This month, accompanied by a small army of Pakistani troops and FBI guards, Attorney General William French Smith visited the tiny Khyber Pass town of Landi Kotel, which for hundreds of years has been a major drug smuggling center -- openly selling heroin, opium and hashish over the counter in its bazaar. Much of that drug traffic eventually makes its way to the United States.

As the party entered the village over the rugged, barren mountainside, the local citizenry lined the street. "They were not smiling . . . and we had been told that on a typical day in Landi Kotel most of the citizenry is armed, well armed," said one official on the trip.

Moments after entering the bazaar area, Smith turned back, despite Pakistani troops along the rooftops and about every five yards along the roadway. The official party hastily departed.

The incident illustrated the problems governments face in curbing the drug traffic Smith had come to study first-hand. The Pakistani government may rule Landi Kotel, but in practice it could not guarantee the safety of the attorney general.

It was perhaps the most awkward moment of Smith's recent 22-day, six-nation trip to study drug smuggling as well as the problems of refugees from Southeast Asia. When it was over, Smith said in an interview this week, it produced some major progress toward a cooperative international crackdown on narcotics trafficking.

In Japan, for instance, Smith began negotiations to seek a mutual assistance arrangement under which the United States could provide and receive investigative intelligence on the "Yakuza," the Japanese equivalent of the Mafia. The Yakuza is believed to be expanding its operations, including loan-sharking, pornography, extortion and narcotics trafficking, into Hawaii and the West Coast.

The Yakuza is estimated to have 100,000 members, and Smith said, "We want to jump on that one before they provide yet another network for drugs into the United States."

Smith also said he has decided to branch out into a virtually new area in the administration's war on narcotics. The government for the first time will try to trace the purchase, import or export of certain chemicals that are used almost exclusively in the processing of heroin or other major drugs.

Smith's trip, which began Oct. 19 and ended Nov. 10, included Japan, Hong Kong, Thailand, Pakistan and Italy and a single day in France to discuss terrorism.

The most personally moving parts of his trip, Smith said, were his visits to the Kamput and Phanat Nikhom refugee camps in Thailand along the Cambodian border.

There he sat through interviews as tattered refugees, who have lost their homes and most of their families, begged agents of the federal Immigration and Naturalization Service to allow them into the United States.

"The decisions they INS have to make are not easy decisions, not the kind of decision I would want to make on a regular basis," Smith said. "You cannot help but have an immense feeling of compassion for these people."

Congress has set an admissions limit of 64,000 Southeast Asian refugees out of the 174,000 in the Thai camps. Because of the extensive study that goes into each decision, the process has been very long.

After his visit to the camps, Smith immediately ordered that the number of U.S. processors be increased from seven to 19, in hopes that the U.S. quota of refugees can be moved out more quickly. During the trip, he also urged foreign leaders to allow more Southeast Asian refugees to settle in their countries.

Smith was presented with a very different situation in Pakistan. More than 2.8 million people fleeing the Soviet occupation of Afghanistan have come across the border along with most of their cattle, sheep and worldly goods.

"These refugees do not want to be resettled in a third country," Smith said. "They have a passionate desire to return to Afghanistan and to throw the Russians out."

Most of Smith's time during the trip was devoted to drug enforcement.

In Italy, where much of the heroin coming into the United States is said to be processed, Smith signed a mutual assistance pact that will allow the two governments to exchange investigative information. He persuaded the Italian government to allow lower-level investigators to deal directly with their U.S. counterparts without going through bureaucratic channels.

In both Pakistan and Thailand, Smith met with government officials to discuss even more complicated problems: how to persuade poor farmers to stop growing profitable opium poppies and substitute another crop, and how to strengthen the laws against smuggling.

"You get the impression that all you need to do is get a battalion, march into the hills, and start pulling up poppies, but it's not that easy," Smith said, adding that the poppies are grown in areas that are both "inaccessible and ungovernable."

In addition, Smith said the Thai government does not "want to so alienate the hill tribes that they will fall into the hands of insurgents ....These people for centuries have had an opium culture, and to educate these people . . . to grow something other than poppies requires a great deal of effort."

Smith said he has discussed working with the Thais to persuade the poppy farmers to grow coffee, a crop that takes more work but could also be more profitable.

In Thailand, Smith also signed a prisoner exchange treaty and began discussions of a mutual assistance treaty dealing with criminal matters.

He has begun negotiations for a mutual assistance treaty with Pakistan, a country described as having no heroin addicts two years ago and having more than 40,000 today. Among Pakistani officials, Smith said, "There is a determination and a dedication to do something about this."

Besides his visits to government officials, Smith also took time to meet with a group of tribal leaders in Pakistan's remote Northwest Province, a center of much of the drug smuggling.

When the tribal elders gathered in a receiving line to greet him, Smith wasn't sure quite what to expect.

As he proceeded down the line of tough, weathered men in flowing, colorful robes, each placed a garland of flowers around his neck. At the end of the line, with flowers stacked to his eyes, Smith realized he was being presented with two large sheep, each draped in festive neckpieces and black and red coats.

Struggling to peer over the flowers, Smith carried out the traditional acceptance procedure, patting each sheep on the head.

Department sources report that the sheep are neither roaming the halls at Justice nor grazing in the attorney general's living quarters at the posh Jefferson Hotel. Smith was able to leave them in Pakistan without offending the tribal leaders.