Palestinian Authority Chairman Yasser Arafat has lost the campaign he has been waging against Israel over the past year, and not to a Zionist infidel such as Prime Minister Ariel Sharon or Chief of Staff Shaul Mofaz, but to a good Muslim Arab just like himself - Osama bin Laden. The hypothesis that a regular army cannot combat terrorism, which can only be handled with terrorism, has been proved, albeit partially and indirectly. The younger generation of terrorists has no respect for its elders. A single hour of mass terror strikes against U.S. American metropolises sent an entire year of Arafat's work down the drain.

The decade that has gone by since the end of the Cold War has made us lose track of the fundamentals of global diplomacy: It is a system of nation states that are united in global (UN) and regional (NATO, the European Union, the Arab League) organizations; they have a legislature (the General Assembly) and a government of sorts (the Security Council, with the permanent members constituting the cabinet); and they are only willing to tolerate the existence of non-government organizations as long as the latter do not pose a threat to their existence as sovereign states. Up until last week, Arafat believed he could have his cake and eat it too; he thought he could win recognition for his state and still continue to function as a terrorist NGO, with no liabilities or responsibilities.

The terrorism of the 1970s and 1980s that was supported by the Soviet Union - either directly or indirectly, through third parties such as East Germany - was one of the tools in the conflict between the Western and Eastern blocs. But this conflict also manifested itself in wars between regular armies (Korea, Vietnam), and was curbed at the brink of a nuclear clash. Terrorism in that era was sponsored by states and even superpowers; and to uproot it, the West would have had to risk a major escalation. This form of terrorism eventually disappeared, along with the Soviets.

For the United States, the international terror conglomerate of al-Qaeda - the board of directors of which is chaired by bin Laden - was, till now, no more than a nuisance. But when this nuisance turned into a horror movie in its own backyard, America took it back to the fundamentals - a world of governments, not organizations; and governments enforce discipline on those within their jurisdiction, or else bear the consequences.

In the global school, the U.S. principal wastes no time with the insubordinate student - it goes straight to the parents. This also makes sense from the military standpoint: Countries build up their armies to face those of other countries. Instead of trying to adapt to guerrilla warfare, with slim chances of success, deal with the country harboring the terrorist and force them to decide whether to yield (and expel the subversive organization) or be bashed on the battlefield.

On a smaller scale, this would also have been the best thing for the Israel Defense Forces vis-a-vis the Palestinian organizations; yet Arafat's international support was too strong to allow Israel a free hand. Israel's situation was particularly tough because in addition to straight-forward terrorist organizations, Arafat also used official state agencies (Force 17) and a private NGO (Fatah-Tanzim) against Israel.

Two large-scale terror attacks led to his downfall. The first, on June 1 at the Dolphi-Disco nightclub in Tel Aviv, generated international pressure against the Palestinian leader, making it clear that a hard-handed response from Israel would not be condemned; it was then that Arafat was forced to agree to the understandings put forward by CIA chief George Tenet. But the PA leader made his escape when the pressures subsided.

The second was the combined attack against the World Trade Center and the Pentagon. Arafat and the Palestinian issue shrank back to their true dimensions; their tactics are negative, there are no two ways about it.

On Monday, U.S. Secretary of State Colin Powell revealed the contents of the talks between Omri Sharon, Avi Gil and Arafat; but the real news was that Arafat's professed willingness to (once again) declare a cease-fire, as the price to be paid for a meeting with Foreign Minister Shimon Peres, is insufficient. Not only will Arafat have to stop emulating Hamas and Islamic Jihad, but he will actually have to fight against them. Arafat has to choose: Either act as a state, or be treated as a terror organization.