The NewsHour with Jim Lehrer

GWEN IFILL: Good evening, I'm Gwen Ifill. Jim Lehrer is off tonight. On the NewsHour this evening, policy and protests collide at the world trade talks in Seattle. Spencer Michels and Margaret Warner update the story. Then, Ray Suarez looks at the connection between free trade and democracy in China. Supreme Court watcher Jan Crawford Greenburg explains two big cases that were argued there today. And Fred de Sam Lazaro reports on an unusual low-cost housing program in South Dakota. It all follows our summary of the news this Wednesday.

NEWS SUMMARY

GWEN IFILL: After a day and night of unrest, Seattle was calmer today, as the World Trade Organization began its second day of meetings. City officials declared about 50 downtown blocks off-limits to protests. Some 300 people were arrested last night and this morning, as police clamped down on lingering demonstrators. Unarmed National Guardsmen and state troopers were called in to help restore order. That was the scene greeting President Clinton when he arrived. He spoke to farmers and others late this afternoon.

PRESIDENT CLINTON: We need to start and ask ourselves some basic questions: Do you believe that, on balance, over the last 50 years, the United States has benefited from world trade? I do. There wouldn't be nearly as many family farmers left in America as there are today, with all the mechanization and the modernization if we hadn't been able to sell our products around the world.

GWEN IFILL: The President later addressed the WTO Conference. We'll have more on this story right after the News Summary. The U.S. Supreme Court heard arguments today in a major public health case involving tobacco. At issue was whether the Food and Drug Administration has the authority to regulate tobacco under a 1938 law, the Food, Drug, and Cosmetic Act. A lower court had ruled only Congress has that power. But the federal government, backed by 40 states, wants that decision overturned. Former FDA Chief David Kessler said there's no question the agency should have authority over tobacco.

DR. DAVID KESSLER: Nicotine is a drug. Open any medical textbook. There is no question in any one's mind, the industry has publicly said, Philip Morris said a number of weeks ago that nicotine is an addictive substance. If it's an addictive substance, then it fits squarely within the act.

GWEN IFILL: Tobacco industry lawyers said they made a strong case against regulation.

CHUCK BLIXT, Attorney, Reynolds Tobacco Company: We're very pleased with the way the arguments went today. We believe the Justices clearly indicated that they understood what is a very complex case that boils down to one simple question and that simple question is: Who is going to have the power in this country to make a decision of a policy magnitude of should cigarettes should be allowed to be sold or not? Is it Congress, or is it a single unelected bureaucrat in the federal government.

GWEN IFILL: We'll have more on the court's day later in the program tonight. Deaths caused by AIDS have orphaned 11 million children worldwide. That's according to a new United Nations report released today marking World AIDS Day. Most of the orphans are in sub-Saharan Africa. 60 percent of AIDS-related deaths occur there. The report also said children in developing countries who lose parents to AIDS are also more likely to be abused and treated as outcasts. An international team of scientists announced a breakthrough in genetics today. The researchers said that for the first time, essentially an entire human chromosome has been mapped. All human DNA is contained in 23 pairs of chromosomes. Doctor Francis Collins of the National Institutes of Health said the new findings could be considered the first chapter in the human instruction book, a first step toward prevention and cure for strokes, heart disease, and mental illness.

DR. FRANCIS COLLINS: This is like a dream come true for the disease gene-hunter. As soon as you know your neighborhood, you know all the players. They're right there on your computer. And you can design your strategy to look for those sequence changes that are going to dell you which gene is involved in a fashion that is dramatically more efficient and rapid than anything we could have done before. So a project to find, say, the schizophrenia gene on chromosome 22, which would have perhaps taken a decade to narrow down and should, with this kind of information, only take a matter of a few months.

GWEN IFILL: The work is part of the Human Genome Project, a $3 billion, government-funded effort, to detail human genetic makeup. The research is to appear tomorrow in the journal "Nature." U.S. And Mexican investigators found the remains of three more people today in a search near Juarez, Mexico. That's in addition to the partial remains of two people found yesterday. Authorities believe they may be the victims of a Mexican drug cartel. A spokesman for the Mexican attorney general's office said bones, clothing, and shoes were undergoing DNA analysis. Investigators have said as many as 100 bodies, including several Americans, may be buried at two ranches near Juarez. The British government gave home rule to Northern Ireland today. Parliament approved the move late last night. Queen Elizabeth issued the formal order transferring power to the province's new Protestant-Catholic government. In Dublin, Prime Minister Bertie Ahern declared Ireland was irrevocably dropping its claim to the region. A 12-member cabinet was formed Monday from an elected assembly chosen last year as part of the Good Friday peace agreement. That's it for the News Summary tonight. Now it's on to policy and protest in Seattle, trade and democracy in China, Supreme Court arguments, and low cost housing in South Dakota.

UPDATE - POLICY AND PROTEST

GWEN IFILL: Once again tonight, Spencer Michels begins our coverage of the world trade meeting in Seattle.

PROTESTERS: The whole world a watching!

SPENCER MICHELS: Protesters at the World Trade Organization meeting returned with the dawn this morning, and so did the police. Day two of what is being called the "Battle in Seattle" by WTO foes began with the lifting of an overnight city curfew declared by the mayor. Seattle authorities arrested more than 100 protesters as part of a more aggressive stance that includes the sealing off of the WTO Conference site. As the city tried to recover from yesterday's damage, some shopkeepers boarded up their storefronts in a defensive posture. Others worked to clean up graffiti and bring order back to Seattle. Officials acknowledge that most of the protesters were peaceful. Some of them were among those who came to help.

SPOKESPERSON: I don't want the statement that we have to get clouded by the violence that occurred yesterday. So I think this is a good way to help remedy that.

SPOKESPERSON: 90 percent of the protesters that were here yesterday were really upset about all the property damage that's been done to Seattle. It's...

SPOKESPERSON: You know, none of us came here with the intentions of doing any kind of violence, any kind of graffiti.

SPENCER MICHELS: Yesterday's crescendo of civil disobedience and violence began with demonstrators getting in the way of WTO ministers and delegates who couldn't get to the opening ceremonies. That session was eventually scrapped, to the disappointment of WTO officials. Police arrested at least 68 demonstrators yesterday and tried to disperse the crowds with pepper spray, tear gas and rubber bullets throughout the afternoon and evening. But as night fell, looters and rioters were clashing with police, breaking windows and trashing police vehicles. Seattle's Mayor Paul Schell declared a state of civil emergency, and Governor Gary Locke called in some 300 state troopers and 200 members of the National Guard to buttress the Seattle police force.

GOV. GARY LOCKE: We're very concerned about public safety. We're very concerned that the Seattle Police Department and the state patrol officers that are already on the scene, as well as the key county police officers have the help that they need in order to keep the peace to keep things calm and so that no one is truly injured.

SPENCER MICHELS: Inside the meeting yesterday afternoon, U.S. Trade Representative Charlene Barshefsky tried to put a positive spin on the day's events.

CHARLENE BARSHEFSKY: This administration has a fundamental sympathy with the views expressed by those protesters who came peacefully to Seattle, who protested peacefully, and as I said, I think quite effectively and who are voicing indeed the same concerns the administration itself has raised over the last five-plus years.

SPENCER MICHELS: WTO Director General Mike Moore was determined to move forward.

MIKE MOORE: This conference will be a success. The issues are far too important to be ignored. Peaceful protests-- I know, because I've been a member of many of them-- often lead to important reforms and social achievements. Such protests have been instrumental in leading to a process of dialogue and engagement. And they have many times throughout history, paved the way for achievement. But violence and destructive behavior would not to be part of that process.

SPENCER MICHELS: President Clinton, who had earlier expressed sympathy for the protesters, had a full day in Seattle today. Shortly after noon he addressed a group of local students and farmers, where he talked about the protests and the need to open up the WTO.

PRESIDENT CLINTON: To those who came here to peacefully make their point, I welcome them here, because I want them to be integrated into the longer-term debate. To those who came here to break windows and hurt small businesses, or stop people from going to meetings or having their say, I condemn them. And I'm sorry that the mayor and the governor and the police officers and others have had to go through this. But we need to make a clear distinction between that which we condemn and that which we welcome, because... (Applause) I am convinced we do have to open the WTO and the world trading system to greater public scrutiny and to greater public participation.

SPENCER MICHELS: Then it was on to the WTO meeting, where he was to address trade officials from 135 nations.

GWEN IFILL: Margaret Warner takes it from there.

MARGARET WARNER: Joining me first from Seattle is the city's mayor, Paul Schell.

MAYOR PAUL SCHELL, Seattle: Thank you.

MARGARET WARNER: Tell us what you've done do restore order today after what happened yesterday.

MAYOR PAUL SCHELL: Well, we did a number of things yesterday afternoon. I declared an emergency, which gave me authority to ask for help from the National Guard. We had a curfew last night that started at 7:00 and extended until daybreak. And then we slowly moved the protesters out. We had something like 35,000 protesters in our city -- 34,000 of which from labor to the faith-based organizations worried about human rights, the environmental community, who were very peaceful, who worked with us, and who made their points. And I wanted to be sure that they had a chance to leave as we tried to clear the area so we could have a safe city for the delegates. And I think that's all worked pretty well. We've got a much larger perimeter that includes the hotels, and that we're making peaceful arrests now of those who are remaining.

MARGARET WARNER: So any demonstrators inside this security perimeter are being arrested today?

MAYOR PAUL SCHELL: Yes. And we've arrested something like 300 today. And it's been peaceful, and they're making their point and we're having to devote a lot of resources to make this happen, but we're committed to do that.

MARGARET WARNER: And so, just to be clear, even if they're obstructing anyone now, if they're demonstrating inside this zone, they're out of there?

MAYOR PAUL SCHELL: If they violate the law. And so that's a key part of this as well, and that, to the extent that they're occupying intersections and disobeying the law, then we're responding.

MARGARET WARNER: Now, your governor called out the National Guard. What's their role?

MAYOR PAUL SCHELL: Well, I asked him to call out the National Guard. We're using them primarily to back up. I've had a lot of officers out on the street for 12, 14 hours. And we're using them for backup support. They're not armed, but they are trained in crowd control, and so they're being very helpful. We've also had help from the King County Sheriff's Department, from other surrounding municipalities, and we're doing the best we can. In many ways, it's a triumph of free speech, because we allowed our citizens to make their case -- anybody who wanted to, even though we knew full well there were some people who had a different agenda, but I thought it was more important to let that happen as peaceably as we could, and make sure that nobody got hurt. And we've had very few injuries, none serious. The ministry opened, albeit a couple hours later. Sometimes democracy is a little messy, but in this case, I think that the people were heard, the message was sent, and the people had a chance to speak. And while I absolutely abhor the property damage, and it makes me sick to my stomach to see what they did to the walls of the symphony hall, but we're going to fix that. And now many of the protesters who marched yesterday are helping us clean up the city. And again, it's a sign that a civil society can work, and I think that's a very important message to send as well, that free speech, engaging our citizens, and being part of the process of making decisions is an issue that we need to take very seriously as well.

MARGARET WARNER: I think a lot of Americans, seeing those television pictures last night, or the pictures in the paper this morning, are wondering how it was so out of control. I mean, these demonstrations were anticipated, were they not?

MAYOR PAUL SCHELL: Pardon?

MARGARET WARNER: The demonstrations were fully anticipated, were they not?

MAYOR PAUL SCHELL: Oh, yes. We'd worked for months with all of the demonstrators, including the Ruckus Society, those who had promised a peaceful, non- violent. And as I said, 99 percent of them were fine. There were some self-proclaimed anarchists from other parts of the country who infiltrated those marches and started throwing off M-80's inside. But no, I think we never lost control, but we had streets that were blocked, and we had vandalism by just a few people, but enough to break windows. And in many ways, the protesters who were trying to make their message were the most offended by this -- labor, the environmentalists -- and those are the people helping us. I couldn't be doing what I'm doing today without the support of the larger community, without the support of those who made those early protests. And so, I think today, because of allowing people to have their say, and making sure that they were heard, we're able to take much more direct action to ensure that we have a safe city for everybody in the city.

MARGARET WARNER: Now, some of the protesters who've been interviewed in the Seattle papers have been quoted as saying, "what we expected to have happen yesterday was, we would be... if we were blocking an intersection, the police would come along and they'd pick us up, put us in a paddy wagon, arrest us--" kind of what you're doing today --not to start immediately with tear gas and rubber bullets. Why were those tactics necessary?

MAYOR PAUL SCHELL: They were because partly, there was a strategy that, if we had to arrest 1,000 people with the1,000 officers we had, we'd have nobody to protect the rest of the people who were doing a peaceful demonstration. It was... it took a lot of discipline on the part of our officers, and patience, to watch people vandalize buildings, knowing that the strategy was to get them to leave their post, and to deal with the vandal people, and that would have put at risk the children and the families from our churches, our labor unions, our environmental community that were out there making their peaceful protest. Look, if I had closed the city and denied protests and had put all sorts of forces in the large area that is really the core of our city where this convention is being held, we'd have been severely criticized for stopping free speech. We'd have been potentially accused of precipitating an even worse demonstration because we were not letting people be heard. And so we took perhaps a tougher course by allowing this to occur, as messy as it was, no serious injuries, the ministerial began, and if the city stands for anything that offsets the awful images of a city being vandalized, we're also a city of free speech.

MARGARET WARNER: Thank you. Thank you so much, Mr. Mayor, for being with us, and good luck.

MAYOR PAUL SCHELL: Thank you.

MARGARET WARNER: Now what's going on inside the WTO meeting. Once again we're joined from Seattle by David Sanger, economic correspondent for the "New York Times." Welcome back, David.

DAVID SANGER, New York Times: Hi, Margaret, how are you?

MARGARET WARNER: Very well. I see now at least we're able to get you out of the meeting site.

DAVID SANGER: That's right. I'm in the convention center where the meetings themselves are taking place upstairs.

MARGARET WARNER: So are things back on track today at the meeting?

DAVID SANGER: They seem to be. I was just up in the offices of some of the trade negotiators, and you see groups getting together and beginning to hash through the questions of what will actually be on the agenda for these trade negotiations. And remember that while you see plenary sessions and so forth on television, the real work of these kinds of things is really done in small rooms with small groups of representatives of different countries.

MARGARET WARNER: Now are the protests that we saw yesterday having any impact on the substantive work of the meeting?

DAVID SANGER: It's a complex question, and we probably won't know the answer to that until we see on Friday the actual agenda for the negotiations that they agree upon. But I can tell you this-- it's fairly clear that many sides are trying to use what happened on the street here to reinforce their negotiating positions upstairs. For example, the French have taken the protests that were against genetically modified foods, and said, "see, even the people in your own country believe that U.S. regulations should not force these kinds of foods on European consumers." The Americans, in contrast, have taken the labor protest and said, "see, this is a deeply emotional issue. It's time for the World Trade Organization to include core labor standards in their mandate in trade negotiations."

MARGARET WARNER: Now yesterday we talked about the fact that the administration was ready to push for at least starting some working group on labor inside the WTO Are they ready to go any further? The reason I ask that is that the President, I guess, gave an interview to the Seattle newspaper, one of them, and said he thought that the working group should then go on to define core standards on labor matters, and that in fact they should become part of trade agreements, and that ultimately there should be a system with sanctions for violating provisions of that. Are they pushing for that now?

DAVID SANGER: Well, I think that some of the American negotiators probably wish the president hadn't gone quite as far as he did in that interview. The fear that some of the developing countries have is that the real U.S. agenda is to use this working group to get trade sanctions set in place as part of these agreements. So, for example, if you could prove that India or Sri Lanka or some other country had poor working conditions or was using child labor in their factories, you could take a trade sanction against their products as they come into the United States. But I'm not sure that the President's comments necessarily helped his own negotiating team, because their public statement so far has been, "we just want to study these issues. We don't know how it will turn out." Of course, these statements reveal how the president wants it to turn out.

MARGARET WARNER: Speaking of suspecting U.S. motives, you had an interesting little line in your article this morning that you talked to at least one developing country ambassador who thought even the protest might have been coordinated or part of a U.S. administration... I don't think he used the word "plot," but explain that.

DAVID SANGER: Well, one of the wonderful things about WTO meetings is that they create conspiracy theories all over the place. The people on the street believe the WTO is a conspiracy to create world government. The diplomats who are upstairs saw the fine hand of the United States in this. They thought that some of the demonstrations-- or at least a few officials said they thought the demonstrations were, in fact, an effort by the U.S. to influence the negotiations, and that that's why the U.S. let the negotiations... let the demonstrations go on so long.

MARGARET WARNER: One of the issues that the demonstrators talk about, and we had a discussion last night on the show as well is the fact that all these WTO trade matters, when they are adjudicated, are all done in secret in Geneva.

DAVID SANGER: That's right.

MARGARET WARNER: Do you think that at the very least, this meeting might change

that?

DAVID SANGER: I suspect it will begin tochange that, but probably not as far as many on the street, and even the U.S. negotiators would like. I was just discussing the subject with some of the U.S. negotiators. What they are hoping for is to basically make a number of the documents within the WTO public as countries go back and forth, and even to make the adjudication process, the court of the WTO, open to some kind of observation. Many in Europe oppose this. They say that these are basically government-to- government negotiations, even if they're taking place in front of a judge, and if you opened it up, it would change the nature of the process, make it far more political. The U.S. response is, "well, the international court of the Hague proceedings are open, why not these?" I suspect that you'll see the U.S. make some progress on this, but probably not anywhere near enough to satisfy the critics of the secrecy of the WTO.

MARGARET WARNER: Now the administration came into this wanting to use this meeting to launch this next round of global trade talks. Where do you think the prospects of that stand now?

DAVID SANGER: Well, I would suspect that when they're all done with this, the talks will be launched. The question is, under what terms? And you know how these things work out, Margaret. The document that will come out will be vague on the most contentious issues. Then they'll start the process of negotiations and at some point, some different countries will say, no, no, no, no -- the agreement we reached in Seattle doesn't allow this issue to be negotiated, but it allows that issue. Let me give you an example. Watch for the wording on what the objective is in agricultural subsidies. The U.S. wants wording that says that the purpose of the negotiations is to eliminate subsidies to farmers, and the Europeans just want wording that will say something like move to reduce or substantially reduce.

MARGARET WARNER: Final question, and briefly, the President, of course, is there now. He is the leader of the most powerful country in the free world. How do you expect the administration to try to use him? In other words, if he had one thing he's trying to do there, what is it?

DAVID SANGER: Well, I think what he's trying to do is use his considerable rhetorical skills to try to move the negotiations toward these labor standards and environmental standards that we've discussed. But remember, at this negotiation, the President doesn't have any of his peers from other countries here. He can't lean on European leaders or Asian leaders. And so to some degree, his influence is far more limited than, say, if he's at a G-7 summit.

MARGARET WARNER: Yeah. I see what you mean. All right, well, thank you, David, very much.

DAVID SANGER: Thank you, Margaret. Good to see you.

MARGARET WARNER: Good to see you.

GWEN IFILL: Still to come on the NewsHour tonight: Trade and democracy in China, Supreme Court arguments, and low cost housing.

FOCUS - TRADE AND DEMOCRACY

GWEN IFILL: Ray Suarez has the story on China, trade, and democracy.

RAY SUAREZ: China hopes soon to become a full-fledged member of the WTO. A question being raised in the U.S. and other western countries is whether WTO membership will push China to democratic reforms. We have three views: Jim Mann is a columnist for the Los Angeles Times and was the paper's Beijing bureau chief from 1984 to 1987. He is the author of "About Face: A History of America's Curious Relationship with China from Nixon to Clinton." Stanley Lubman is a consulting professor at Stanford Law School and provides legal advice to U.S. companies doing business in China. He is also the author of a new book, "Bird in a Cage: Legal Reform in China After Mao." Drew Liu is executive director of the China strategic institute, a think tank that promotes China's peaceful transition to constitutional democracy. Well, gentlemen, I guess we'll start with the most basic question: Can WTO membership open up China? Drew Liu?

DREW LIU, China Strategic Institute: It's necessary condition but not a sufficient condition. But it's certainly a right step towards...in that direction.

RAY SUAREZ: Jim Mann?

JIM MANN, Los Angeles Times: I'm deeply skeptical, Ray, that this WTO agreement is going to change China's political system. I think that's an argument that some elements of the business community use to sell the agreement. This is a trade agreement. It's going to help in some ways some American investors and some American companies that want to export to China and Chinese companies that want to export to the United States. It ought to be judged on its economic merits. But the idea that this agreement is going to change China's political system I think is a fantasy.

RAY SUAREZ: Stanley Lubman?

STANLEY LUBMAN, Stanford University: First of all, we have to know that change in China can only come very slowly. It took centuries for the rule of law to evolve in the West, and it's going to take a very long time-to-for China to make greater progress towards legality. But entry into the WTO ought to provide momentum to legal reforms that have been ongoing. The members of the WTO have to agree to provide uniform impartial and reasonable systems of law-making. China has to agree in a protocol of accession to do what is necessary to meet the treaty standard. If and as China does what it's supposed to do, then improvements in the Chinese legal system ought to benefit Chinese, as well as foreigners.

RAY SUAREZ: Well, Stanley Lubman, given China's recent past and its track record toward international regimes, opening to the outside world, allowing supranational sovereignty to affect Chinese interior law, how likely do you think it is that they will exceed to these things you mentioned?

STANLEY LUBMAN: The Chinese leadership, it has not made a wholesale commitment and a deep-seeded commitment to the rule of law, but it also recognizes that it must reduce arbitrariness in Chinese governance in order to maintain its own legitimacy. So for its own reasons, it has been implementing some laws that have begun to take some effect. Also, the consciousness of those laws and of rights under those laws is beginning to spread slowly in China. There will come movement from Chinese society, as well as from above, and I think, although it's going to take a long time, as I said, there will be... there ought to be some movement towards openness.

RAY SUAREZ: Drew Liu, people have been waiting since Nixon's visit to China for economic liberalization to bring political liberalization in its wake, and a lot of people have been disappointed in that expectation. Why should WTO make a difference?

DREW LIU: Well, rightly so because China is such a big elephant. When elephant moves, turns around, it moves very slowly. There's no linear linkage between the economy and the political life, but however, China's past progress in the last two decades were primarily brought about economic changes. When the economy really energized into the people's, you know, thinking and the civil liberties and then from that, you have the spillover impact into other sectors of life, including the political life. I think the rule of law, as the professor pointed out, is a very important building block. Beyond that, you have the information exchange, into China. and then people get to know what's going on outside. And then they have like a target, a vision for the future. And right now, there is a tremendous energy inside China to move forward to a new century. And that the past Communist kind of a residual regime is no choice, and the future has to be democratic institutions and based on the rule of law and their respect for human rights. I think there's no alternative if China evolves peacefully and run its own course in time, and the WTO is something like stabilize this process and stabilize not only the U.S.-China relations, but also the internal process which China needs, especially at this moment, the reform engine somewhat lost its steam, and it needs external stimulus to push the reform engine forward.

RAY SUAREZ: Jim Mann, could we end up with an economically liberal but politically authoritarian state at end of this process?

JIM MANN: Very, very possibly. You know, there is a model for this. This issue of the rule of law, the questions question is: Rule of law for whom? We could have the rule of law for foreign investors and foreign companies and not for individuals. That's what you have in Singapore, where you have a legal system which does quite well at protecting foreign investors and is also used by the government to harass dissent. And Singapore in some ways is a model for China. China is so much infinitely larger than Singapore that I don't think you can compare the two, but that's the idea. And you take one look at shall within a couple of days after the WTO agreement was signed, or within days of it, and you have...what happens? You have the executive committee of the National People's Congress gets together, they pass a law about cults to crack down on cults, and then they use this law to go out and arrest members of this organization Falun Gung. So you can have the rule of law for oppressive purposes, as well.

RAY SUAREZ: Stanley Lubman, let's talk a little bit about the ways that the short-term health of an economy may force a state to move to crack down. A lot of the economic forecasts about WTO's effect on China says that, in the near term, there may be new mass unemployment, as inefficient state industries are shut down, as factories that don't produce things that people want to buy are shut down and as cheaper agricultural commodities make it apparent that some Chinese farms just have too many people producing things that are not economic. Could this force a crackdown?

STANLEY LUBMAN: As you say, in the short term, yes, social unrest could deter the improvement in legal institutions. But I'd like to make one point that I think is important about what the WTO can do before China belongs. I mentioned the protocol of accession. That... there is a draft now, which states what China has to do in order to improve its legal institutions. That draft not exigent or articulate enough on what China has to do. And I think in the multilateral negotiations that have not yet been concluded, the standards should be set in a more precise fashion so that there will be a higher express standard that China has to meet in the short and in the long run, I think that's very important.

RAY SUAREZ: Drew Liu, international activists have tried to bring attention to the existence of prison camps producing commodities for international export, widespread use of coerced labor, child labor. Could we see WTO addressing and effectively working against these things?

DREW LIU: There are bound to be two steps: First, bringing China in, into some kind of forum. So within the institutional structure, then try to pressure China towards more conformity with the international standard. What a very important point is the WTO is not the end of the game; rather, it's the beginning. And we they'd to look at, as a process, bringing China closer and closer to the international ethical standard, including what you mentioned about the labor issues and labor camps.

RAY SUAREZ: But this is a country that, because of its peculiar history, has been very protective of its internal sovereignty. There was a time when foreigners had burr owed into the country, so they want to make sure that doesn't happen again. Why should it happen now?

DREW LIU: Look at its history, and in the last 150 years, China was obsessed with foreign invasions of its culture, ending of Chinese civilization. And with Hong Kong's return and China's gradually assuming a more normal, kind of a posture in the international community, I think there will be a normalization not only of, you know, China's external relations with the West, but also with itself, about its identity, about what kind of values it will pursue, and I think it needs a process. And the WTO, you know, stabilized the international environment and create the kind of condition incentive, as well, so China can gradually evolve towards, you know, democracy and constitutional democracy.

RAY SUAREZ: Jim Mann, do you find Drew Liu too optimistic?

JIM MANN: I do find him too optimistic. I hope he's right, I wish he was right. I don't see a lot of change, and I don't see a lot of change down the road either. People talk about the changes that the Internet and interaction will bring to China. We're talking about a country, this is not the United States where everybody, or most people are on the Internet. Workers in China make less than $100 a month. How many of them do you think are out there surfing the web? How many Chinese peasants are out there surfing the web? There will be, as China's economic interactions with the rest of the world increase, more information coming into China. The question to me still, unfortunately, is: How much will the leadership allow people to engage in open political activity? And I haven't seen that yet.

RAY SUAREZ: Stanley Lubman, briefly before we go, what should web looking for?

STANLEY LUBMAN: We should be looking for the slow spread of ideas. I meet ordinary Chinese who have never read John Locke who know about the rule of law because they know how they've been governed, and they know that there's an alternative. I think that those ideas that Drew Liu mentioned and that Jim just mentioned will spread, and I think that slow institutional reform will make progress. But I do think it's going to be very, very slow. We're watching-- I'm going to change the met for that Drew used. We're watching not an elephant. We're watching a glacier creep, and glaciers creep very, very slowly.

RAY SUAREZ: Stanley Lubman, Jim Mann, Drew Liu, thanks a lot.

FOCUS - SUPREME COURT WATCH

GWEN IFILL: Two major cases before the Supreme Court today. One focused on whether tobacco should be regulated by the Federal Drug Administration. The second dealt with federal aid to religious schools. Newshour regular Jan Crawford Greenburg, national legal affairs correspondent for the "Chicago Tribune," was at the court for both arguments this morning, and is here with us now.

Jan, both sides seem to agree at least that this... to this much, and that's that cigarettes are unsafe. But that's not really at the root of this argue.

Is it?

JAN CRAWFORD GREENBURG: Well, no. I mean this case really began in 1996 when President Clinton announced that the FDA, The Food and Drug Administration, for the first time ever was going to regulate tobacco products as drugs and drug-delivery devices. President Clinton said at the time that the regulation was important as part of this effort to curtail underaged smoking. So as parted of that, the agency issued a series of regulations that limited the sale and marketing of cigarettes, limits on vending machines, limits on advertising to curtail this underaged smoking. The industry, retailers, advertisers, immediately filed suit to block this newly asserted regulatory role. They prevailed in a federal appeals court, which said basically that the FDA had no authority to regulate cigarettes, that Congress never intended for the FDA to have that authority. The agency took that dispute to the Supreme Court, and that's what we got into today.

GWEN IFILL: You were in the courtroom today. What were the arguments like?

JAN CRAWFORD GREENBURG: Well, this really I think was the court at its finest hour. It was just a terrific argument. The Justices, though testy and tense at times, were thoroughly engaged throughout. The advocates on both sides, Seth Waxman for the Clinton administration, Richard Cooper, a prominent Washington lawyer for the industry, very, very distinguished and quite ably presented their respective positions. So it was just a terrific argument with quite a lot at stake.

GWEN IFILL: There seems to be... that's my very next question: What is at stake? You have Congress, which has something at stake here, the tobacco industry, which has something at stake and the FDA, as well.

JAN CRAWFORD GREENBURG: Well, that's right. And in the short term, of course, what's at stake is whether or not these regulations will go into place or at least some of them. Some also are under attack by the advertising restrictions. But in the long term, the industry argues that nothing less in a way than its future is at stake because they maintain that there's no way that you can say cigarettes are safe and effective, as you mentioned earlier, so therefore, if the FDA is going to regulate them as a drug, it would have no choice but to ban them.

GWEN IFILL: Isn't that a reasonable argument?

JAN CRAWFORD GREENBURG: Well, some have made that argument, and the appeals court below found that to be a reason why the FDA lacked this jurisdictional authority. They said, "look, Congress surely never intend tended that result. Congress never would have wanted the FDA to ban cigarettes."

GWEN IFILL: For years, the FDA has said they didn't have the power to regulate tobacco or the tobacco industry for various reasons. What's different now?

JAN CRAWFORD GREENBURG: The FDA says that newly discovered evidence shows that the tobacco industry knew about the intended effects of nicotine, and because of that, because there's this intent, that it brings it within the definition of the law and that it allows it to regulate these products as drugs and drug devices.

GWEN IFILL: So say the court decides that tobacco is a drug and that a cigarette is a drug-delivery system. Is there any choice it has but to give the FDA power to regulate it?

JAN CRAWFORD GREENBURG: Not... I guess not in the short term, and there still will be things hashed out in the lower courts on, for example, the advertising restrictions, which a district judge found to be unconstitutional. But several of the Justices were very skeptical today about this newly asserted regulatory role that the FDA maintains that it now has.

GWEN IFILL: Now, I know it's hard to predict what the Justices will do, and I would never put you in that position. However, here's an interesting cue perhaps. Do any of the Justices smoke?

JAN CRAWFORD GREENBURG: Yes, actually Justices Antonin Scalia and the chief justice, Chief Justice Rehnquist both smoke. And in fact they also scoffed today when Seth Waxman made the point that the FDA was stepping in now because the industry, for so long, has denied that nicotine is a harm... Or is an addictive substance. And Scalia and Rehnquist both said, "well, no one believed that when they said that it wasn't addictive." But other Justices today seemed very skeptical, as well. Justice O'Connor, for example, said that regulation of cigarettes just doesn't fit under federal law, and she said, "I think the conclusion is, under the statute, if they are covered, tobacco, tobacco has to be banned."

GWEN IFILL: There was another case, important case argued today at the court. This was about the separation of church and state, an issue, especially having to do with schools, that the court has tiptoed around a lot. What was different about this case today?

JAN CRAWFORD GREENBURG: Well, in some ways they recognize that they had tiptoed around some of these issues in and that some of their earlier cases have created this very confused state of the law about what kind of aid to schools is appropriate and what is not. Several of the Justices today seemed eager to clarify when federal aid and taxpayer money is appropriate for religious schools, but as other Justices said, Justice Stevens, for example, said that's just a really difficult line to draw.

GWEN IFILL: What is this particular case about?

JAN CRAWFORD GREENBURG: This case involves a federal program that provides instructional materials to public and parochial schools, materials like computers, library books, software. A group of parents in Louisiana challenged that, saying that violates the First Amendment -- the federal aid, you know, going to these religious schools, too establishes a religion and that that's just improper. A federal appeals court agreed, and that's how this case has now reached the Supreme Court.

GWEN IFILL: So presumably, these are parents whose own children are in public schools and think that their money should not be going to...

JAN CRAWFORD GREENBURG: Right.

GWEN IFILL: How do you make the distinction between, say, federal money spent for computer and federal money spent to send kids to school on a bus?

JAN CRAWFORD GREENBURG: Well, the court grappled with many of those said. They said, "you know, could you... what about a lectern? Could the government pay for a lectern that a teacher would use to teach are or software? Could they build a school, a religious school if they also were building public schools?" In the past, they've said that textbooks were okay for religious schools, implying that the textbook was all right because it couldn't be used for a religious purpose. I mean it was there, what was in the textbook, so they couldn't take it and turn it around and use it to do something different.

GWEN IFILL: Unless the textbook was about creationism.

JAN CRAWFORD GREENBURG: Well, that point was made in court today, too.

GWEN IFILL: So what can we glean from the questioning in court, once again, on this case about where the Justices are coming down?

JAN CRAWFORD GREENBURG: Well, this is... I think this was with a much more difficult argument in many ways. And while the first argument was fast and furious and you know, 85 miles an hour, this one slowed down to about 50. And some of the very influential Justices, Justices that we think of as swing votes on these very difficult issues of religion, Justice O'Connor and Justice Kennedy, were pretty quiet during this argument. I think that the main thing we can take from today's case is that the Justices themselves are somewhat, I guess you could say frustrated with some of their earlier decisions and would like to clear up these issues, particularly, though it wasn't mentioned specifically today, but particularly as other issues are on the horizon, such as school vouchers.

GWEN IFILL: We know what the stakes were in the tobacco case, who the winners and losers are. What stands to be lost or gained in the ruling on this case?

JAN CRAWFORD GREENBURG: Well, the federal government wants to try and have every American classroom connected to the Internet. That's a very... right there, that's an immediate impact that the ruling could have in this case. But as I mentioned, vouchers also, people are very closely monitoring this case because of the implications that it could have for these vouchers, tuition programs, letting parents take, you know, taxpayer money and giving those to religious schools for their children.

GWEN IFILL: And for the future of public schools, as well.

JAN CRAWFORD GREENBURG: Exactly.

GWEN IFILL: Jan Crawford Greenberg, thank you very much.

FINALLY - LOW COST HOUSING

GWEN IFILL: Finally tonight, using the prison system to solve housing problems in South Dakota. Fred de Sam Lazaro of KCTA-St. Paul-Minneapolis reports.

FRED DE SAM LAZARO: The hardest thing to find in South Dakota is people. At three quarters of a million, the entire population is that of an average U.S. city, except here they're spread across 300 small towns, which continue to wither due to a changing farm economy, according to Governor Bill Janklow.

GOV. BILL JANKLOW, South Dakota: South Dakota in 1972 had 185,000 K-12 kids. Today we have 131,000. We have lost 50,000 kids, K-12.

FRED DE SAM LAZARO: Armour is a typical small South Dakota town struggling to hang on to its 854 residents. Communities like these could be attractive to growing families raising children, but housing is a huge problem. There's not much available. At the same time, Janklow said many elderly residents are rattling around in homes they no longer need.

GOV. BILL JANKLOW: They had a lot of children, they had a lot of bedrooms, different floors, big yards. They can't care for that stuff anymore. And they'll move to another bigger community that has elderly facilities, and it helps kill the town.

FRED DE SAM LAZARO: In an ideal world, Janklow said smaller homes would be available right in town for retirees. That would free up some larger homes for young families. So the governor decided to build a small home factory in Springfield, South Dakota. Springfield's attraction? An abundant supply of low-cost laborers, all in fact residing at the same, somewhat confining address. Inmates at the medium-security Mike Durfee State Prison produce about 100 of these modular homes each year. They come in two sizes: 800 And 1,200 square feet. Over the past three years, about 400 of them have been trucked out and cranked onto foundations across the state. The pay for Donald Mallow and about 90 fellow inmates is even more modest than the homes they build-- 25 cents an hour.

DONALD MALLOW, Inmate: We make top $40 a month, okay? And 40 bucks a month, that barely buys your shampoo and your necessity, your health items. And that's it. You know, you can't save any money here.

FRED DE SAM LAZARO: Construction supervisor Steve Maruska says the real savings go to those who are eligible to buy the homes, people 62 or older, or disabled.

STEVE MARUSKA: This is a 1,200 square-foot house, the one that we're in right now, and that's just under $30,000, I think.

FRED DE SAM LAZARO: $30,000, Delivered to any lot?

STEVE MARUSKA: Delivered to any lot within the state.

FRED DE SAM LAZARO: It was a deal that allowed Janice and Lyle Dierks to remain in Armour where the recently retired couple have spent their entire lives.

JANICE DIERKS, Homeowner: We weren't about to stick a whole lot of money into a home at our age, and we both had health problems. We didn't see, you know, getting anything too elaborate.

SPENCER MICHELS: The size and price of their new place was perfect, the Dierks say, and that's echoed by the family that purchased their old place down the street.

BETH ADAMS, Homeowner: They priced this home reasonable so it would sell, and so that somebody like us, you know, a family, could afford to buy it, you know? So we were very fortunate.

MIKE ADAMS: I think they had their "for sale" sign in the yard one day and then...

BETH ADAMS: Yeah, and then we came in.

FRED DE SAM LAZARO: Mike and Beth Adams spent two years looking for a home in the area where she works in a nursing home office. He is a highway patrolman.

BETH ADAMS: It has four bedrooms, which we like, because we have a boy and a girl. They each have their own and we have ours and then we have a guest room that we can put company into.

FRED DE SAM LAZARO: By putting down roots, families like the Adams, with two young children, put money into the bank of Armour's financially strapped school district. State education dollars are based on a head count, says Superintendent Wally Weatherford.

WALLY WEATHERFORD, Armour School Superintendent: It's vital to us that we have young families that have their children going to school in Armour. And, you know, with the governor's housing program, it's a great idea, a great plan. It does help open up some housing.

FRED DE SAM LAZARO: It also opened up a big row will private contractors who say the prison program has cost them jobs. Kurt Hanson of South Dakota's Builders Association says there's no way to compete with 25 cents an hour.

KURT HANSON: There's lots of good things that people need, but when you develop a social welfare program, there are costs. And some of those costs are that unfair competition with the private sector, which costs people jobs. And when you lose those jobs that are very few to start with in those small towns, we're going to impact negatively on that population growth in those towns in that way. So we're paying, you know, robbing Peter to pay Paul here.

FRED DE SAM LAZARO: Governor Janklow calls the contractors' criticism hypocritical since they've long benefited from government- sponsored loan programs.

GOV. BILL JANKLOW: I found it ironic when I met with them, and I so told them. I said, "never have I heard from you people that you object to us competing with the banks and the savings and loans, offering loan rates that are less than banks and savings and loans to buy the houses you people are building.

GOV. BILL JANKLOW: Now, can you get from your chair into the other chair?

ROD TAYLOR: Yeah.

GOV. BILL JANKLOW: You can? And then you run your TV?

ROD TAYLOR: Yeah.

FRED DE SAM LAZARO: Janklow says most buyers in the prison housing program, like Rod Taylor, have modest incomes and could not afford the typical privately built home. But Mike Kauffenberg says his home-building company has lost business to the state.

MIKE KAUFENBERG, Building Contractor: There's one house right near Madison that we know we lost because we priced it out specifically for this customer, and he opted for the governor's house. And of course, like I said, we don't know how many we didn't get because we don't know how many customers never call us.

KURT HANSON: If we could limit this program to people that were not being served by the private sector, right now you could be a multimillionaire making $100,000 a year. You can live in the house as a primary residence and in two weeks sell it and pocket a tidy profit.

FRED DE SAM LAZARO: Governor Janklow says he will fine-tune the program to prevent abuses, but he also plans to expand it. Low-income people need homes, and prison inmates need job skills, he said.

GOV. BILL JANKLOW: When people work a full eight-hour shift a day, forty hours a week or so or more, they don't have time for crime. (Hammering)

FRED DE SAM LAZARO: Inmate apprentices we spoke with complained about the low wage, but each of them readily volunteered for this detail, hoping it would some day launch productive careers.

JAMES BASHAM, Inmate: I'm originally from out west. Out there stuff like this pays really good, so the more experience, the more money you'll make. So do this for a year or two years, you get out on the outside, you'll be set with a good-paying job.

ANDY GRAF, Inmate: Before I came in here, I just split up with my wife, and just working at a burger stand because I didn't know much of anything else, and needed some more cash and I went out and robbed a bar and came in here. And now I'm trying to better myself and hopefully this out here will top it off. And when I get out, I'll stay out of trouble, you know?

FRED DE SAM LAZARO: It's not certain yet whether the prison training will help inmates launch successful futures. Many we talked to had complications with chemical dependency. Also, there are few alumni so far from the three-year program. Nonetheless, Janklow plans to double the output of these so- called governor's homes before his own term ends in 2002.

RECAP

GWEN IFILL: Again the major stories of this Wednesday: Seattle police clamped down on protests at the WTO meetings. President Clinton called for a consensus on dropping trade barriers. A U.N. report said aids has orphaned 11 million children worldwide. And Mexican investigators said they have found the remains of five bodies buried near Juarez, Mexico. We'll see you on-line, and again here tomorrow evening. I'm Gwen Ifill. Thank you, and good night.