Israeli President Chaim Herzog's publicly released letter to Rabbi Alexander Schindler, president of the Union of American Hebrew Congregations, invites American Jewish critics of Israeli actions on the West Bank and Gaza Strip to offer a different approach. On the assumption that Herzog is talking policy rather than riot-control talking policy rather than riot-control techniques, I offer the following set of alternative policies:

First, restate Israel's commitment to a peace formula based on U.N. Security Council Resolution 242 and expressly endorse that resolution's applicability to the West Bank and the Gaza Strip. Israeli right-wingers argue that Israel's commitment to withdraw from territories occupied in the 1967 war in exchange for recognition and secure boundaries was satisfied by the withdrawal from Sinai. In the past, the Likud coalition has specifically endorsed a policy of annexing the West Bank and Gaza. But "land for peace" remains the only settlement basis for which there is international support and the only basis for a just solution for both Israel and the Palestinians.

Second, arrest and reverse the policy of "creeping annexation" through settlement and government appropriation of the occupied territories. More than half the land on the West Bank and Gaza Strip has been confiscated by the Israeli government for "security" or other reasons. This process must be frozen, with previously confiscated land not directly used for the basing of security forces returned to Arab ownership.

The so-called freeze on new settlements under Israel's national unity coalition government is a fiction. Creeping annexation continues through the expansion of existing settlements. What is needed is a freeze on Israeli home construction on the West Bank.

The settlement of Israelis on the Gaza Strip is a naked grab for land to which there is no historical Jewish tie. Here the policy should be the termination of existing settlements by a date certain.

Third, terminate the special arrangements that permit extremist Jewish settlers to rule, provoke and terrorize Palestinians. A number of the Jewish West Bank settlements are populated by fanatic ideologues, many of them American born, who have succeeded in achieving a legally privileged status enabling them to impose a virtual reign of terror on resident Palestinians.

Jewish settlers are permitted to keep and bear arms; Arabs are not. The Jewish settlers are covered by Israeli civil and criminal legal procedures while the Arabs are subject to military edict. The system is rotten to the core and ought to be reversed.

Fourth, lift all discriminatory economic regulations now applicable to the occupied lands. Israeli policy has been to turn the West Bank and Gaza Strip into economic fiefdoms. The territories are prime sources of cheap contract labor for Israeli manufacturers. Arab entrepreneurs may not open establishments in competition with Israeli businesses, nor may Arab merchants export products to markets coveted by the Israelis.

Freedom to export, to import and to open banks and other business establishments should be guaranteed. Further, the tens of thousands of residents of the territories who hold jobs inside Israel should enjoy full eligibility for health insurance and other benefits applicable to Israelis.

Fifth, get on with the business of Palestinian political autonomy, permitting the election of mayors and other municipal officers, the restoration of Arab control over land and water rights and the assumption by Palestinians of a greater role in policing the area. Israel today finds itself without Palestinians with whom it can conduct a dialogue because, during the course of two decades it has systematically stifled Palestinian leadership and political self-expression.

When elected mayors were removed, political leaders expelled, colleges closed and movements quashed, the claim was always that those involved had been sympathizers of the PLO. But if anyone is waiting for a Palestinian Histadrut movement to take hold in the occupied territories, he is likely to wait in vain.

Political office should be open to all residents. And their power should involve more than garbage collection. The area's vital resources are land and water, and autonomy plans not embracing control of these resources are mere shams. Moreover, local security should be in Palestinian, not Israeli, military hands. The overriding legitimate Israeli security interest in the territories is that they not become an invasion route for aggression against Israel or a base for terrorism against Israel proper or Jewish residents of the area. This interest can be satisfied with a far more modest Israeli security role.

Sixth, end the most egregious violations of human and civil rights, including home demolitions, deportations and military beatings.

Seventh, institute sufficient reforms of the military judicial system to provide at least a semblance of the rule of law. This would involve sharp limits on administrative detention, making it far tougher for the military to fabricate cases and far easier for civilian judges to review the legal and factual basis for punishment, as well as military discipline imposed on those who seriously abuse their power.

Eighth, accept an international peace conference, including all relevant parties prepared to negotiate on the basis of Security Council Resolutions 242 and 338. Such a conference could provide a context for direct negotiations among the parties to the dispute and would have no authority to impose a settlement of its own.

It is time that Israel stopped pretending that the current situation is a product simply of its fruitless 20-year search for negotiating partners, that confiscation of Arab land has been warranted by security concerns, that the "iron fist" regime of lawless brutality is somehow the creation of American television.

The facts are otherwise. The heart of the problem is the greed, the extremism, the opportunism that have increasingly driven Israeli policy in the occupied territories and the weakness of more moderate leaders to stand up to these forces of darkness or even to recognize them for what they are.

The writer is Pentagon correspondent for ABC News and was its Tel Aviv correspondent in 1984-86.