The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. The major headlines of this day are these. Libya said Americans there will not be harmed. West Germany said no to sanctions against Libya. The unemployment rate went below 7 for the first time in five years, and stock prices on Wall Street dropped 39 points, the biggest one-day dive in history. The details are in the news summary coming up. Robin?

ROBERT MacNEIL: After the news summary we focus on the new Libyan sanctions. Assistant Secretary of State Richard Murphy on U.S. terrorist evidence, the reaction from the British ambassador and Libya analyst Joseph Churba. Then part two of Charles Krause's special documentary series on the U.S. military in Latin America; tonight, training their soldiers. Finally, a Wall Street analyst on today's victory of Polaroid over Kodak in instant photography. News Summary

LEHRER: The world was full of reaction today to President Reagan's new words and sanctions against Libya. The Libyan government said Mr. Reagan's order to U.S. citizens to leave Libya and other steps announced last night were tantamount to a declaration of war, but a government spokesman said the Americans will be safe and helped in their departure. White House spokesman Larry Speakes followed up on Mr. Reagan's words with a few of his own about what the U.S. would do in the future.

LARRY SPEAKES, White House spokesman: I can assure you that if Qaddafi strikes again and Americans are involved, the United States will be prepared to hunt down and to take drastic action against those responsible for it. If we can find them, we'll get them.

LEHRER: Mr. Reagan late today signed an order freezing all Libyan government assets in U.S. banks. There was no word on the total amount involved. The State Department today also issued a white paper on what Qaddafi has been up to since he took over 16 years ago. The seven-page [sic] document accuses Qaddafi of promoting subversion andfior terrorism in Africa, the Middle East, Asia, Latin America and the United States. Robin?

MacNEIL: America's European allies were virtually unanimous in rejecting President Reagan's call for sanctions on Libya. While Britain and several other nations said they believed trade restrictions were not the most effective way to combat terrorism, West Germany, Italy, Spain and Portugal flatly rejected sanctions. In Washington the President sounded a note of understanding for the problem confronting the European allies.

Pres. RONALD REAGAN: We have to remember that several of those countries have not had anything near the economic recovery that we have had and they are lagging far behind. They already have excessive unemployment. They are still trying to get back on their feet. In that same period of three years in which we have created almost nine million new jobs, there are some of those trading partners of ours that have not created a single new job in the last 10 years. So obviously they're torn between these two problems. At the same time, I would hope that we could persuade them that we're talking about something of short duration, that if we could all stand together in a thing of this kind we might once and for all bring back into the fold of civilized countries these outlaws that are perpetrating the terrorist deeds.

MacNEIL: A Soviet Foreign Ministry spokesman pledged all-out support for Libya against what he called "crude, imperialistic pressure" from the United States. This afternoon a group of ambassadors from Arab countries went to the State Department to express their governments' reactions and hear U.S. explanations.

LEHRER: In South Africa today, half of the country's black students stayed away from school to protest the government's racial policies. They defied a government order against such a boycott. Also, six American congressmen met with President P.W. Botha at his home. Afterward, delegation leader William Gray, Democrat of Pennsylvania, said this.

WILLIAM GRAY, (D) Pennsylvania: However, I must admit in all candor that listening to the specifics I was not given much to hope for in terms of the question of apartheid major reforms. In a word, I must say that the message we conveyed to the president was that the United States of America and the public, we feel, in our country will not continue to support apartheid.

MacNEIL: In economic news today, unemployment fell to 6.9 in December, the lowest rate since April, 1980. White House spokesman Larry Speakes said with this strong year-end finish we can reasonably expect to exceed the administration's forecast of a 6.7 civilian unemployment rate for 1986. In the past year, total employment rose 2 to 108.2 million.

Eastman Kodak Company will have to start getting out of the instant photography business tomorrow, following a court ruling today in Washington. Kodak lost a nine-year patent battle with the Polaroid Corporation, and a U.S. circuit court today turned down Kodak's appeal. In court papers Kodak said the decision would cost hundreds of jobs and severely damage its reputation.

LEHRER: There were two developments on the big money front today. Stock prices on the New York Stock Exchange took an historic dive. The Dow Jones industrial average closed down 39.10 points, the deepest one-day loss ever, even bigger than the worst day during the Great Depression. Analysts blamed it on word from Salomon Brothers economist Henry Kaufman that interest rates would not come down as expected, and on a long-overdue need for the overextended market to do some retreating.

And in Washington today the Federal Reserve Board voted three to two to restrict the use of so-called junk bonds in corporate takeovers. The new rules are expected to make it more difficult to finance takeover attempts.

MacNEIL: A top level U.S.-Canadian team told President Reagan today that the U.S. should spend $5 billion to combat acid rain. The report followed agreement by the President and Canadian Prime Minister Brian Mulroney at their summit last year to set up a joint study. The U.S. team was headed by former transportation secretary Drew Lewis. After presenting the report at the White House, Mr. Lewis said the President is not going to walk away from it. Lewis outlined the recommendations.

DREW LEWIS, Special U.S. Envoy: We indicated that acid rain is a serious problem, that it's trans-boundary, that it's an extremely critical issue as far as the Canadians are concerned. We recommended a billion-dollar program over five years. That's five billion, a billion each year, half to be paid by industry and half to be paid by the federal government. This is not specifically a program that calls for emission controls but technological developments, not researching the issue, which we've done for almost too long. It calls for technological developments which we think will help abate this problem over a period of time.

LEHRER: And finally in the news of this day, the flight of space shuttle Columbia has been put off indefinitely. NASA called off tomorrow's scheduled launch from Cape Canaveral, Florida, because of a faulty engine valve, and no date was set to try again. The launch has been scrubbed six times since December 18th. Its crew of six astronauts and a congressman was to study Halley's Comet, among other things.

MacNEIL: That's our summary of the news. Coming up, Assistant Secretary of State Richard Murphy, British Ambassador Oliver Wright and security analyst Joseph Churba on reaction to the Libyan sanctions, then Part Two of Charles Krause's special documentary series on the U.S. military in Latin America, and a Wall Street analyst looks at Polaroid's victory over Kodak. Libya: Reaction to the Sanctions

MacNEIL: First we turn to Libya and reaction to President Reagan's announcement of new sanctions. As the President promised last night, the State Department today issued a 17-page white paper documenting what it described as links between Libya and international terrorism. Its titled Libya under Qaddafi, A Pattern of Aggression. With us now to detail these accusations is Assistant Secretary of State for Near Eastern and South Asian Affairs Richard Murphy.

Mr. Secretary, is there anything new in this report, anything we did not already know about Qaddafi?

RICHARD Sec. MURPHY: I think that it is a compilation of a variety of items you have heard about over the years, but it has for the first time put together a study of Qaddafi's activities in the various geographic regions of the world in a form for the public which I don't think has ever been done before.

MacNEIL: Would this document constitute the concrete proof that some, for instance some of the allies, Austria, for example, said yesterday was lacking to link Libya with specific events, for instance, the December 27th attacks in Vienna and Rome?

Sec. MURPHY: That document does cite as one very strong piece of evidence that the passports carried in the Vienna and Rome incidents were those confiscated by Libyan authorities from Tunisians working in Libya last summer. They turned up in the hands of Abu Nidal representatives in Vienna and Rome just after Christmas. I think that's pretty good circumstantial evidence.

MacNEIL: But that had been published before, that fact. And yet people like the Austrians, whose own airport was attacked, was saying -- their foreign minister was saying as late as yesterday that they didn't see conclusive proof linking Libya with the attack.

Sec. MURPHY: I think that we will have the opportunity in discussions with our friends and allies over the coming weeks to lay out even more detail -- in even more detail the circumstances concerning the Abu Nidal organization, its links with the regime of Colonel Qaddafi. We think they are conclusive, and we hope they will be persuasive.

MacNEIL: Should this document in itself persuade the allies?

Sec. MURPHY: I think it lays a good foundation for that. That was the intention.

MacNEIL: Were you implying a moment ago that the State Department will be able to give allied nations more detail in private that it cannot publish publicly?

Sec. MURPHY: That's correct.

MacNEIL: I see. Why can't you publish it publicly?

Sec. MURPHY: Well, basically because of the nature of the sources, the intelligence sources that we use to acquire the information.

MacNEIL: Many of the incidents outlined in the white paper are Libya's previous attacks, or alleged attacks, against Libyans living abroad. What do you think is Qaddafi's principal motive now?

Sec. MURPHY: I think that as you track the movements of the Abu Nidal organization from originally in Iraq to Damascus and now on to Libya, you've seen an expansion of that organization's efforts which have dovetailed with Colonel Qaddafi's efforts now and being used by Colonel Qaddafi as he is using Qaddafi -- it's a mutual benefit society, if you will -- to work against, in the region, moderate Arab regimes, to work against Libyan dissidents, wherever they may be found, in Europe, in the United States, as was the case last summer. You have a fairly broad focus where that organization and the Libyan regime have linked up on activities on truly a worldwide basis.

MacNEIL: Let's turn to the Americans in Libya for a moment. Their foreign minister said they would all be safe and unharmed. How safe do you think they are?

Sec. MURPHY: We hope the foreign minister meant exactly what he said. We are putting full responsibility on the Libyan regime for their safety.

MacNEIL: What punishment are Americans liable to, what was the President referring to last night, if they disobey the order to leave Libya?

Sec. MURPHY: There will be criminal penalties amounting to some prison terms and some financial penalties as well if they continue trading, in commerce, in investment, in extending loans or credit to Libya after the cutoff date on the 1st of February.

MacNEIL: Because they violated a presidential executive order?

Sec. MURPHY: That's correct, in which he invoked his powers under the International Emergency Economic Powers Act.

MacNEIL: How long could somebody go to jail for, for disobeying this?

Sec. MURPHY: I believe it's up to 10 years.

MacNEIL: How long have they got, these Americans there, to leave? The President said leave immediately. What kind of grace period do they have to get out?

Sec. MURPHY: I don't think there's been any set period for that, but I think he put it in the strongest possible terms when he said "immediately."

MacNEIL: What if it involves the Americans in economic loss or financial hardship? Does the United States compensate them for this?

Sec. MURPHY: I cannot answer that directly. I think the purpose of the act which -- the action of last night, which was taken on the basis of a series of acts over the last several years -- our first sanctions date back over seven years ago. This was to put the final comprehensive sanction on trade and commerce with Libya in place. Now, a question of compensation to American citizens, I think the basic message the President was giving us last night was that we will not as Americans, as a government, continue to deal with the regime of Colonel Qaddafi.zMacNEIL: So they would -- each individual would have to absorb any financial losses himself? Is that what you're saying?

Sec. MURPHY: That's right.

MacNEIL: I see. Thank you. Jim?

LEHRER: European reaction to the U.S. call for sanctions against Libya has been much, much less than enthusiastic. West Germany officially said no today, and the early signs from Spain, Italy and Portugal were equally negative. In London the U.S. ambassador paid a call on the British foreign secretary to sample British reaction, as we do ourselves now with the British ambassador to the United States, Sir Oliver Wright.

First, Mr. Ambassador, is the evidence of Libya's role in the airport attacks convincing to Britain?

Sir OLIVER WRIGHT: We haven't had a chance yet to study the white paper. We've had a copy, but I have no doubt at all that a lot of this evidence will prove to be convincing.

LEHRER: Then what, then, is Britain's answer to the U.S. call to join us, please, in the sanctions?

Amb. WRIGHT: Well, you know, we've been through this before ourselves. Way back in April, 1984, we had a problem with the Libyan Embassy then, the Libyan Peoples Bureau in London, where a gunman from inside the Libyan Embassy shot an English policewoman outside in St. James' Square. So this isn't a new problem to us, and we took action then. The action we took was, one, to cut off diplomatic relations with the Libyan authorities and expel all Libyan officials in London and indeed in the United Kingdom. We stopped any supply of armaments of whatever sort to Libya. We canceled government-supported credit, the export credit guarantee department, credit to trading with Libya. And we set very strict restrictions on private Libyans, like students, for example, coming to the United Kingdom. So we've been through this before, and we are very sympathetic indeed and understand the sense of outrage that the United States feels.

LEHRER: But will there be any further steps taken by Great Britain?

Amb. WRIGHT: I'm not certain about that. As you said in the news, that Ambassador Price has only this afternoon been to see the foreign secretary. We shall have to take very careful consideration of what he says. But after the meeting the foreign secretary did say, and you will have noted from what the President said earlier, we will do our level best not to undercut American sanctions.

LEHRER: Why is there a reluctance, apparent reluctance to say immediately yes, Great Britain will join in these sanction moves?

Amb. WRIGHT: Well, I'm afraid it is sad experience of economic sanctions. I don't know a single example in recorded history where economic sanctions have actually succeeded in achieving the object that you set out to achieve. What our objective must be, it seems to me, is first, if at all possible, to stop these thugs getting into our airports and doing the things they do. And, secondly, if we fail to stop them doing what they do, to catch them before they can get away. And our tendency in Britain is to believe that that should be the main emphasis of both our national action -- and we see a great responsibility for national action there -- but also the main responsibility for international action.

LEHRER: A U.S. congressman, Congressman Lantos from California, was quoted today as saying that what Europe does on this sanction issue will be a test of Europe's resolve against terrorism. Is that a fair characterization?

Amb. WRIGHT: I don't think so myself, with all respect to Congressman Lantos, who is a good friend of mine. I don't think in a complicated situation like this we would accept that there are criteria which you lay down which will characterize your determination to counteract this terrorism. I would prefer such criteria as the safety of airports. What is the record of Heathrow, Gatwick, Manchester, in preventing people like that harming innocent travelers? What is the record of your government in actually sharing information with other governments in trying to combat this international terrorism? Because, remember, we are very much having our attention focused this moment on Libya, but that is not the only form of terrorism there is in the world. Practically every country has -- well, a great number of countries also have their own terrorist problems, and it is to that that we must address ourselves. And, indeed, in Europe -- I can only speak for the United Kingdom. But indeed in Europe we have the European convention on the suppression of terrorism. All the West European nations have signed this convention, and they undertake, among other things, to collaborate very closely with each other in exchange of information and so on to try and root out this menace from our midst.

LEHRER: Mr. Secretary, is what we've heard from Ambassador Wright a statement of support of the U.S. position toward Libya?

Sec. MURPHY: I think it's a very carefully presented statement by the Ambassador that we do take as a statement of support, and he has rightly cautioned us not to look only at economic sanctions.

LEHRER: He says they don't work, Mr. Secretary.

Sec. MURPHY: They have not worked in the past because I don't think there's been sufficient motivation in the international community to make them work. We hope that we are dealing in the case of this rogue elephant, in the case of Colonel Qaddafi and of Abu Nidal, with forces which will be more broadly recognized as inimical to law and order internationally.

LEHRER: Why not try this time to make them work, Mr. Ambassador? Do you think it's a fruitless exercise?

Amb. WRIGHT: Well, one can only go by experience, and whether it was before World War II in our sanctions in connection with Ethiopia; we have had this very close to home, too, over the question of Rhodesia, when Ian Smith in 1965 went into rebellion against the Crown we called upon the rest of the world -- undertook sanctions ourselves against Rhodesia and we tried to persuade the rest of the world to conduct them as well. And the plain fact is that although Rhodesia was a landlocked country and therefore one would have thought that, had there been sufficient international collaboration, it would have been possible, it turned out that it was not possible. And indeed, sad to say, that at the end of 15 years, when the Rhodesian rebellion ultimately came to an end, Rhodesia was industrially better off than it was in the first place. Ultimately the Rhodesia rebellion was brought to an end by guerrilla warfare.

LEHRER: Mr. Secretary?

Sec. MURPHY: We think that the measures that the President called for last night will result in some short-term dislocation to the Libyan economy. Now, that dislocation, that pain, can be prolonged by cooperation from our friends, from our allies on a broad basis. There's just no questioning that in our mind. It will be very difficult to work out. The profit motive is very strong.

LEHRER: Do you agree with Congressman Lantos, who I quoted a moment ago, that this is a test of Europe's resolve to do something about terrorism? Is it that serious a matter to the United States government?

Sec. MURPHY: It is a very serious matter to the United States government.

LEHRER: Thank you. Robin?

MacNEIL: We have further reaction now from Joseph Churba, editor of the monthly newsletter Focus on Libya and president of a private consulting group called Pemcon. He was a senior defense and foreign policy adviser during President Reagan's first term, and for four years the Pentagon's senior intelligence evaluator for the Middle East.

Mr Churba, on this program last week you said the President had to get tougher with Libya. Has he been tough enough?

JOSEPH CHURBA: Absolutely. I applaud his reaction, his first major serious step in isolating economically Libya and in setting notice on the Libyans that it's not going to be a cost-free affair. I further understand that there will be other measures if these measures do not have the desired effect.

MacNEIL: What could they be?

Mr. CHURBA: Well, that's a matter of speculation at this point.

MacNEIL: But you're a very well-informed person. Let's speculate a moment.

Mr. CHURBA: Well, to begin with, I don't believe that the economic weapon, so to speak, is limited. The reason for West European passivity in this instance lies in the fact that there are $16 billion worth of developmental contracts that they have with Libya. There are over 300 European firms active commercially in Libya. Seventy percent of Libya's imports come from Western Europe, where 54 of Libyan oil and exports go to Europe. So this imbalance is perceived by Colonel Qaddafi as heavily in the European favor, and because of this, he anticipates that the Europeans would lie over -- would roll over and ignore the American demand for cooperation. He may well be right, because the Europeans do not have the guts, the stamina, the will, the determination to resist worldwide terrorism. So far we've seen their commercial interests as being paramount and primary. Now, the American President has finally taken the first step and he has acquired the moral leverage that he needed with which to face the European societies, the parliamentary democracies, and insist that it is in their larger, broader national security interests to cooperate with the United States in putting an end to this renegade regime. It's not going to be done by economics alone. This is only one half of the equation.

MacNEIL: What's the other half?

Mr. CHURBA: There are political exiles very active in Egypt and in Western Europe who can form a constructive alternative to the Qaddafi regime. These political exiles have the will, they have the intelligence, the arms, the men for replacing Mr. Qaddafi, and in my judgment they should be supported by the United States politically and diplomatically. I think there is room for fundamental change in Libya, and when that happens then we need not worry about our airports.

MacNEIL: Are you saying that you believe the Reagan administration has i- the back of its mind getting actively into the business of replacing Qaddafi?

Mr. CHURBA: Well, we have evidence over the past few months -- I think it was revealed that this administration finally has decided to isolate and to undermine the regime of Colonel Qaddafi. I don't think that it is a great secret to Qaddafi himself that this is so. The only question is, by what means? And the point is, and it's a very sharp point and very much to the discussion here, that it is not for the United States to replace that regime. The primary responsibility for the recovery of freedom and liberty in Libya belongs to the Libyan people themselves. We can create that kind of strategic and political environment that would encourage these very heroic individuals to take power in Libya.

MacNEIL: How do you think Qaddafi himself is going to react to these sanctions?

Mr. CHURBA: I think very negatively. I think as his domestic base erodes very fast, with the clergy, with the businessmen, and with his own military whom he has confined to the barracks, I think as his domestic base disintegrates he is going to strike out wildly and in desperation with more terrorism abroad. And I think the best fact of his desperation and his vulnerability is in the point that he has systematically sought out his political exiles for assassination, in Germany, in London and other places where they are residing, particularly in Egypt. So Mr. Qaddafi understands his vulnerability and he is going to seek to eliminate his political opposition. I think he's going to escalate terrorism even in the United States.

MacNEIL: Well, thank you. Jim?

LEHRER: Do you expect that to happen too, Mr. Secretary, the escalation of the violence from Qaddafi both here and in other parts of the world?

Sec. MURPHY: No, I don't think that's a given. I think that is a possibility. I think it's also possible that as we raise the costs, as we increase his isolation, as we in effect keep him off balance and really put him in the position of pariah from the international community, he just might get more cautious. I don't think it's a given that the violence will escalate, but it is certainly a possibility I can't deny.

LEHRER: Mr. Ambassador, you heard what Mr. Churba had to say about guts and stamina against terrorism and $16 billion and 300 firms in Europe. Is that the fact?

Amb. WRIGHT: I heard what he said. I disagree with him, but I will defend to the death his right to give his opinion.

LEHRER: Okay, but I will defend your right to disagree with him and tell us where he's wrong.

Amb. WRIGHT: I think what we're really arguing about is not whether there is terrorism and whether it must be combatted, but how we do it. And I have already suggested to you some of the ways in which we must do these things and how we can combat terrorism more effectively. I would be much more concerned with -- to begin with one, we are all democracies, and we must uphold the rule of law, and that is certainly the base point as far as my government is concerned. This sometimes in other forms of terrorism ties your hands behind your back. All right, but you do not promote the cause of freedom and democracy if you disobey the law.

LEHRER: Meaning Mr. Churba's suggestion that the United States should try to overthrow Qaddafi?

Mr. CHURBA: I did not suggest that.

LEHRER: No, no, but I mean the suggestion that that's in the wind or in the works.

Mr. CHURBA: My suggestion was we should create the kind of political and strategic environment that would allow the Libyans to do the job.

LEHRER: Exactly. I misquoted you. You were saying that it was no secret that the Unied States was attempting to do that.

Sec. MURPHY: Seems to undermine the region.

Amb. WRIGHT: Whatever Libyans do is up to Libyans, and I would not choose to follow Mr. Churba along that line. What I do think we can do and perhaps improve is to prevent what happened at the airports from happening again. Improve security at airports, improve communication between governments of information on these terrorist actions and so on. It has been very effective. You can have also, for example, extradition treaties between governments, and if some terrorists happen to hole up in other countries they will be returned for a fair trial in the face of their terrorism. I'm thinking, for example, of the supplemental treaty which we have just signed between Britain and the United States, which is waiting for the advice and consent of the Senate.

LEHRER: Gentlemen, let me ask all three of you, beginning with you, Mr. Secretary, it's been suggested in the last several days, it was suggested on this program, in fact, last week, that all of this attention and concern and sanctions and threats against Qaddafi is actually playing right into this hands, that he couldn't be happier over this because it has caused him to be right on stage center of the world political scene right now. How do you feel about that kind of talk?

Sec. MURPHY: I think it has puffed him up beyond his real worth and his real weight in the North African scene and the Arab world and the regional picture. It's a little hard to avoid that when such dramatic incidents happen, the murders in Vienna and Rome, and he is a very flamboyant, very charismatic figure to avoid having the focus in on him personally. But I say -- what I said earlier was I think there's a possibility at least that, as he senses the pressures growing, the coordination growing that Ambassador Wright referred to, that he just may end up being tamed and drawn away from some of these bloody practices.

LEHRER: You met today with the representatives of several Arab countries. Does that concern you, how the Arab world seems to be rallying around Libya in this?

Sec. MURPHY: It doesn't concern me in the sense that I understand the initial reaction is always going to be, he's an Arab, he's a cousin, he's a member of the family. That doesn't mean they stand up and say they respect him or they follow him or they admire him or they'll cooperate with him. So many of them have suffered from his efforts against their regimes, be it Tunis or Cairo or Sudan, Saudi Arabia. They've all been the focus of his efforts to subvert their governments over the years.

LEHRER: What did they tell you today? Did they tell you to cool it?

Sec. MURPHY: No, they asked a couple of questions. They asked whether we considered ourselves in a state of war today with Libya. I said no, we did not. And then they asked, well, how can we in the Arab world cooperate with the United States on the Palestinian issue? And they discussed that as the cause of much of the problems that gives rise to activities such as Abu Nidal.

LEHRER: Did they say to you that if the United States continues this course against Libya, that we should count on the Arab world being on his side against us as a solid group?

Sec. MURPHY: No, they didn't say that, and I don't think that's a reality in the Arab world. But, as I say, there's a certain mystique about Arab unity and that the initial reaction is always going to be, he's a member of the family, as many difficulties as we have with him.

LEHRER: In a word, Mr. Churba, is this helping Qaddafi more than it's hurting him, as we speak?

Mr. CHURBA: I believe up until last night he had obtained the political and propaganda advantage. Since last night he is now more desperate than ever. He should be frightened to death that the United States is finally taking a meaningful serious step economically to isolate him as a prelude to his political removal by Libyan exiles themselves.

LEHRER: Mr. Churba, Mr. Secretary, Mr. Ambassador, thank you all three very much.

MacNEIL: Still to come on the NewsHour, Part Two of Charles Krause's documentary series on the U.S. military in Latin America, and analysis of Polaroid's victory over Kodak. Latin Command: Training Their Soldiers

LEHRER: It's now time for Part Two of special correspondent Charles Krause's series on the Latin Command, which runs the U.S. military presence in Latin America. Tonight's story takes place in the United States, at a special school for special soldiers.

CHARLES KRAUSE [voice-over]: Columbus, Georgia, two hours south of Atlanta, a traditional southern town where some things haven't changed since the Civil War. An unlikely place to find one of Latin America's most important and most controversial military training academies. Unlikely, perhaps, but Fort Benning, Georgia, on the edge of Columbus is now home to the U.S. Army's School of the Americas. Its motto, "All for one and one for all." Its official language, Spanish, not English. The school's goal, to provide training for Latin American armies allied to the United States and to maintain U.S. influence over them.

Capt. CHARLES BUSICK, U.S. Army: We've had experience on various battlefields around the world, and when people come to us they want to just feed off that knowledge that we have. Basically they come here and they want to learn U.S. doctrine.

KRAUSE [voice-over]: Captain Charles Busick, one of the instructors at the school, teaches combat patrolling.

Capt. BUSICK: They want to learn how do we do it conventionally. They want to take that basic doctrine back to their country and adapt it to their particular situation. And that's what they can do.

Master of Ceremonies: Argentina, 613 graduates.

KRAUSE [voice-over]: At a cost to the U.S. government of about $4 million a year, the School of the Americas has trained more than 46,000 Latin military officers since the end of World War II. At one time or another, many of the hemisphere's most powerful generals received their training at the school. Men like Panama's late General Omar Torrijos. A year ago, General Paul Gorman, then commander-in-chief of all U.S. forces in Latin America, called the school essential to U.S. security.

Gen. PAUL GORMAN, former Commander-in-Chief, U.S. Southern Command: This school has become a way of bringing the countries of Latin America together in a fashion that otherwise would have been impossible. So this is a strategic resource, a way of communicating the doctrine, the methods of instruction, the standards of our army to the security forces of other nations.

KRAUSE [voice-over]: Traditionally, the School of the Americas' mission was to train Latin officers to defend their countries from an external enemy. Today, with guerrilla conflict raging across Central America, Colombia and Peru, the school's expanded and its emphasis has changed to counter-insurgency. Last year more than 1,000 officers from 12 different Latin countries attended courses at Fort Benning. The school taught them everything from combat operation to military intelligence to psychological warfare. Meanwhile, the number of U.S. instructors has grown to about 100, many of them hispanics. Forty additional guest instructors come from countries throughout Latin America. U.S. Army Colonel Miguel Garcia is the school's commandant.

Col. MIGUEL GARCIA, Commandant: I think one of the characteristics of the school is its ability to expand rapidly when tasked to do so. So in that sense the school is very flexible, very capable, and it responds to the necessities dictated by policymakers.

KRAUSE [voice-over]: For officers from Latin American, training at Fort Benning is free, but the State Department carefully determines which countries receive scholarship money, and the School of the Americas enrollment clearly reflects U.S. foreign policy at any given time. Currently, Cuba, Nicaragua, Chile, Argentina and Surinam do not have officers in training. The vast majority of students come from just one country, El Salvador. At war with Marxist guerrillas, the Salvadoran army has received well over half a billion dollars from the Reagan administration since 1981. Today the School of the Americas is a virtual training center for El Salvador's armed forces, in part because Georgia is safer for U.S. Army instructors than Central America. Many mid-level Salvadoran officers come to Fort Benning for a course in combat operations. The day we visited their classroom these officers were plotting tactics and strategy for retaking a town overrun by guerrillas. Their theoretical problem, to retake the town in San Vicente Province without injuring innocent civilians. Other Salvadoran officers come for engineering courses. They learn to build houses, schools, roads and other facilities that could help improve their image among the civilian population. And young cadets from El Salvador's elite military academy come to the school for what amounts to advanced basic training. Captain Busick, a West Point graduate and a U.S. Army Ranger, is one of their instructors.

Capt. BUSICK: They lack some of the basic soldier skills that our basic trainees learn in the first five weeks that they go through a basic training program, but in the period that we train them they will acquire and gain those basic skills and techniques.

KRAUSE [voice-over]: Last month 185 cadets finished their 24-week course. Captain Busick put them through their final test.

Capt. BUSICK: We were running them through the Darby Queen, which is the United States Army Ranger School obstacle course. It's 26 obstacles that tests a man's confidence and his ability to work together as a team. They run in four-man teams through the obstacles of varying difficulties and varying heights above the ground. Some to just test their quick mental ability, some to test their agility and others to test their teamwork. They are much more physically fit than our soldiers were. Their ability to run long distances was just remarkable.

Col. GARCIA: The only difference between us and other institutions in the Army are simply that we teach in Spanish to a larger audience, and this is particularly important, I believe, for the cadet courses where we can influence young minds, we can help shape their thinking by providing an insight to what our culture is, what kind of things we do and how we do things, how we react in certain ways when posed with a crisis.

KRAUSE: Then are you saying that the school in a way helps to extend the influence of the United States in Latin America and reinforce the influence of the United States in Latin America?

Col. GARCIA: I think that it serves the national interest of the United States in that sense.

KRAUSE [voice-over]: The school has long been an important instrument of U.S. foreign policy. Founded in 1946, it was located in Panama until a year and a half ago. Then, under terms of the Panama Canal treaties, its flag was furled and it moved from Fort Gulick, Panama, to Fort Benning, Georgia. But there's a story behind the move. General Manuel Noriega, head of Panama's powerful defense force and himself a graduate of the school, wanted it to remain at Fort Gulick, but public opinion in Panama, led by the opposition newspaper La Prensa and civilian politicians made that impossible. In Panama and throughout Latin America, the school has a bloody reputation. It's known as a school for dictators.

ROBERTO EISENMANN, Publisher, La Prensa: I can tell you that I was one of the people that violently opposed the school staying.

KRAUSE [voice-over]: Roberto Eisenmann is La Prensa's publisher. He's now a Neimann Fellow at Harvard.

Mr. EISENMANN: I think the School of the Americas was a school for dictatorship. And I never went to class there to be able to prove that, but the track record certainly shows that. When these boys got together at the School of the Americas, I can only imagine that they talked about the way they ran their countries and oppressed their people and tortured their people and what was effective and what was not.

Prof. RICHARD MILLET, Southern Illinois University: I don't think that's really a fair characterization.

KRAUSE [voice-over]: Richard Millet is an expert on the military in Latin America and was recently a guest instructor at the school.

Prof. MILLET: There is no evidence that an officer there is more likely to wind up taking over his government than one who didn't. This is a product of domestic conditions, of the Spanish military heritage, of Latin American history, not of training at the School of the Americas. The opposite thing, the question is, has the training there done anything to make them less likely to take over their governments? It probably hasn't done that, either.

KRAUSE [voice-over]: Commandant Garcia says there's been a lot of debate over whether the school should offer courses that teach respect for human rights and democratic government.

Comm. GARCIA: In fact, many of our Latin officers think that we don't do enough of that, and perhaps that's a real criticism. But I think we don't want to go into be -- compared to what other ideologies do, specifically the Marxists, where part of being trained, part of the price you pay of being trained by them in the bloc countries is to suffer a lot of ideological exposure to the virtues of the communist system or the Marxist system or like that. I think that we tend to think that democracy sells on its own values.

KRAUSE [voice-over]: Now that the school is in the United States, the hope is that Latin officers will learn about democracy first hand. The young cadets from El Salvador, for example, had an opportunity to travel extensively during their six months at Fort Benning. As they were packing for home, we talked to one of the cadets, Walter Zabaleta.

[interviewing] What did you find to buy in the United States?

WALTER ZABALETA, El Salvadoran cadet: Clothes. Electrical appliance, many things.

KRAUSE: What did you find most interesting?

Cadet ZABALETA: The people. They are very interesting. The people are very friendly and they are interesting to El Salvador. I enjoyed very much in this place.

KRAUSE: How do you think North Americans and Salvadorans -- are there differences in the way we think about things?

Cadet ZABALETA: No. They think the same way because they think that democracy is the most important thing.

Prof. MILLET: I suspect they get exposed more to K-Mart than they do to democracy.

KRAUSE [voice-over]: Professor Millet doesn't think just being at school in the United States is enough.

Prof. MILLET: It establishes lines of communication, and those can be useful. It probably contributes a little to mutual comprehension. Every little bit helps. But the overall effect, I think, is much more limited than either the most ardent advocates or the most ardent detractors of the school would maintain.

KRAUSE [voice-over]: The school's primary mission is to provide military training, and by all accounts it does that very well. It's importance was underscored again last month when the cadets graduated. Among those present was General Carlos Vides Casanova, El Salvador's defense minister. He told the cadets they had just finished one of the most important components of their military training. He also reminded them of their duty to respect democracy and human rights. It was a poignant message at what was a poignant ceremony. From Fort Benning the cadets return directly to El Salvador. Today they're on a distant battlefield, fighting for their country and for the United States. Through them the School of the Americas plays a key role in the Reagan administration's strategy for countering Cuban-style revolution in Central America. That strategy: to train local armies to fight local battles, to avoid another Cuba and to help prevent another Vietnam.

LEHRER: Tomorrow night Charles Krause looks at the political problems in Panama, home of the Latin Command and key to U.S. interests in Central America. Developing Story: Polaroid vs. Kodak

MacNEIL: Tomorrow things will start to get tough for some 16 million Americans who own instant cameras made by Kodak. As a result of a Supreme Court ruling today, Kodak must start getting out of the instant photography business tomorrow. Kodak has lost a nine-year patent battle with Polaroid, which introduced its first camera 37 years ago. Polaroid charged that Kodak copied one of its cameras, and the court agreed. Kodak asked for permission to stay in the instant photography business, saying its reputation would be irreparably damaged. But today that appeal was turned down. To discuss what it means we have Eugene Glazer, an industry analyst with the brokerage firm of Dean Witter Reynolds. First of all, those 16 million consumers. What's going to happen to them? How can they buy film for their cameras?

EUGENE GLAZER, technology analyst: They won't be able to. As of tomorrow Eastman Kodak can no longer sell film for its cameras.

MacNEIL: So even if the stores have some it'd be illegal to sell it, you mean?

Mr. GLAZER: No, actually they probably could. The retailers can sell it. It's just that Eastman Kodak can't sell it to the retailers.

MacNEIL: I see. So what's going to happen to the people after that film runs out?

Mr. GLAZER: Well, basically they're not going to have the use of those instant cameras. I strongly believe that Eastman Kodak will make some offer to all those 16 million owners of instant cameras to exchange them for conventional cameras. I understand they'll offer them stock, if you will, one share of Eastman Kodak stock.

MacNEIL: What do those cameras cost? What are they worth?

Mr. GLAZER: Oh, probably around anywhere between $30 to $60 would be the suggested list --

MacNEIL: So that's the kind of stake people have in this? So Kodak, they'd be doing that for public relations purposes, to repair the damage in their reputation, would they?

Mr. GLAZER: Well, partially for that but also from the perspective that, I would assume, that Polaroid will make an offer to those 16 million consumers out there to trade in their cameras for Polaroid cameras. That's an obvious market for them.

MacNEIL: And give them a deal on that.

Mr. GLAZER: That's right.

MacNEIL: And would it be at all feasible for Polaroid to start making film that would fit the Kodak cameras?

Mr. GLAZER: No, I don't think they'll do that. I think they'll go the route of trying to convince all those consumers to buy Polaroid cameras.

MacNEIL: I see. Kodak said that its reputation would be irreparably damaged. Is it going to be?

Mr. GLAZER: I don't know about that. I mean, I think it will be damaged, from the perspective that when consumers go out to buy a camera there is sort of an implied warranty that that film will continue to be available. But I think this offer which they will make to consumers will be attractive, whether it's Kodak stock or conventional cameras and so forth. I think that will mollify the consumer.

MacNEIL: How is this going to hurt Kodak financially?

Mr. GLAZER: Well, it could be quite significant. For one, the cost of doing that, the cost of getting out of the business -- they've got pretty substantial assets devoted to the instant photographic business --

MacNEIL: They said $200 million worth of equipment will be idled, they told the court.

Mr. GLAZER: That's correct. But I think the biggest part of where it may hurt them is, if this continues to go the way it has been going, if the court says that the Polaroid patents are valid, they've been infringed by Polaroid, it's going to go back to the lower court for damages trial. And in that damages trial we could be talking about a great deal of money that could potentially be going from Kodak to Polaroid.

MacNEIL: So the court has yet to award damages to Polaroid against Kodak?

Mr. GLAZER: That's correct. The damages trial has not yet commenced.

MacNEIL: I see. So it's not just the business advantage to Polaroid, it's the damages. Is this likely to harm Kodak's other business, its reputation for selling all the other photographic products it sells?

Mr. GLAZER: Oh, I think it will hurt somewhat, but I don't think this is going to be a major setback for them, no.

MacNEIL: What is the instant photography business like these days?

Mr. GLAZER: Basically it's been a declining business for a number of years. 1978 was the peak year for instant photography and every year since 1978 the business has declined. Now, I think there is some opportunity for that business to pick up. Polaroid is about to introduce the major new instant photographic system, probably within the next three months or so, and that has a potential to turn that around somewhat.

MacNEIL: But what was causing the decline of the business?

Mr. GLAZER: Well, I think basically what you've had over the years is the availability of these 35-millimeter cameras, first the single-lens reflex camera, then rangefinder cameras, cameras which are very, very simple to use, relatively low in price and give you superb pictures. Instant photography to date has not given you superb pictures and it's a very expensive form of photography. So there has been a switching process, I think, that's been going on, from instant more to conventional.

MacNEIL: But you would expect the instant to pick up again with Polaroid's new system?

Mr. GLAZER: Well, I think there's some opportunity for that to happen. The new system will be a much higher quality system than the old system and, from what I've seen of it, the pictures will be close to 35-millimeter in quality. They'll still be expensive but now you'll be able to get a quality level that pretty much rivals conventional. And I think that will help.

MacNEIL: Speaking of damaging Kodak, this was a turbulent day on the stock exchange. What happened to Kodak's and Polaroid's stock today?

Mr. GLAZER: Well, what you would expect would happen. Kodak stock went down; Polaroid stock rose. Actually it hit a one-year high. It was up three points at one point during the day, traded a million shares, which is extremely unusual for Polaroid. Of course, Polaroid stock has been strong for the past several weeks. I think there has been some anticipation by professional investors that Polaroid was going to win.

MacNEIL: Now, can I ask you to put on another hat and be a Wall Street analyst and tell us what on earth happened on Wall Street today?

Mr. GLAZER: Well, really what happened was early in the day --

MacNEIL: Just to recapitulate for viewers who missed the beginning of the program, the market dropped 39 points, the biggest drop it's ever taken in one day, right?

Mr. GLAZER: I mean actually not in percentage terms. The biggest point drop that it's ever taken. Well, what happened is earlier in the day the employment figures were released and, actually, from most of our perspectives the figures were good. There was a decrease in unemployment, a very sharp rise in non-farm employment, and what that was starting to suggest is that maybe perhaps the economy is starting to pick up, and if the economy is picking up there's no need for interest rates, for the Federal Reserve to drop the discount rate and therefore everybody started to think, well, perhaps we're not going to get this fall in interest rates that we've all been expecting --

MacNEIL: Especially after Henry Kaufman of Salomon Brothers said so.

Mr. GLAZER: That's right. I think that was a major --

MacNEIL: He has extraordinary influence, doesn't he?

Mr. GLAZER: Yes, he's got a lot of power in what he says. And so what happened is the bond market got hit very sharply and that spilled over into the stock market. And of course you've had the stock market hitting new all-time highs, I think perhaps readyfor some setback, and this was what precipitated it.

MacNEIL: What's your reading of what's going to happen next?

Mr. GLAZER: Well, basically we've taken a quite positive view of the market. One would expect something like this to happen, perhaps not of the magnitude that it happened in one day. You've got to expect these type of setbacks as you move along. But I would think overall 1986 is going to be a pretty good year for the stock market, reflecting a turnup in the economy.

MacNEIL: Mr. Galzer, thank you very much.

Mr. GLAZER: My pleasure.

MacNEIL: Jim?

LEHRER: Today's Lurie cartoon is again about Qaddafi of Libya.

[Lurie cartoon -- (to the tune of the Viennese Waltz) Qaddafi lies on the therapist's couch complaining, "My problem, doctor, is that no one wants to listen to me anymore." But the doctor has left the room.]

Again, the major stories of this day. Libya promised not to harm or hinder the Americans ordered by President Reagan to leave Libya. West Germany and other European allies declined to join the U.S. sanctions against Libya. The unemployment rate for December was 6.9 , the first time it's been below seven since Jimmy Carter left the presidency. Stock prices, as we heard, took their deepest dive in history, the Dow Jones industrial average closing down 39 points. And a faulty engine valve caused the launch of space shuttle Columbia to be scrubbed again, this time indefinitely. Good night, Robin.

MacNEIL: Good night, Jim. That's our NewsHour tonight. We'll be back tomorrow night. I'm Robert MacNeil. Good night.