosted by the Center for Strategic and International Studies. The lead-off speaker was Terrell Arnold, a former head of the State Department's counter-terrorism program. Here's a sampling of some of the advice offered by Arnold and the other speakers:

Treat terrorism as a crime, rather than as a political problem. We should try, to the extent possible, to handle international hostage-taking the same way we do domestic kidnaping -- with a combination of quiet negotiation and tough law enforcement. The same rules that our police apply in domestic kidnaping cases should prevail abroad. That means dialogue with the kidnapers, especially initially. But if the hostages aren't released quickly, we should be prepared to use force to free them. Since normal police tactics probably won't work in places like Lebanon, we should be ready to use stealth and trickery to lure terrorists out of their sanctuaries to jurisdictions where they can be apprehended and prosecuted. Finally, we should try in Beirut -- as in Boston -- to put kidnapers in the crosshairs of a sharpshooter's rifle. If they threaten to harm their captives, we should shoot to kill. This isn't assassination, but simply the application of standard law-enforcement techniques. It won't be easy to apply this law-enforcement approach in Lebanon, but it's worth a try.

Tone down the rhetoric. The anti-terrorism tirades by President Reagan and Secretary of State George Shultz in 1984 and 1985 only inflamed the problem and added to the atmosphere of political crisis. We could have done without Reagan's 1985 attack on Iran and Libya as "outlaw states run by the strangest collection of misfits, looney tunes and squalid criminals since the advent of the Third Reich." Ditto for Shultz's bellicose 1984 warning that we were becoming the "the Hamlet of nations . . . wallowing in self-flagellation." Explains Terrell Arnold: "Exaggerated rhetoric pushed us to pay too much to get our people back . . . . It excited the kidnapers to raise the ante."

Military force has its uses. The American raid on Libya last year worked. It frightened Col. Gadhafi and probably deterred Libyan attacks against American targets. Perhaps more important, the American air raid prodded European nations to take action themselves against Libyan terrorist networks in Europe (if only to forestall further air raids by the crazy Americans). The F-111 turned out to be a surprisingly effective anti-terrorism weapon, and the next time we're provoked, we should be ready to use it.

Don't be afraid to talk with terrorists. Negotiation is a tactic used by most police departments in domestic hostage incidents, and it should be used abroad as well -- but quietly, by trained intelligence officers, rather than by ham-fisted NSC staffers. Terrorists can even become good sources of intelligence. During the 1970s, for example, the United States maintained a security-cooperation relationship with Yasser Arafat's chief of intelligence. The PLO man provided timely information that helped save many American lives. That sort of relationship makes sense today -- provided it's done discreetly. Says Arnold: "It doesn't make sense to say that you won't talk."

Never say "never." "A rigid anti-concessions policy is at odds with common sense," says Arnold, and he's right. Just because we've learned the folly of trading arms for hostages doesn't mean that we should reject, out-of-hand, the sort of modest concessions that may allow kidnapers to release their hostages without losing face. Instead of maintaining an inflexible no-concessions policy (one that we will probably have to violate eventually), we should say "no concessions of substance," argues Arnold. And we shouldn't specify -- ever -- what concessions we might or might not be prepared to offer.

Keep the president away from hostage politics. Our chief executive shouldn't meet hostage families, and he shouldn't welcome the hostages home when they're freed. That may sound heartless, but the Iran affair shows how vulnerable presidents and their advisers are to the human tragedy of kidnaping and the pleas of hostage families for help. The cold fact is that we probably help our hostages most when we appear to be helping them least. Public attention only enhances the hostages' value to their captors. To reinforce this harsh lesson of the Iran-contra affair, Congress should enact a law banning any public celebrations at the White House when hostages are released. Such occasions provide terrorists with an incentive to grab the next American and begin the psychodrama all over again.

No more yellow ribbons. The American public should act with the same dignity and restraint as the president. We shouldn't allow terrorists to exploit our compassion. Television networks may continue to offer interviews with grieving widows and tearful relatives, but the rest of us should resolve not to watch. The image of "America Held Hostage" that emerged during the 1979 seizure of our embassy in Tehran and the 1985 TWA hijacking should never be repeated.

Maintain a dialogue with Iran and other states that support terrorism. The Reagan administration was right in trying to make contact with political moderates in Iran and repair relations between the two countries. The mistake was that we did so clumsily -- piggybacking on an ongoing Israel arms-trading operation and using dubious characters like the Iranian "prevaricator" Manucher Ghorbanifar and Saudi tycoon Adnan Khashoggi. Selling arms to the Iranians was a monumentally bad idea. But continuing the political dialogue makes sense. It would be disastrous if the Soviets were the only superpower talking to both sides in the Iran-Iraq war. Terrorism expert Robin Wright of the Carnegie Endowment explains: "America must come to grips with militant Islam, for which Iran has become a leading symbol. I believe that the time for rapprochement with Iran was almost ripe when the Reagan administration began the folly of the arms-for-hostages swap."

Curb our obsession with the Middle East. Americans show little interest in terrorist incidents in most parts of the world; but when they happen in the Middle East, they drive us crazy -- in ways that make it harder to deal with the problem. American hostages have been released quietly this year in Mozambique, Sudan and the South Pacific. In these instances, says Arnold, "negotiators could work quietly to get the hostages out."

Because of our focus on the Mideast, we often forget that terrorism is a worldwide problem. State Department statistics {see accompanying chart} show that terrorism is actually declining, and that the recent growth areas have been Asia and Latin America, rather than the Middle East. Between 1985 and 1986, the number of international terrorist incidents increased 83 percent in Asia and 33 percent in Latin America -- but not at all in the Middle East. In Europe, terrorist incidents of Mideast origin declined 47 percent from 1985 to 1986 and were down 71 percent during the first half of 1987 compared to a year earlier.

Depoliticizing terrorism in the way Arnold recommends may be impossible in our democracy. When the U.S. government wants to stay cool during a terrorist incident, the news media will often be working overtime to keep the story hot. That tension is inescapable in a democratic nation, and it probably means that we'll never be as disciplined or efficient as a closed society in dealing with problems like terrorism.

Bringing terrorists to justice will also be easier said than done. The Iran-contra report offers depressing evidence of how few intelligence resources we have available in Beirut. If we can't locate the hostages and bring them out of Beirut alive, we probably can't apprehend the captors, either. Imprudent rescue attempts could get the hostages killed, and so could a poorly planned retaliation. But we have lots of options, and the terrorists can't hide forever.

We also have some new legal tools that can help achieve Arnold's goal of handling terrorism as a criminal problem, rather than a political one. Congress passed an anti-terrorism act last year that extends U.S. legal jurisdiction to terrorist crimes that are committed against Americans overseas. That means that when terrorists attack Americans, they may be extradited to face prosecution in the United States. In areas like Lebanon where the machinery of law enforcement has collapsed, the United States should look for creative ways to apprehend terrorists and bring them to justice.

The Reagan administration, alas, violated nearly every one of Arnold's simple rules during the Iran-contra affair. Starting in 1984, when Lt. Col. Oliver North was briefing reporters in his plans for gung-ho "pro-active" tactics against terrorism, administration policy began to jump the tracks. North and CIA Director William Casey tried everything in their increasingly frantic efforts to deal with the captors of the Beirut hostages: from an alleged assassination attempt on a Moslem sheik in West Beirut to the shipment of weapons to Iran. None of it worked. As the congressional report on the Iran-contra affair states bluntly, they were "taken to the cleaners."

Never again.

David Ignatius, an associate editor of The Washington Post is editor of the Outlook section.