The MacNeil/Lehrer NewsHour

MS. FARNSWORTH: Good evening. I'm Elizabeth Farnsworth in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Tuesday, we have a debate about dealing with China, human rights versus trade, a report on how the Alaskan oil spill lives on in the courtroom, an analysis of the big Lockheed- Marietta merger, and the story of an Indian tribe's desire to make money in nuclear wastes. NEW SUMMARY

MS. FARNSWORTH: U.N. Secretary General Boutros Boutros-Ghali said today a last ditch effort to get Haiti's military leaders to step down peacefully has failed. He said they refused to meet with his personal envoy to defuse the crisis. At a meeting in Kingston, Jamaica, this afternoon six nations agreed to contribute troops to a U.S.-led invasion force. Deputy Defense Sec. John Deutch said, "There can be no doubt in anybody's mind that the multinational force is going to Haiti." Another official said the force could number 10,000 and would immediately begin training in Puerto Rico. Meanwhile, the U.S. Coast Guard picked up 731 Cuban refugees so far today, compared with nearly 300 yesterday. Talks between the U.S. and Cuba will begin on Thursday. Jim.

MR. LEHRER: China will resume human rights discussions with the United States. Commerce Sec. Ron Brown made the announcement in Beijing today. He also said American companies have signed up to do $5 billion of new business in China. We have more in this report narrated by Richard Vaughan of Worldwide Television News.

RICHARD VAUGHAN, WTN: The rewards of commercial diplomacy. U.S. Commerce Sec. Ron Brown's visit to China will bring America billions of dollars in new business and a new deal to reopen talks on China's human rights abuses. Last May, President Clinton decided that human rights problems should not block trade. Now Beijing is hoping he'll support Chinese membership of the global trading club, GATT.

RON BROWN, Secretary of Commerce: As of this afternoon, we have already signed agreements with a total value of almost $5 billion, assuring continued economic growth and the creation of jobs in the United States and just as importantly, ensuring the continued development that is taking place in China which would benefit the Chinese people. There will be a renewal and a reopening of the bilateral human rights dialogue between the United States and China.

MR. VAUGHAN: Brown believes more business will foster greater democracy in China.

MR. LEHRER: President Clinton will meet with China's president in November at a trade conference in Indonesia. We'll have more on this story right after the News Summary.

MS. FARNSWORTH: Martin Marietta and Lockheed Corporation announced today they will merge, creating the country's largest defense contractor. The new company, known as Lockheed-Martin, will have annual sales of nearly $23 billion and employ 170,000 people. Lockheed is the maker of the Stealth Fighter. Martin Marietta produces the Mars Observer spacecraft and the Titan IV rocket. The $10 billion stock swap is still subject to approval by regulators and the shareholders of both companies. The new company will be based in Bethesda, Maryland. We'll have more on the story later in the program.

MR. LEHRER: In other economic news today, the Commerce Department reported new home sales up 8.3 percent in July. The increase was seen in all areas of the country except the Midwest. Consumer confidence fell slightly in August. The index stood at 89, down from 91.3 in July. It charts consumer optimism about current and future economic conditions. The Index is compiled by the Conference Board, a private research organization. And that's it for the News Summary tonight. Now it's on to trading with China, the Alaska oil spill in court, the Lockheed-Martin Marietta merger, and profits in nuclear waste. FOCUS - CHINA WATCH

MS. FARNSWORTH: We start today with the China story and the news that the U.S. and China will reopen talks on human rights next month, talks that had been stalled since February. Commerce Sec. Ron Brown made the announcement in Beijing, where he and a delegation of corporate executives are trying to line up new business for American companies. So far, they've signed agreements worth $5 billion for such firms as Westinghouse, Pitney-Bowes, and IBM. Earlier this year, the Clinton administration severed the connection between its trade policy towards China and human rights issues. The Brown mission has been criticized by human rights activists and some columnists, in part because it seemed to coincide with a new Chinese crackdown on pro-democracy activists. Those critics include Sidney Jones, executive director of Human Rights Watch Asia, a human rights monitoring group and A.M. Rosenthal, a columnist for the New York Times. Also joining us are Calman Cohen, vice president of the Emergency Committee for American Trade, a lobbying organization for more than 60 American corporations promoting international trade, and Pei Minxin, an associate professor of political science at Princeton University. He's a former student activist and recently returned from a trip to China. Commerce Sec. Ron Brown said today that he was exhilarated by the results of his visit in Beijing. And he's talking about the planned resumption of human rights talks and a series of contract signings with new business deals and everything from power plants to telecommunications. Is this something to be exhilarated about? Calman Cohen I want to you ask you first. Is this something to be exhilarated about?

MR. COHEN: I think the answer is yes on several scores. First of all, it's good for the U.S. economy. Trade with China is a strong supporter of jobs in the United States. Over 160,000 jobs are generated by American exports to China. It will strengthen U.S. competitiveness here at home and overseas. Two other points that I would make. It would also lay a very strong foundation for us to make progress as was indicated in your News Summary on other areas, including human rights, issues such as the environment, as well as on nonproliferation. And third, one can be exhilarated because it will allow us to do more to support market reforms in China, which are really the sine quinone of progress in the area of democracy in China. I'd like to say that we need to create a constituency for democracy in China. And one does that by expanding trade. Trade is the first step to getting these market forces going.

MS. FARNSWORTH: What do you think, Mr. Rosenthal?

MR. ROSENTHAL: I'd like to say that one remark I just heard, that we need to create a constituency for democracy in China, is probably the most condescending and erroneous I've heard in almost a lifetime of reporting. The constituency for democracy exists in China. The ability to exercise democracy does not exist largely because, entirely because the policy of the Chinese government. Of course, Mr. Brown is exhilarated. Anybody who believes that -- I don't blame 'em -- that foreign policy in the United States is synonymous with a dollar, with commercial opportunism, would be exhilarated. Mr. Brown was also exhilarated, I presume, when he was the lawyer for the Duvalier regimes in Haiti. I'm exhilarated only in the sense that this is all out on the table now. The real issue is not trade, for which we will be permitted to sell to -- to sell the Chinese one dollar for every dollar we buy from them and to support the Communist army and its product, that and as far as new jobs are concerned. If we sell -- if selling -- buying $8 billion from the Chinese, business, 150,000 new jobs, and presumably since they -- we sell them $40 billion, we'll lose four times as many jobs, so if that's exhilarating, there it is. I'm not exhilarated, and I believe that the issue here is not simply trade, which I think is a phony, it will not benefit the American economy all over, but certain companies and certain investment trusts who are putting our money into China, and will not create jobs. The issue here is what kind of a country we see ourselves as. The issue is America as much as it is China. Are we a country that sees ourselves as based on democratic realism, and that our foreign policy should be based on it, or are we a country that believes foreign policy should be based on perfidy and economic falsehood, which this one is.

MS. FARNSWORTH: What do you think, Mr. Pei? You're a former student activist. Do you thinkthe trade deals that are being made will help the cause of human rights and democracy in China?

MR. PEI: I do not think directly, but indirectly I do believe that expanding trade with China and also keeping China's market reforms going will help improve human rights.

MS. FARNSWORTH: How? How can it help?

MR. PEI: Well, let me just give some firsthand stories. I returned from a short trip to China in July, and I saw that with my own eyes people's freedom has dramatically increased. China does not have democracy today. But to say that Chinese people do not have freedom is completely inaccurate. I think the scope of freedom grows with the scope of the market. And today China is certainly a lot freer than China 15 years ago when China did not have a market economy.

MS. FARNSWORTH: Ms. Jones, what is the situation of human rights? Is the scope of freedom growing with the scope of the market? What do you think? What is the information you get at Human Rights Watch?

MS. JONES: Everything that we've seen is a deterioration in the human rights situation in China since last March, when Sec. of State Christopher visited Beijing. There has been a systematic crackdown on labor activists, on people who are trying to form independent associations. And I would say that one of the most important groups trying to work in China today are people working on behalf of workers coming in from rural areas into the Southern coastal provinces, where a lot of foreign investment is taking place. And unless those people have the freedom to organize some kind of association to defend their rights, there's going to be more labor unrest. There already have been 12,000 strikes in the last year by the Chinese government's own figures. If they don't have the ability to organize and speak out against horrendous working conditions, over time where they're locked into buildings and can't safe fires, safety conditions that are appalling, there's going to be more unrest in precisely the places where American corporations are investing. So we say that yes, go ahead and invest in China, yes, go ahead with the trade, but it's not enough just to be there. These businesses have to take very pro-active steps in defense of human rights, and to open a dialogue with the Chinese government or to reopen a dialogue is not enough.

MS. FARNSWORTH: Now, Mr. Rosenthal, you actually are for a boycott of Chinese goods?

MR. ROSENTHAL: Yes, I am now. It's taken me a long time to get there. May I say one word? Incidentally, when my Chinese friend and I first talked several years ago, about three years ago, his opinion was exactly the opposite. He was all for sanctions against China, and now, after three years or whatever in the United States, he's changed his mind, which is perfectly his prerogative. And I do respect you. I just hope and expect in a few years you may change your mind again back to what it was originally. I have never -- I have not come out for a boycott until today. I had my personal boycott in that I simply didn't buy Chinese goods, because I didn't know whether they were made in a free company or in a gulag. Nobody knows that, or whether they were made by the Chinese army, and I was paying for the support of the Chinese army. I came to that conclusion because the Chinese, and particularly the Clinton administration have allowed us -- there's no other alternative for an individual to do something. I believe a great deal in individual action. I believe that Americans should act against crime, themselves, do something. And I believe also that when it comes down to a foreign policy, when you face a foreign policy such as this, what you believe is totally erroneous and in a sense evil. That's a big word. Then you have to say to yourself, is there anything I can do? Though I have to say here, Clinton has betrayed his promises, he's torn up his pledges. He has walked -- turned his back on Congress and his own party. He has wiped out the whole human rights policy in relation to China. This business about talks is just nonsense. They've been talking and talking for years. We've talked to the Chinese. They know what is necessary for them to do: name or free some of the dissidents, stop torture in jails, stop slave and forced labor, and so on, and do something to relax the oppression of Tibet. That's exactly what Mr. Clinton demanded and said he would do in his executive order. He didn't do anything. Then, not only did he not lift the tariffs, which he said he would do. But when it came down to it, then the human rights people went down a notch and said, please, if you're not going to do that, at least generally would you do that for the products of the Chinese army, whose profits support the Chinese army and party leadership? No to that. No to everything. So the person who believes in human rights, and I know everybody does -- should act -- has to say what am I going to do, just sit here? I believe that if the American people -- I know it'll be difficult, because the Chinese do not have a great political constituency here -- that if the American people did what was done in South Africa -- by Americans in South Africa -- the individual stockholder got up in every meeting --

MS. FARNSWORTH: I want to get here to Mr. Cohen on this.

MR. ROSENTHAL: Okay -- got up in every meeting and demanded a code of conduct, if individuals said, I'm just not going to buy products for a while, I think the Chinese would notice this, and I think that if a few billion dollars dropped from that thirty billion dollar profit they're making for us every year, the Chinese might pay attention and might free a few people, which the present policy hasn't allowed.

MS. FARNSWORTH: What do you think about that, Mr. Cohen?

MR. COHEN: I think it would be a colossal mistake to have a boycott of Chinese products. Let me give some examples of what I have in mind here. Right now we are trying to encourage the conversion of military enterprises in China to commercial purposes. That is a policy that began in the Bush administration, is being continued in the Clinton administration. Were we now to put a ban on products coming in from let us say military groups or groups that have any tie whatsoever with the military, we would be undermining that policy. I believe that there would be progress in China were these various militarily-oriented industries reoriented. With regard to the question of how to promote change in China, I think it takes tremendous hubris on the part of the United States to suggest that it is we in the United States that can determine the direction and pace of change in China. What is really driving it and what I was trying to refer to earlier by a constituency for democracy is development of market forces. It's a fancy way of saying that we need to develop the middle class in China. We need to see entrepreneurs develop in China. These are the very individuals who would like to see the rule of law develop. They are among the reformers. They are among those who are champing at the bit from their reluctance to follow the edicts of the rulership in Beijing. These are the individuals that market forces are promoting in China. They're the ones who are going to want to see democracy. Let me give you an example of what American companies have done in China.

MS. FARNSWORTH: Mr. Cohen, let me interrupt one minute. I can see that Ms. Jones wants to respond to this.

MS. JONES: These are precisely the same people who are being arrested as well. These are the people who are demanding rights for workers coming in from the rural areas. These are the people who were rounded up when Sec. of State Christopher was there, people like Wei Jingshun, people like Bao Tung, who is one of the architects of economic reforms, who's been imprisoned since May '89, not even, not even June 4th. And nothing is being done on their behalf. President Clinton sent a letter to Jung Xamin via Mr. Brown, and there was nothing in that letter whatsoever about individuals, precisely the kind of people who are benefiting from these reforms. There's got to be something more than just sort of letting nature take its course. There's got to be active intervention and pressure. And it doesn't have to be at the expense of business.

MS. FARNSWORTH: Let me just go to Mr. Pei for one minute here. Yet, you said when you were there in July that you thought that the trade, open trade, or the continued trade and the continued MFN status, Most Favored Nation status, has really improved things. What's your evidence for that? How do you respond to what Ms. Jones is saying?

MR. PEI: Well, we obviously must be aware that trade improves things slowly, gradually, structurally, and in terms of structure of Chinese society and economy, China is very different. I understand that Mr. Rosenthal's last visit to China was in '86. And I gather you have not been back since. I would really urge you to go back to China and see how free the society has become.

MS. FARNSWORTH: But, Mr. Pei, what about the arrests?

MR. PEI: Secondly --

MR. ROSENTHAL: I'd be glad, if you let me in --

MR. PEI: Well, the arrests, I understand, amount to a reaction, a real defensive reaction by the Chinese government to stabilize the political situation on the eve of its political power success. Deng Xaoping has just celebrated --

MS. FARNSWORTH: He's head of the Communist Party.

MR. PEI: -- now his 90th birthday. So all the forces --

MS. FARNSWORTH: So you think it's internal Chinese politics that are driving things.

MR. PEI: It's internal Chinese politics. It has nothing to do with American foreign policy. So we have to be patient.

MS. FARNSWORTH: Yes. Mr. Rosenthal.

MR. ROSENTHAL: I'd like to address the talk about this policy or philosophy of trickle down freedom, i.e., if you build up the economy, you will -- through capitalism -- you will get more and more freedom. I used to live in Communist countries as a correspondent in Eastern Europe, and they used to say the same thing, more trade with the West, the more freedom, and it simply was not true. What we seem to forget that what the Chinese are building up is a kind of Stalinist capitalism, which is not unknown to the world, or Fascist capitalism, which is even better known to the world. The fact is that there are many countries, from Hitler down to Saddam Hussein, who have operated if not in a totally free market certainly as free as one -- as China's is ever going to be. And as long as they kept political control and police control, there was no freedom. As a matter of fact, the market sustained them. I am a fairly conservative individual, except on this issue. And I think that the theory that's being peddled around by China lobbyists and others and bought by some Chinese that capitalism, itself, will save or free market will bring freedom is simply not true. It is capitalism plus a free society that speeds and allows democracy.

MS. FARNSWORTH: Mr. Cohen, briefly, what do you think about that?

MR. COHEN: I would just simply state my basic John Loch, which taught us that the basis of democracy is private property. Defense of property rights give rise to the democracy that Mr. Rosenthal addresses. If we try to isolate China, try to boycott China's products, try to use economic warfare, I think the net result is going to be to lead in the direction of the 50's, 60's, and 70's, when China was isolated from the world. And I would remind us that what happened in that period was up to 80 million Chinese lives were lost according to some estimates. China, during the cultural revolution and the upheavals of that time, was not being followed by the West, we did not know what was going on there. Now you have American companies, American government, foreign governments, foreign companies involved in China. They are able to shine a spotlight on Chinese practices. Indeed, one of the reasons why we're having this debate is that there has been tremendous change in China. As Mr. Pei, Prof. Pei, has indicated, the China of today in terms of freedom is far more free than the China of the 50's, 60's, and 70's. Indeed, I would go so far as to say that we need a new definition of human rights.

MS. FARNSWORTH: Mr. Cohen, I have to interrupt you. I have to interrupt you. I want to give you one chance to respond to this. Ms. Jones has something she wants to say, and then we have to go out. Go ahead.

MS. JONES: I'm just saying we shouldn't isolate China. That's right. Be we shouldn't give them everything on a silver platter either. It's up to the Clinton administration to set very specific conditions with trade and get those corporate executives to use their influence in support of human rights.

MS. FARNSWORTH: Okay. I'm sorry. That's all we have time for tonight. Thank you all very much for being with us.

MR. LEHRER: Still to come on the NewsHour tonight, the Alaska oil spill in the courtroom, the big defense merger, and storing nuclear waste. FOCUS - SPILLOVER

MR. LEHRER: Now, the legal aftermath of the Exxon-Valdez oil spill. The 1989 spill in Prince William Sound, Alaska, was the largest in North American history. Now another kind of history may be made. A federal court jury in Anchorage today began to assess damages in the case against Exxon. Lee Hochberg of Oregon Public Broadcasting reports.

MR. HOCHBERG: While these salmon fishermen on Alaska's Prince William Sound are satisfied with their catch today, exacting vengeance against Exxon is still the No. 1 thing on their mind. Their long-awaited federal court case against the oil giant has been going on all summer in Anchorage. In a class action suit, 10,000 fishermen claim the Exxon-Valdez oil spill in 1989 resulted in several poor fishing seasons. In addition, 3500 native Alaskans who live along Prince William Sound claim the spill harmed their native land. The trial, which began in May, was to determine three things: First, if Exxon was reckless in its operation of the Valdez; second, what damages fishermen and native Alaskans should receive to compensate for their losses; and third, how much Exxon should pay in additional punitive damages. In the trial's first phase, jurors ruled that Exxon was reckless for placing recovering alcoholic Joseph Hazelwood at the helm of the huge supertanker. Fishermen, weary from five years of battlingExxon, are elated.

MIKE MAXWELL, Commercial Fisher: Hallelujah! You know, what more can I say? It's fantastic!

WENDALL JONES, Commercial Fisher: I couldn't help but get a lump in my throat thinking maybe we do have a chance at these guys, maybe we do.

MR. HOCHBERG: Plaintiffs' attorney Dave Oesting says the punishment for Exxon's recklessness should be the highest in American history, $15 billion.

DAVE OESTING, Plaintiffs' Lawyer: It takes, in our view, at least that much for this entity to sit up and say, whoa.

MR. HOCHBERG: Oesting argues only a huge punishment will convince Exxon, the world's largest oil company with gross annual revenues of $111 billion a year, to take environmental protection seriously.

DAVE OESTING: We need to have them recognize not that this is just one more cost of doing business; this is just one more thing we absorb.

MR. HOCHBERG: Exxon says it had already been punished enough long before this trial began. In 1989, it spent $2.1 billion to try to clean Alaskan beaches and recover spilled oil. In a 1991 civil settlement, it gave $900 million to the Alaskan and federal governments for losses they incurred in dealing with the spill and to fund restoration projects. In addition, it paid a $125 million criminal fine for polluting Prince William Sound. It's also spent $300 million paying the individual claims of 11,000 Prince William Sound area residents and business.

PATRICK LYNCH, Exxon's Lawyer: From the day of the spill onward, Exxon has set an example of responsible citizenship and has made an enormous effort to minimize the risk of oil spills and other accidents.

MR. HOCHBERG: In the trial's second phase, Exxon won a significant victory making fishermen worry they won't get the multibillion dollar punitive settlement they're seeking. The jury considered their direct spill-related losses and awarded them only one third of the $900 million they claimed. Ron Stephens said he's been unable to pay for his home since the spill ruined his fishing season in 1989. He said it also diminished market prices for Alaskan fish believed to be tainted and caused genetic damage in herring.

RON STEPHENS, Commercial Fisher: They got lesions and sores and I don't know, everything was fine for years and years up till then, and then we have a catastrophic failure of our herring, of our salmon, of shrimp, you know. There's not even any jellyfish out there.

WENDALL JONES: They're the ones that didn't monitor their drunken captain. They're the ones that have destroyed our lives and have taken away all of our kids' education, and we can't pay for our homes. Why the hell shouldn't they pay?

MR. HOCHBERG: Still, the jury was not persuaded to compensate fishermen for the collapse in fish prices or the genetic damage to fish. In the trial's punitive phase, Exxon argued, as it asserted in this report to its shareholders, that resources in the spill- affected area are essentially recovered and wildlife is present at levels within historical ranges.

DR. TED COONEY, Biological Oceanographer: I would have to take exception to what Exxon is saying in its publication here.

MR. HOCHBERG: But growing evidence from state and federal scientists concludes ecological damage persists in Prince William Sound. Some marine mammal species have not recovered, and fish counts for herring and other species are down. Biological oceanographer Dr. Ted Cooney is with a joint federal-state panel trying to restore the Sound.

DR. TED COONEY: There are some elements of the Sound that still appear to be sick. There seems to be evidence that this has a longer-term effect than we would have originally thought, and it is possible that some food webs have been compromised by the presence of oil in the system.

MR. HOCHBERG: Exxon says its own research contradicts the government findings, but it refused to make company officials available to the media to explain its data. In addition to the fishermen's claims, the native Alaskan plaintiffs sought a settlement in the suit for their cultural losses. Thirty-five hundred natives from villages like Tatitlek claimed $50 million in damages to their traditional foods like sea and kelp. Midway through the trial, they settled out of court for $20 million. Illene Totemoff, mother of 10, says no amount of money will make things right for her.

ILLENE TOTEMOFF: Just the feeling of seeing nothing, nothing like it used to be, that we don't see the wildlife that used to be around here before.

MR. HOCHBERG: In yet another legal proceeding, this one in state court, 18 Alaskan native corporations are trying to get Exxon to pay $110 million for so-called environmental losses. An expert witness testified that the value of some native land was diminished even though it was not touched by oil.

UNIDENTIFIED MAN: You have land that has been traumatized because there were thousands of animals and birds and things that were dying and affected and, in some cases, the food chain is affected.

MR. HOCHBERG: Exxon attorney John Clough rebuked the argument.

JOHN CLOUGH, Exxon's Lawyer: They're asking for damages for mountaintops, for glaciers, for forests, for parcels that are entirely land-locked and miles away from any shore line. We think that's a gross exaggeration of their claim.

MR. HOCHBERG: Industry analysts are assessing the potential impact of a huge punitive sentence. Jim Clark of First Boston Bank of New York says Exxon has been largely unaffected by the $3 billion it's paid up to now but it would be hurt by a new $15 billion judgment.

JIM CLARK, Oil Industry Analyst: You're talking about a significant impairment to the balance sheet according to our calculations, and you are talking about a penalty that will most definitely have an impact on the company's ability to invest.

MR. HOCHBERG: Exxon's stock, which trades at about $60 a share, dropped $2.50 the day the recklessness verdict was announced. Industry critics though, like the nonprofit Trustees for Alaska, contend that while Exxon might suffer financially, a huge punitive damage will not necessarily teach the company a lesson.

ANNE ROTHE, Environmental Lawyer: What it's teaching them is to isolate themselves from the costs of a major oil spill but not necessarily prevent a major oil spill.

MR. HOCHBERG: Attorney Anne Rothe says oil companies like Exxon are divesting themselves of their oil shipping operations. Exxon's tanker fleet is down to 51 tankers from a high of 177 twenty years ago. It now contracts with a company called Sea River Marine to carry much of its oil.

ANNE ROTHE: They're separating themselves from the risk and the cost of future oil spills by separating the shipping part of the oil business from their part of the oil business.

MR. HOCHBERG: So if Sea River Marine has an accident, who's liable?

ANNE ROTHE: Sea River Marine. Once that oil goes in the tanker, Exxon is no longer responsible.

MR. HOCHBERG: Ironically, many independent shipping companies actually have poorer safety records than the major oil companies, and though the legal wrangling in Anchorage will soon end, Alaskan fishermen say their nightmare will not, regardless of how muchmoney they receive. With ecological questions still unresolved, fishers like Ron and Mary Stephens say, a huge punitive damage won't heal the psychic injury this region's people have sustained.

MARY STEPHENS, Commercial Fisher: There's just no more optimism. And I think that's really the main thing that's been lost, is just your sense of --

RON STEPHENS: -- future.

MR. HOCHBERG: The jury in the case has begun deliberations on the punitive damages and a verdict is expected any time. FOCUS - MEGADEAL

MR. LEHRER: Now, a big deal in the defense industry. Today's merger between Lockheed and Martin Marietta will create the nation's largest defense contractor and is part of a major reshuffling of an industry that is struggling to find its place in the post Cold War world. Two analysts help take us through those changes. Gary Reich watches the defense industry for Prudential Securities, a Wall Street Firm. Gregory Bischak is executive director of the National Commission for Economic Conversion & Disarmament, a non-profit research group in Washington. Mr. Reich, what prompted this merger?

MR. REICH: Well, what we're seeing here is basically the conclusion of nine years of defense budget cuts, which accelerated during the last three years. We have a situation where there is great excess capacity in the industry. There are not enough contracts to fill this capacity, and the companies right now are in a position of having to consolidate in order to survive.

MR. LEHRER: Were both Lockheed and Martin Marietta in trouble, or were they -- down the line, were they going to have trouble if they didn't merge?

MR. REICH: Well, down the line, they would have had problems. All of the major companies, with few exceptions, have been experiencing declining backlogs, declining backlogs because of declining government authorization. Declining backlogs lead to declining sales, and eventually, declining sales lead to declining earnings. This is an inevitable result that had to be stemmed, and you do it by rallying the tents. And this is what's happened today.

MR. LEHRER: Mr. Bischak, do you agree that these companies essentially had no choice, they had to get together one way or another?

MR. BISCHAK: They had other choices but, in fact, what each of them are trying to do is become the big fish in the pond. They're trying to get a bigger piece of a shrinking pie and become dominant in their particular areas. In this case, we have a merger of satellite producers that are now going to be the dominant producers of spy satellites. That's wedded with the launch capacity that Martin Marietta has. And, in fact, there's many antitrust concerns that are raised by this that I understand that even under Sec. Deutch, the Defense Department has raised already. This also raises questions about the impact on employment. Consolidations by Lockheed last year and acquisition by Martin Marietta led directly to many defense industry layoffs as a result of the consolidations. Indeed, each firm laid off over 8,000 of their employees last year.

MR. LEHRER: And more will probably result from this?

MR. BISCHAK: That's right. There's --

MR. LEHRER: How many? How many?

MR. BISCHAK: Well, already, this year Lockheed has laid off nearly another 8,000. And Martin Marietta has a practice of announcing its total layoffs toward the end of the year, but we've tracked a few thousand already. It's unclear. It depends on what happens within their own assessment about their own capabilities and the match between these two firms.

MR. LEHRER: Mr. Reich, do you agree that this is going to result in some layoffs, large layoffs?

MR. REICH: I think it will result in some layoffs, but we have to examine what causes layoffs. Layoffs aren't only the result of downsizing or consolidating. Layoffs are the result of less government spending. If the government spends less, there are fewer jobs, and if there are fewer jobs, you need fewer people, and, therefore, you have layoffs. When two companies merge, or consolidate, what they do is merge and consolidate facilities. And as a result, you need fewer people within those facilities that are brought together.

MR. LEHRER: And that's one of the points of a merger is to save.

MR. REICH: Exactly. Exactly. It's a cost savings move. It's a move to survive. And a company is really a living thing, and it has to do what it can to survive.

MR. LEHRER: And the thing that we -- you pointed it out -- but just to say it straight out -- they only have one customer, and that's the government of the United States, correct?

MR. REICH: Yes. I'd like to point out that really this is a strange industry. It's a monopsony. A monopsony is the opposite of a monopoly. In a monopoly, you have a few companies that control the source of supply. Here you have one customer controlling the source of its supply, and it's quite the opposite of a monopoly. You have a group of companies that are very highly dependent upon the government. And when the government cuts back, these companies suffer. We're seeing that.

MR. LEHRER: Yeah. Mr. Bischak, let's go back to the point you made. Explain to those of us who don't follow the defense industry what being the largest means now. I mean, put it in some kind of context that we can understand.

MR. BISCHAK: Well, one things is, is that there is a real crisis in the defense industry. In fact, the Defense Department made clear there's more cuts coming down the line. They found themselves $150 billion short over the next five years. So if you're the big fish, your likelihood of getting more of these contracts is going to be greater. And, in fact, Martin Marietta and Lockheed have positioned themselves on what they see as some of the growth sectors of the defense industry. Yet, even with that --

MR. LEHRER: But it's who is second, who is third, and how does that fit in? I mean, give us an overall picture of the defense industry as we sit here tonight.

MR. BISCHAK: Well, in fact, in the year end round-up, Lockheed was No. 1. Martin Marietta was No. 4. The consolidation will create a $23 billion company of which about 16 1/2 billion of that will be defense sales worldwide. These are worldwide sales. And it's real clear that Lockheed has been aggressive in pursuing export markets in the arms industry, particularly in Asia, and that was a growth industry. But there is somewhat of a credit crunch in hitting the arms export market. Although Asia still looks to be a lucrative market.

MR. LEHRER: What countries in Asia are buying arms right now?

MR. BISCHAK: Oh, Taiwan, Korea, South Korea, Indonesia, throughout, and there's intense competition going on. And part of the deal to try to restrain Pakistan, if you recall, in its nuclear aspirations was a potential sale of F-16s and the delivery of F- 16s to them which would have benefited Lockheed.

MR. LEHRER: Mr. Reich, do you agree that there are some anti- trust questions raised by this? Are they that big a fish in this?

MR. REICH: They are a big fish, but the problems of anti-trust I think reside only in the minds of a few people because these companies must be allowed to merge with each other, because if they don't, the entire defense base will be destroyed. There is nothing else for these companies to do. They can't go out and make refrigerators.

MR. LEHRER: Why can't they go out and make refrigerators?

MR. REICH: Well, because refrigerators are already made somebody. If there was a demand out there that wasn't being fulfilled, then they could go out and do it. But they can't sit down and say, gee, tomorrow let's go make refrigerators or television sets because somebody's already doing it. As a result, this industry has not been able to take its technology and transform it into something else.

MR. LEHRER: Are they trying?

MR. REICH: They try, and they make some progress slowly. Lockheed is a beautiful example, and so is Martin Marietta making progress slowly. Martin Marietta is taking its heads up display operations and -- well, when a fighter pilot sits in the cockpit, he looks straight out through the cockpit, and he sees all the instruments in front of him that he needs to see without looking down. That application can be used in children's video games. Any child today, any teenager today would feel very comfortable in the cockpit of a fighter plane. Lockheed has developed toxic waste removal equipment as a result of closing down its Burbank facilities and finding toxic waste in Burbank to come into the toxic cleanup waste business.

MR. LEHRER: In other words, in cleaning up their own waste, they develop the business.

MR. REICH: Yes. But you can't say, gee, we make -- we make F-16 fighter planes, let's turn that into a consumer vocation. It doesn't work.

MR. LEHRER: What's your reading of that, Mr. Bischak? I mean, Lockheed, Martin Marietta now merged together, but the whole industry as a whole, how well is it doing on, the word is conversion, how well is it going?

MR. BISCHAK: Well, in fact, even the big guys are beginning to convert. They're beginning to find markets where they have a high degree of technological competence and a capacity to engage in joint ventures with different firms that have access to civilian markets. Our other commentator cited a few examples in the case of Lockheed, but even Martin Marietta, whose CEO, Norm Augustine, has been very derisive of conversion. But, in fact, he's seen the writing on the wall and has tried to diversify the product mix of is own company not just in the area of computer video games, which has been cited often, but also in the case of Federal Aviation Administration modernization of the air traffic control system, various contracts with the postal system, a computer information and database system. And, in fact, this is one of the civilian areas where Lockheed and Martin Marietta have a growing segment of their civilian market where there's some compatibility. And it's an interesting aspect of where there may be some complementarities between these two firms.

MR. REICH: We shouldn't be blind-sighted.

MR. LEHRER: Yes.

MR. REICH: We shouldn't be blind-sighted, because where the companies are successful in going into the commercial civilian sector, it's only been a very tiny portion of their overall sales. They haven't been able to capitalize on any of this in any big way.

MR. LEHRER: Do you dispute that?

MR. BISCHAK: Well, $3 billion of Martin Marietta's business is in the civilian segment, and they have a goal of bringing into alignment 50 percent of their revenues by the year 2000 in civilian work, and it's fairly clear that the writing is on the wall. These guys see what the strategy is for them to survive and that there are more defense cuts coming down the pike. Undersecretary John Deutch made it really clear that even the F-22, which is the advanced tactical fighter that Lockheed was pegging a lot of its future on in the combat aircraft division, is even being put on the chopping block. Now, that's a big ticket item. And the defense industry has to get serious about looking at diversification if these firms are going to in some way meet the expectations of the shareholders.

MR. REICH: Yes. But that conversion that you talk about is not a result of taking a known product within the company and suddenly developing a civilian component of it. The --

MR. LEHRER: Going into a whole new business you mean?

MR. REICH: The commercial work that Martin Marietta is doing is commercial work that was developed and purchased away from its military area.

MR. LEHRER: Yeah.

MR. REICH: That doesn't mean they can't be successful at it, but it isn't a derivative of the military business.

MR. BISCHAK: That's not entirely the case. I mean, there are many products, the FAA product being one, the air traffic control systems, radar, navigation, some civilian satellite applications.

MR. LEHRER: In conclusion, Mr. Reich, for those of us who do not follow the defense industry, are just ordinary folks out there, is this a good thing for this country, what -- these two companies getting together, or is it something we should worry about?

MR. REICH: It's good so far as the industry isn't ground into the dust by overzealous people who don't want any defense spending. The United States has to be able to produce the weapons of peace to protect itself. So long as the industrial base is not destroyed, this is still a good thing.

MR. LEHRER: Good thing, bad thing, Mr. Bischak, something to worry about?

MR. BISCHAK: In my estimation, there are serious reasons to worry, and one of the reasons is because the taxpayer is actually beginning to foot the bill for some of the consolidation costs of the mergers, and we have to take a close look at how the taxpayer's money is being spent in this case.

MR. LEHRER: All right, gentlemen. Thank you both very much. FOCUS - POISONOUS PROFITS?

MS. FARNSWORTH: Finally tonight, the fight over an Indian tribe's unusual new business proposal, a nuclear waste storage facility. Tom Bearden reports from the Mescaleros' Reservation in New Mexico.

MR. BEARDEN: The Mescalero Apache Indians have had a lot of success in the tourism business on their remote South Central New Mexico reservation. They built a 134-room resort hotel, a casino, and a saw mill. Their ski area is the mainstay of the economy of the entire area, not just the reservation. All this makes the Mescalero tribe more prosperous than most, but unemployment still soars to 30 percent during the off season. Tribal vice president Fred Peso says the Apaches need to create many more high paying jobs if they are ever to enjoy opportunities other Americans take for granted.

FREDERICK PESO, Mescalero Apache Tribe: You can move from house to house if you are unhappy with where you live. You can move to another home, another house, buy another house. We don't have that opportunity here because we don't have the housing. If you want another job, you can just pick up and go to another job. We don't have that type of employment. We have to create that employment.

MR. BEARDEN: But the way the tribe wants to create jobs has most of its neighbors on the warpath. The Mescalero want to operate a high level, nuclear waste storage facility on ranch land on the western edge of their reservation. The waste would come from civilian nuclear power reactors all over the country, thousands of highly radioactive fuel assemblies presently stored in water-filled pools. The federal government has long planned to permanently entomb the fuel underneath Yucca Mountain in Nevada. But the project is far behind schedule and can't open until 2010 at the earliest. Many reactors will run out of storage space long before then. Utilities say they'll be forced to shut them down if more space isn't found, creating a critical shortage of electricity. Hoping to avoid that, Congress created a grant program for states and Indian tribes interested in studying the construction of temporary storage until Yucca Mountain opens. Silas Cochise, great grandson of the famous chief, runs the Mescalero Fuel Storage Initiative.

SILAS COCHISE, Mescalero Apache Tribe: The Mescalero Apache Tribe was one of the first group of people to apply for a grant that was put out by the U.S. government for that, and so in late 1991, I believe, the tribe received $150,000 to do a study on it.

MR. BEARDEN: But New Mexico Senator Jeff Bingamon introduced an amendment that killed the grant program's funding.

SEN. JEFF. BINGAMON, [D] New Mexico: I can understand why all these states that are generating this high level waste would like to see it moved to another state, but that's not in our national interest. It's not in my state's interest either.

MR. BEARDEN: But the Mescalero were determined to use their land as they saw fit and refused to give up. They began negotiating directly with more than 30 utilities to build something nobody had ever contemplated before, a private nuclear waste facility, a facility to be operated by a sovereign nation not subject to outside regulation. Apache tribal sovereignty was established by the treaties that ended the war between the tribe and the United States.

FREDERICK PESO: To us, sovereignty means the right to recover from the wrongs the past has inflicted on our people and to chart our own destiny.

MR. BEARDEN: At forums like this legislative hearing in Santa Fe, the Apaches argue they aren't bound by the mountain of laws and regulations that are often used to frustrate other nuclear projects.

FREDERICK PESO: Sovereignty means the right of the Mescaleros to protect our modest reservation and the rights of our people. Sovereignty is the acceptance of responsibility for our people and the undertaking of those ventures which will provide a stable future for them and their children.

MR. BEARDEN: Indians say that while they're willing to talk with state officials, they don't need their approval to proceed. Former Colorado State Legislator Miller Hudson runs the tribe's public information program.

MILLER HUDSON, Mescalero Apache Tribe: It's a delicate line you have to walk here because you can't create the impression that there's a tacit veto or that you need the approval of the state. What we want is their cooperation.

MR. BEARDEN: But you don't need it?

MILLER HUDSON: We don't need it, and we're not asking for it.

MR. BEARDEN: Nonetheless, a lot of people have already lined up to try to stop the project.

UNIDENTIFIED MAN: I'm not at all interested in having this in New Mexico, and there are a lot of people who will do whatever they can to keep this from happening. And that's probably an extreme point of view, although I think it's probably widely shared.

MR. BEARDEN: Towns like Ruidoso, that border the reservation, are worried the project will destroy real estate values and hurt tourism. Mayor Gerri Shaw.

MAYOR GERRI SHAW, Ruidoso, New Mexico: Ruidoso's stand is that it doesn't mix with tourism, that tourism is our only industry, and probably always will be, and because of that, we don't feel the two things mix.

MR. BEARDEN: Others say Indian sovereignty won't prevent the state from intervening.

DAN HANCOCK, Environmental Advocate: Ultimately, I think the state can short circuit it; among other things just delaying it forever and ever and ever.

MR. BEARDEN: Don Hancock runs Southwest Research & Information Center, a non-profit environmental organization.

DAN HANCOCK: Certainly one of the places the state has most potential control is the fact that any fuel would have to travel hundreds of miles within the State of New Mexico to get to the Mescalero reservation, and there are numerous things not in violation of interstate commerce that the state can do in that regard.

MR. BEARDEN: Such as --

DAN HANCOCK: Such as requiring an inspection every five miles, such as charging user fees hundreds of millions of dollars potentially.

MR. BEARDEN: Obstructionist tactics?

DAN HANCOCK: Obstructionist, or health and safety tactics.

MR. BEARDEN: Can the state stop you if it really tries?

DAN HANCOCK: They can make life rough, and they can protract the process, but no, I don't think they can stop us.

MR. BEARDEN: Ironically, a number of public interest groups are pushing a major new environmental policy initiative designed to protect minority communities from becoming dumping grounds for hazardous waste. The concept is called environmental justice.

MR. BEARDEN: What do you think of the argument that the state and others, other opponents of this project might make that, that this is not the kind of project that ought to go on an Indian reservation?

FREDERICK PESO: Well, I think they should not be making decisions for us.

SILAS COCHISE: We're not going to establish anything if it's going to hurt our tribe, if it's going to hurt our environment, and we're looking out for their safety I think even more so than the outside is aware of. You know, a lot of people come and tell us that, aren't Indian people supposed to be close to the land? We are, and we just don't see anything that can be of danger to the lives of our tribal members and the environment that we live in.

MR. BEARDEN: New Mexico already has several nuclear projects like the Waste Isolation Pilot Project designed to permanently store plutonium-contaminated waste from the nuclear weapons program. The tribe says it wouldn't be fair to shut the door when others have made huge profits from this project and others, not fair to shut the door when the Mescaleros stand to make perhaps $25 million a year for their 3200 members.

FREDERICK PESO: With this rich history of benefits to the state, it is unacceptable that the door to further nuclear projects be slammed in the faces of our people. It is unacceptable.

MR. BEARDEN: But opponents think the tribe is focusing on the income and ignoring a huge risk, that once the waste comes to the reservation, it might never leave.

FREDERICK PESO: Well, the licenses probably would be made for 20 years, with the option to apply, reapply for another 20 years. So hopefully, during that period of time there will be new technology that's made on -- whatever new technologies come along will be beneficial. Also, the United States should have developed a repository by that time also.

MR. BEARDEN: What happens if it hasn't?

FREDERICK PESO: Then with the -- the utilities will have to take back their fuel.

MR. BEARDEN: Take it back to the nuclear reactorsite.

FREDERICK PESO: Right.

DON HANCOCK: There is no way they can ensure that it is temporary. They can sign pieces of paper, and Indian tribes have signed lots of worthless pieces of paper over the last 250 years in this continent.

MR. BEARDEN: The waste products are continuing to build up, while the Mescaleros pursue privatization. The Department of Energy's nuclear waste negotiator's office is also still looking for someone willing to accept a government-operated storage product, but without the grant program that Sen. Bingamon killed, three Indian tribes are still interested. But Deputy Waste Negotiator Robert Mussler concedes time is running out for the federal effort.

ROBERT MUSSLER, Department of Energy: Our office goes out of business unless extended in January of '95. So our job is to work with the tribes that we have right now and also to explore some additional opportunities that we're looking at to see if in the very near future we can identify a potential host who's ready to move forward and get the job done with us.

MR. BEARDEN: So you've got six months?

ROBERT MUSSLER: We've got six months.

MR. BEARDEN: If you were a betting man, what are the odds?

ROBERT MUSSLER: For anybody to suggest that they can make it happen, that they know how to do it, and they're optimistic, I think I'm not sure they're really telling me the truth. But I can tell you this: We're committed to giving it a try.

MR. BEARDEN: So the Mescalero Apache tribe's private project is the only one with any real chance of opening in time to relieve the pressure. The tribal council plans to hold a referendum in October. If the membership approves the idea, they hope to open the site shortly after the turn of the century. RECAP

MR. LEHRER: Again, the major stories of this Tuesday, U.N. Secretary General Boutros-Ghali said an effort to get Haiti's military leaders to step down has failed. Six nations agreed to join a U.S.-led invasion force against Haiti. The Coast Guard picked up at least 731 Cuban refugees. China agreed to resume human rights talks with the United States, and Martin Marietta and Lockheed announced a merger, creating the country's largest defense contractor. Good night, Elizabeth.

MS. FARNSWORTH: Good night, Jim. That's the NewsHour for this evening. We'll be back tomorrow night. I'm Elizabeth Farnsworth. Good night.