The MacNeil/Lehrer NewsHour

MS. WARNER: Good evening. I'm Margaret Warner in Washington.

MR. MUDD: And I'm Roger Mudd in New York. After the News Summary, we look first at the return of former communists to power in Poland. We have analysis by Zbigniew Brzezinski. Then the price of peace in the Gaza Strip, the economic impact of contract talks in the auto industry, and an update on the Reginald Denny trial in Los Angeles. NEWS SUMMARY

MR. MUDD: From the President on down, the administration put on a public relations blitz today trying to build support for the soon-to-be announced Clinton health care plan. First Lady Hillary Rodham Clinton and several cabinet members were on Capitol Hill to begin two days of briefings for members of the Congress. More than 300 Senators and Representatives attended. This morning, President Clinton invited more than a hundred doctors, including his personal physician from Arkansas, to the White House, and former Surgeon General C. Everett Koop has signed on to help. He said he will host a series of forums with medical professionals this fall to explain the plan and solicit advice.

DR. C. EVERETT KOOP, Former Surgeon General: Physicians have been notably absent from past efforts to reform the American health care system even when it turned out that physicians proved to be among the major beneficiaries as with Medicare. Indeed, all too often past health care reform measures have been imposed upon physicians, or against their loudly voiced opposition. This time, doctors cannot allow themselves to be cast in the role of nay sayers, and, therefore, I call upon the medical profession in which I have served for over half a century to assume its rightful position of leadership to drive the health care system to the reform excellence that it can deliver.

MR. MUDD: Yesterday, Sen. Daniel Patrick Moynihan, the New York Democrat, criticized the President's plan for funding his health care proposal. Moynihan said it was fantasy to believe that $238 billion could be saved by restricting the growth of Medicare and Medicaid. The President said today he believed those savings could be achieved within five years. Mr. Clinton will present his health care plan to a joint session of the Congress on Wednesday night. Margaret.

MS. WARNER: Secretary of State Christopher said today the U.S. and Russia will sponsor a conference of wealthy nations to raise money to help implement the Israeli-Palestinian Peace Accord. Most of the money would be spent to build up impoverished Palestinian areas as they win autonomy from Israel. The Secretary spoke at Columbia University in New York.

WARREN CHRISTOPHER, Secretary of State: The International Community must move immediately to see that the agreement produces tangible results in the security in daily lives of the Palestinians and the Israelis. If peace is to be achieved, this must be translated directly and visibly vividly into real progress on the ground. Now, there are varying estimates of the amount of resources required to start building an economic base in Gaza and the West Bank. The World Bank's initial estimate is at least $3 billion will be needed over the next 10 years. An important portion of this sum will be needed for a quick start effort over the next year in the very next months it must be doing.

MS. WARNER: Syrian President Hafas Al-Assad has told an Egyptian newspaper that only Israel will gain from the Israeli-PLO Agreement. Assad also said he won't try to silence Palestinians who oppose it. President Clinton phoned Assad last week and asked him to intervene with radical Palestinian factions in Damascus. Yet, despite such comments, Syria didn't oppose an Arab League statement today endorsing the accord. Meanwhile, Israeli warplanes bombed positions in Southern Lebanon today. The raids were in apparent retaliation for attacks on Israeli forces in South Lebanon. Israel bombed positions held by guerrillas from the pro-Iranian Muslim group, Hezbollah.

MR. MUDD: New peace talks among Bosnia's warring parties were called off today. International peace mediators had hoped the three factions would sign an agreement in Sarajevo tomorrow. The mediators, along with Croat, Muslim, and Serb negotiators, flew off to a surprise meeting todayon a British ship in the Adriatic. Afterwards, the mediators said that none of the parties had shown sufficient flexibility in their negotiating positions. The main sticking point is believed to be a Muslim demand for additional territories. Former Communists are returning to power in Poland. Voters in yesterday's general election cast more than 20 percent of their ballots for the Democratic Left Alliance, a party comprised mainly of ex-Communists. The outgoing party won less than 11 percent of the vote. The former Communists will now get the first shot at trying to assemble a coalition government. The election result has been blamed on voter anger at low wages and massive unemployment, arising from the old government's free market reforms. We'll have more on that story right after the News Summary.

MS. WARNER: The State Department says it will let John Demjanjuk reenter the U.S. Yesterday, the Israeli Supreme Court ordered him released from custody. The court ruled there wasn't enough evidence to try him on new charges of being a Nazi Death Camp guard. Members of his family will escort him home to Cleveland later this week. U.S. Justice Department officials have said they will begin deportation proceedings against Demjanjuk as soon as he returns. Chinese dissident Wai Xing Shung arrived home today. Chinese authorities released him last week after he'd spent 14 years in prison. He said today he's still banned from any political activity. China has taken several steps recently to mollify critics of its bid to host the year 2000 Olympic games. Critics cite China's human rights record. A decision is expected Thursday.

MR. MUDD: That ends our summary of the day's top stories. Ahead on the NewsHour, a return to power in Poland, the price of peace in Gaza, auto industry contract talks, and a Denny trial update. FOCUS - COST OF PEACE

MS. WARNER: We start tonight with Poland and the possible return to power of Communists who were voted out of office in 1989. Unofficial returns in Sunday's parliamentary election indicate that the ex-Communists may be forming the next government in Warsaw. By western standards, Poland's market reforms were the most successful of any in the former East Bloc. Poland's economy is growing at 4 percent this year, faster than any in Europe. But along with that growth has come the pain of 16 percent unemployment and far higher levels in many old industrial cities. This may have been too much for many voters to bear. We begin with a report narrated by Liz Donnelly of Independent Television News.

LIZ DONNELLY, ITN: If the preliminary results are a true indication of the final outcome, Poland's electorate will have delivered a stinging rebuff to the four years of free market reform, highly praised by western nations. The former Communists ousted in 1989 are in the lead, predicted to get 20 percent of the vote, and have started their search for a coalition partner.

ALEKSANDER KWASNIESKI, Leader, Democratic Left Alliance, SLD: Having got the best result from the elections, it is hard not to be satisfied, but one has to draw deeper conclusions. People have voted for the reforms and for serious change to improve their situation. I think the most important thing is whether the political partners reach agreement on forming a stable government.

MS. DONNELLY: The former Communists, the SLD, had a far more effective election machine than the other parties, with a grassroots network established over the years. Their appeal too can be put down to concern about the speed of economic reform. Poland's undergone an economic transformation, but though the shops are full of produce, unemployment's high, and many more can't afford the prices. The obvious coalition partner for the former Communists would be the Peasants Party. They look set to come in second place, but their leader's not yet revealing his intentions. The former government, led by Hanna Suchocka, was brought down by its refusal to give into pay demands from striking public sector workers and is predicted to come in third. Today, as her supporters kept their spirits up, she said her successor would inherit a country in good shape, at the forefront of reforms in the Eastern Bloc.

HANNA SUCHOCKA, Former Prime Minister: [speaking through interpreter] Thanks to this, we could count on reducing our debt, and when recovery comes in Europe, we can expect more help. I hope that the next government will continue our reforms, otherwise, the economy will be in chaos.

MS. DONNELLY: The former Communists insist they've been converted to Social Democratic principles and promise that if they do form a government, they'll continue economic reforms. But they've also said they'll pay more attention to wage demands, a promise they'll find hard to keep without increasing the country's debt.

MS. WARNER: President Lech Walesa, whose only Solidarity allies drew barely 5 percent of the vote, said he would abide by the results. He said they reaffirmed the country's passage to democracy. For analysis of Zbigniew Brzezinski, former National Security Adviser to President Carter and now a counselor at the Center for Strategic & International Studies. Mr. Brzezinski's Polish by birth. His latest book is titled Out of Control: Global Turmoil on the Eve of the 21st Century. Well, Dr. Brzezinski, welcome.

DR. BRZEZINSKI: It's nice to be with you.

MS. WARNER: Is this an example of your title Global Turmoil?

DR. BRZEZINSKI: Well, to some extent. Let me just say that I think it's misleading to talk about the Communists returning to power. They are returning to the political game, but I very much doubt that they are going to have power actually.

MS. WARNER: Well, what do you think happened here? You were here -- you were there -- excuse me -- late this summer, right?

DR. BRZEZINSKI: Well, I think it's a combination --

MS. WARNER: Did the people expect too much?

DR. BRZEZINSKI: Yes. It's a combination of things. As you said in the analysis earlier, it's to some extent anger of people disappointed by the pains of the transition, the cost of that transition and sacrifice. It's also the combination of a series of mistakes made by the other groups, the right wing, for example, which obtained almost as many votes as the Communists. It's not going to be represented even at all in the new parliament because it was so fragmented, so divided, that it wasn't a vote to cross the 5 percent threshold. Walesa, himself, played a strange game, at the last minute organizing a personal party which undercut the support of the center government reform movement because he drained votes from them. The reform movement, itself, did not disassociate itself, in my judgment, clearly not from the Communist past, did not attack the newer Communists clearly enough, thereby contributed to the political rehabilitation. All of that cumulatively created a situation in which the former Communists got 20 percent of the vote. But, you know, 20 percent of the vote means that four out of five did not vote for Communists. And we tend, I think, to overstate the scale of this Communist success.

MS. WARNER: But you mean because the ex-Communist forces were better organized, they were going to get a much greater number of seats in parliament, even though --

DR. BRZEZINSKI: That's right, unproportional --

MS. WARNER: Yes. Yes.

DR. BRZEZINSKI: And I think it's useful to bear in mind here that we're dealing with a society which is not only in the midst of an economic restructuring but also a political restructuring of just developing, consolidating its democracy. Think of France and Italy in the '50s and '60s and even into the '70s. The extreme left, the Communists, used to get much more than 30 percent of the vote, and yet, they did not gain power, and democracy finally took hold, they consolidated, and Communists faded. I think this will happen in Poland too, but in the meantime, we are going to see some significant slowdown in the process of economic reform.

MS. WARNER: Let me ask you about one other factor in the election before we go into the impact which is: How much of a factor was what we heard about a lot here in the West, that women were very unhappy with the government's alliance with the Roman Catholic Church and passing restrictive abortion legislation and other social legislation?

DR. BRZEZINSKI: Yes, I think that played a role. There's no doubt that the right wing, not the extreme right, but just the wrong wing, lost support, and the Catholic-oriented political movements lost support because many women were turned off by the stand of the Church on abortion. And there was some feeling, more pervasively perhaps, that the Church was intruding overly into the political game.

MS. WARNER: So what effect do you think this is going to have on the economic policies in Poland?

DR. BRZEZINSKI: Well, it's useful to look more specifically at the political program of the party which is going to be the kin maker. To understand the situation in Poland today, you have to understand the Communists got about 20 percent of the vote, but the party which is going to be the swing party is the next party after that. It's the so-called "Peasants Party," which is critical of the government's economic reform program, which is more populist, which has a relationship with the Communists, but which may not want to be the junior party of a Communist-led government. But in order for the former reform-oriented coalition to form a joint government with the peasants, that coalition will have to accept the peasants' program on the economy, in which case the Communists might even be still the opposition. But that will mean -- and I'm looking at the program -- a slowdown in privatization, an increase in the budget deficit, and inflation, some increase in food prices for the sake of the peasants, probably some increases in taxes, probably as a consequence of the foregoing a considerable increase in inflation, a larger state intervention in the state economy, preferential credits and payments for agricultural, state farms, food industry, some impediments to foreign investment, and transfer capital from Poland, and probably a slower process of entry into the West.

MS. WARNER: And so do you think it's fair to say that really they're trying to turn the clock back, or is this sort of a mid course correction, more like the Social Democratic Party --

DR. BRZEZINSKI: Well, I would call it a mid course miscorrection. It's not turning the clock back. I don't think anyone, not even the Communists, are advocating a return to the Communist type economy and certainly not to the Communist type political system. But this is a kind of what I would call demagogic populism. They say we like the reforms, we like the free market, but they entail too much pain, and, therefore, a lot of subsidies have to be given, the state budget and particularly the banking system have to be manipulated in order to relieve social sufferings, with the risk that, of course, the reform process may as a consequence get significantly slowed down.

MS. WARNER: What do you think it will do to western investment in Poland?

DR. BRZEZINSKI: I think most major corporations currently contemplating going into Poland will be taking another look, and this will probably slow it down. I personally don't think that such panic reactions are justified. I think we're going through kind of a transitional phase in which people shocked by the cost of the reforms pulled back and wanted to, quite literally, stick it to the government. And in the next elections, there will be a correction. But business operates largely on the basis of conventional wisdom. Until recently, most people didn't realize that Poland was a most attractive central European country. Then everybody jumped on the bandwagon. Now, everybody will be considering jumping off it.

MS. WARNER: And do you think the West could have done anything to prevent this?

DR. BRZEZINSKI: To a marginal extent, yes. I think we have been very slow not in giving them more aid -- because that's not the issue -- but I think we've been very slow in opening up our own markets and the markets of Western Europe to export-driven growth in Central Europe by which I mean not only Poland but Hungary, Czechoslovakia, and so forth. This is the way to help them, and by and large, the European Community and ourselves, we have been somewhat exclusionary.

MS. WARNER: Why should anyone in the West care about this election result?

DR. BRZEZINSKI: Well, we should care to the extent that if we are really serious about the victory over Communism, we think it meant a major historical turning point, and it's very important that this victory, we construct it, we consolidate it, and the post Communist transition be a success politically as well as economically, and the issue is not just economics. It is also the political consolidation of a viable, democratic process. What is happening in Poland is an indication that not only the economic but the political process in Central Europe as a whole is going to be encountering difficulties, and this, these difficulties are going to be vastly greater in the case of the former Soviet Union because they're both economic, and the political crisis is much deeper. And what Poland tells us is that the process of transformation is going to be neither as quick nor as easy as many tended to assume.

MS. WARNER: Well, we did see former Communists come to power in Lithuania just a few months ago. Do you think we're going to see more of this in Eastern Europe? Hungary has elections next spring I think.

DR. BRZEZINSKI: Yes, but not coming to power. I think the Lithuanian case was a very clear cut situation in which there were really just two forces. We're more likely to see the Polish pattern, which is the former Communists masquerading as Social Democrats, coming back into a more significant role in the political game, and this is where we started our discussion. I do think we have to distinguish their participation in the political game from which they were excluded by their previous defeat and actually taking power, which by and large I don't think is likely in the case of the former advanced Central European states.

MS. WARNER: As you point out, of course, there's such great implications for the former Soviet Union. I mean, if this, these economic reforms can't proceed in a place like Poland, what does it say for say Ukraine or Russia, where it's so much more complicated?

DR. BRZEZINSKI: Well, what it says for them is to some extent what I have been saying, myself, namely, we should be more careful about not dogmatizing our own advice to these people. I think there has been a tendency in the West and particularly in the United States to take a look at the Polish example, which is that of very ambitious change called by experts the Big, Big Bang Theory of economic transformation, and say to the Russians and Ukrainians do the same. I think Big Bang, without a stable, political frame work is likely to produce a big mess, namely a strong reaction, even of the kind that occurred in Poland under much better conditions than economic change is occurring in Russia and Ukraine. I would say to the Russians and Ukrainians you have to have a reform program. That reform program has to be from the bottom up, but the government has to be engaged in that reform program, directed economic growth. To some extent on the Korean model, for example, rather than on the Polish example, is what you people need.

MS. WARNER: Explain that a bit. What do you mean the Korean model?

DR. BRZEZINSKI: The Korean model involved essentially, a direct role by the government, some generalized goals and targets being set by the government, and the government deliberately using credit policy and subsidies to stimulate certain segments of the economy, while at the same time creating a free market.

MS. WARNER: But, of course, the Korean government wasn't particularly democratic then either, was it?

DR. BRZEZINSKI: Well, you have touched a very sensitive point. That might have to be the case, or that might be the case under some conditions of change in Russia and Ukraine, where both the economic conditions and the political conditions do not favor simultaneously the emergence or even existence of an entrepreneurial class, or the generally democratic, political class. And we have to realize that. I think the advice we have been giving the Russians and the Ukrainians has created in Russia tremendous chaos, with people switching policies, going in the right directions, and the so-called Big Bang in Russia has produced very limited privatization and a small, capitalistic class which is essentially parasitic. It's not the class that's investing in making the country grow. It's a class that's exploiting growth with some benefits. And in the Ukraine we have essentially contributed to stalemate by telling them to reform but by not being willing to help them. I think both cases some degree of reform from the top down in terms of government guidance and loosening up the forces of creativity and innovation from the bottom up with directed government guidance is the way to go.

MS. WARNER: Would you say that's essentially what the Clinton policy has been since the Vancouver Summit, to sort of encourage the IMF to be just a little more relaxed in its standards toward Russia, or are you talking about relaxing even more?

DR. BRZEZINSKI: I would say relaxing more, advocating a little less, and particularly in the case of the former Soviet Union balancing aid to Russia with aid to the non-Russian states because there we have also an additional goal which is that the former Soviet Union become genuinely pluralistic in a geo-political sense, that does not, again, become an empire, and where I fault the Clinton administration the most in the case of the former Soviet Union is thatit has neglected, by and large, the non-Russian states, thereby contributing to a vacuum around Russia which inherently enhances the material aspirations of those in Moscow who would like to have both an empire and a strong economy financed by us.

MS. WARNER: Well, I'm afraid that's all the time we have, but thank you, Dr. Brzezinski.

DR. BRZEZINSKI: Nice to be with you. FOCUS - COST OF PEACE

MR. MUDD: Next tonight, the cost of peace. As we reported earlier, Sec. of State Christopher called for a conference of donor nations in an effort to underwrite the Israeli-Palestinian Peace Accord, the estimated price tag about $3 billion over 10 years. The scale of economic difficulties, particularly in the Gaza Strip, is monumental. Correspondent David Smith of ITN reports.

DAVID SMITH, ITN: This is the Jewish New Year, and peace agreement or not, the Israeli army has closed the border between the Gaza Strip and Israel to prevent, they say, any Palestinians upsetting the national holiday. So the tens of thousands of Gazans who work in Israel not only lose their pay but also their right to travel in a country that uses their labor. On both sides of this conflict now there is agreement as this peace process unfolds that it can only work if Gaza and the West Bank stop being an economic parasite and develop an economic life of their own.

ODED ERAN, Deputy Director, Israeli Foreign Ministry: If we don't see an immediate exit, I think that the peace process doesn't stand a very good chance of surviving.

MR. SMITH: To what extent do you think economics can make or break this agreement?

SARI NUSSEIBEH, Palestinian Leader: I think to a great extent, we need to put in a lot of money in the occupied territories. We need to change a lot of things. As you know, the Palestinian economy, especially over the past five years of occupation, has become a totally parasitic economy on Israel.

MR. SMITH: When it comes to Gaza, the statistics alone tell much of the story. More than 800,000 people, with one of the highest birth rates in the Arab world, crammed into a tiny sliver of land twenty-nine miles long, five miles wide. Average family income about $100 a week. Unemployment among males 60 percent and rising. All this is reflected in the peace agreement which calls for massive investment here, huge programs of rehabilitation and relief, and total reconstruction of the refugee camps that so dominate the landscape of Gaza. There is even a cause for posing that a brand new fort be built here down by the shore at Beach Camp. Estimated cost, $750 million. The sums involved are fairly staggering, and it all raises any number of questions: Who's going to give and who's going to take, how best to channel money to the people most in need, and who will decide what the priorities are. Until now, it's largely been the United Nations and charities funded by the PLO which have moved investment aid into Gaza. The proposal up for discussion in Washington here is something very different: a central fund acting like a clearing bank, receiving what the world gives and then distributing it to the Palestinians at the territories. It's an Israeli idea, and like so much of this economic process, Israel intends to have a big say.

ODED ERAN: There is a possibility of having some sort of like clearing house which will not deal with the resources, themselves, but will have the ability to channel the resources. They will say, look, the EC, there are certain projects in Jericho, and I'll do this, you do this. Then they will say to the Japanese, look, we have decided, all of us, that there is a need to have progress in that land. So they will be something like a traffic warden for all of these projects and resources if that's the new province.

MR. SMITH: In some areas you can see the hand-over working quite smoothly. Take health care, for example. There are just two big main hospitals in Gaza, with about 300 beds. No one can doubt the need. But at least in place here are Palestinians, doctors, nurses, ancillary staff, and while the Israeli army's been ultimately in charge of this for 26 years, it's the Palestinians who've run hospitals and clinics on a day to day basis in Gaza. It's when you look at another immediate issue, policing the territories once the Israelis are going. But you diagnose the crisis to come. The Palestinians have been showing off their youth movements and touting them as prospective policemen. Fayez Abu Rahme, Mr. Arafat's longtime representative in Gaza, says he wants 25,000 officers paid four to five hundred dollars a month, which adds up to about $150 million a year.

FAYEZ ABU RAHME, Mayor-Designate Gaza: They will come from Gaza, from Palestinians who are outside and fit to be policemen, and there have been recruitments of 50 officers from loyals. They will be trained for three months in Egypt. They have already left for Egypt.

MR. SMITH: But will they have guns?

FAYEZ ABU RAHME: Yeah, they must have guns. They must have guns, but not tanks. They will never have tanks.

MR. SMITH: Will there be consultations with the Israelis about this?

FAYEZ ABU RAHME: There will be consultations with the Israelis.

MR. SMITH: And there's the problem, because it's perfectly clear to Jordan and those responsible on both sides that Yasser Arafat and the Israelis have fundamentally different agendas when it comes to rebuilding the occupied territories so that project for a new force in Gaza may be written into the agreement signed in Washington, but here on the ground, it's already a bone of contention that the Israelis wanting the Palestinians to carry on using an Israeli port up the coast.

ODED ERAN: The port in Gaza isn't as economically necessary. It is a long-term project. Right now, I would go with the immediate needs of the population in Gaza, and that is not necessarily a major port.

MR. SMITH: Why not use an Israeli port up the road?

FAYEZ ABU RAHME: Well, the Israeli ports are crowded, and they will not be given the opportunity before them. So we want to have our harbor. We will have opportunities for ourselves.

MR. SMITH: Three days after peace was signed in Washington and the Palestinians are effectively in control of much of the territory. It is so far a joyful revolution, but potential donors and investors overseas will no doubt want to see stability before risking economic capital here.

SARI NUSSEIBEH, Palestinian Leader: It is not going to the areas because, in fact, the economic stability and development will be a component, the necessary condition for the success of the peace process. And so if we have that, then we are going to make sure or more sure that the process will work out, will succeed. It's really very important for everybody concerned to do everything they can on the Israeli side, on the Palestinian side, perhaps also on the International Community side to make the experiment work.

MR. SMITH: As we left Gaza, hundreds of people were gathering, marching across the sand dunes at Jabiliya Refugee Camp, one of those extraordinary images that tell you how much the Palestinians value the freedom they've begun to taste in the past few days. The meeting they attended was fairly chaotic. No one's quite sure what's to be done next. And at this stage there are many more volunteers than the PLO can handle. Giving these people jobs will be the priority, turning peace into prosperity the goal. But a day in Gaza makes you realize the Israelis and the Palestinians are already starting to talk different languages about the future, the Israelis wanting an amicable separation based on the economic inter-dependency of the past 26 years, the Palestinians wanting real independence.

MS. WARNER: Still ahead on the NewsHour, contract talks in the auto industry, and an update from the Denny trial in Los Angeles. FOCUS - COMING TO TERMS

MR. MUDD: Next tonight, a look at the auto industry. It's contract time for the big three automakers. A tentative agreement reached at the Ford Motor Company last week, which is the healthiest of the three, may be too rich for Chrysler or General Motors to swallow whole. Last week, a strike was diverted at Ford after a 40-hour marathon session yielded outlines of a deal which today is being presented to the leaders of United Auto Workers locals. Rank and file are expected to approve the contract in the next two weeks. One of the big issues was health insurance. Ford got the union to contribute a few pennies of each worker's cost of living increase to help pay for health benefits. Under the new contract, workers will get the same health benefits they had before. The Ford plan for UAW members has no deductible and 100 percent payment of most medical costs. The Ford contract also says union members are retained at almost full pay when the plant is shut down temporarily and that union members get a 3 percent wage increase and higher pension payments. One concession for Ford is that newly hired workers will be paid at a lower pay rate, starting at 70 percent of the standard base pay and rising over three years. Once the Ford contract is ratified, the union will push this model in what is called "pattern bargaining" in talks with Chrysler and General Motors. We take a look at whether Ford's agreement spells trouble for the rest of the industry. Harley Shaiken is professor of industrial relations at the University of California at San Diego, and Maryann Keller is an auto analyst at the New York brokerage firm of Fuhrman Selz. She's the author of a new book on international competition on the auto industry titled Collision. Ms. Keller, is the contract that the UAW and Ford tentatively agreed on a good deal for Ford, or a good deal for the UAW, or both?

MS. KELLER: It's a good deal for Ford and for Ford workers. It is the contract that any one of us could have predicted a long time ago because it played into Ford's strength. In effect, what Ford has done for itself is create a system to enrich the pension and to encourage early retirement. Since Ford is operating at full capacity and has no prospect at having any surplus workers any time in the future unless its economy went into the tank, Ford is going to be able to replace those older workers with young workers for whom it just negotiated a new wage level 70 percent of the standard base rate.

MR. MUDD: Prof. Shaiken, why did UAW pick out Ford as its target first?

PROF. SHAIKEN: Well, my sense is the UAW felt that with Ford we could reach a settlement without a strike more surely than they could at GM. But GM was very much a participant at the Ford talks. While it may not formally have been sitting at the table, its presence was very, very noted. This was an agreement that was negotiated at Ford but very much is meant to be an industrywide agreement. UAW, while the negotiations at Ford were going on, was talking with General Motors, negotiating there as well, as a fairly solid idea of what GM's problems are, what GM's objections to this agreement might be, so why the UAW picked Ford, I think, was to established certain principles but for a contract that is meant to stand the entire industry, not simply Ford.

MR. MUDD: But is it -- if you're an automaker, is it good to be first, to be picked out by the union as the first target?

PROF. SHAIKEN: In general, it is, and in general, the automakers prefer it, and the reason, of course, is it gives you an opportunity to shape the agreement to your own specific needs, and as part of that process, you not only shape it to your needs, you see how you can negatively affect your competitors. But the UAW was very aware of that and very much aware that the real problems this time around were not at Ford, although Ford certainly has its share of problems, but at General Motors. So the UAW, in a sense, was a stabilizing force for the entire industry, seeking to gain a contract at GM and at Chrysler, but negotiating the specific provisions at Ford.

PROF. SHAIKEN: So, Ms. Keller, is it, is it fair to say that the Ford Company negotiators were looking to damage General Motors by the contract they struck with the UAW?

MS. KELLER: I don't think that it would be fair to say that Ford was looking to specifically damage General Motors, but frankly I think that that's the consequence of it. I fail to see how it is in General Motors' best interest to be in a situation where high pensions have been negotiated for its retirees as well, except General Motors' pension fund is grossly under-funded and Ford's is fully funded. General Motors has by its own admission 50,000 surplus workers, and it's going to have to continue to shed workers. So it has virtually no prospect of adding very many people at this wage rate, 70 percent of the standard, which Ford will be able to do.

MR. MUDD: One of the things that Ford wanted to do during these negotiations was get some union help in holding down health costs. Did it succeed?

MS. KELLER: Ford got no concessions on health care, and that had been one of the issues going in, although I think everyone both - - in all of the auto companies realized that that was probably the one major strikable issue, and so not really very much was accomplished. The union and the companies have always worked together in ways of helping to hold down the rate of increase in health care costs in terms of encouraging HMOs and preferred provider plans and things like that, but in terms of actually making revolutionary change in the health care programs, no, nothing was accomplished.

MR. MUDD: I guess this is just not a very good year, given all that's going on in Washington with the administration of Congress on health care, not a very good year to revamp a health plan between the union and the companies.

MS. KELLER: I think almost impossible, given what's happening in Washington right now. No one knows what's going to come out of Washington, therefore, no one knows how to structure a corporate program.

MR. MUDD: Well, Prof. Shaiken, why is, why are health care -- why is health care such an important issue with the union?

PROF. SHAIKEN: Well, with the UAW many of these benefits that have radiated out through American industry were pioneered there. Workers in previous years gave up other possible benefits or wage raises in order to gain these health care benefits, so there's a long tradition and very, very strong feelings that these are hard-won gains that the union does not want to give up. Beyond that, the Ford, the GM, and the Chrysler workforces are older workforces. At Ford, it's in the mid forties. So these are people that have very real health problems in an industry that is very physically demanding. If you work in an assembly line and you develop a problem with your wrist, you don't want to be thinking about a copayment as to whether or not you should see a doctor for that problem. I would disagree though with one of the things that Ms. Keller said in terms of the union on this issue. Quite clearly, the union stood firm on issues of principle, i.e., fighting very strongly against copayments. But there was an important compromise in that future cost of living payments in part will be used to defer health care benefits. At Ford, that could amount to $180 million during the life of this agreement, which is not insignificant.

MR. MUDD: Any comment on that, Ms. Keller?

MS. KELLER: Well, nothing happened comparable, for example, to what happened last year at General Motors for its salaried workforce. General Motors made radical changes in the health care, insurance coverage for its salaried workers when it forced all of them to significantly increase their contributions towards that. I think the industry was looking for a little bit more, but, as I said, it's impossible to really make significant changes when the government is exploring this issue more broadly.

MR. MUDD: Just in passing, how much will this Ford contract cost the car buyer in, in an increased price? Is there a figure you can put on it, a couple hundred dollars?

MS. KELLER: It's hard to say. In the case of Ford, if they can get enough people to retire and replace them with new workers --

MR. MUDD: At a lower rate.

MS. KELLER: -- at a much lower rate, the increase which normally would be 5 or 6 percent a year could be a little less than that. In GM's case, on the other hand, it's just going to be increased pension expenses because the fund can't really pay out that much more without putting more money into it, plus no substitution of older workers with younger workers. So for GM I would expect that the rate of increase would be higher, perhaps 6 or 7 percent.

MR. MUDD: Professor, the UAW now goes on to Chrysler, and then, I gather, they'll hold General Motors to the end. What is -- tell - - explain to me what the significance of the Ford contract is for General Motors? Is, is it a contract breaker for General Motors?

PROF. SHAIKEN: No. I think it's a contract that General Motors can live with and likely will ultimately accept. Certainly between the acceptance and now there will be a lot of rhetoric, and I think that General Motors will be quite, complaining quite loudly, both privately and publicly. Also, there's a lot of pressure from Wall Street on General Motors for a certain kind of a contract. But I think, ultimately, what GM has to do as part of its restructuring is ensure that it has a very good relationship with its workforce and with the union. Pivotal to GM isn't simply cutting costs next quarter or next year, but the ability to have the kind of relationship with the union where productivity is raised, where quality becomes very high, those kind of things. And for that to happen, it's going to require certain stability in the industry. Ms. Keller mentioned about the retirees and the additional cost to GM there. Clearly, that's true, but there's also a benefit to General Motors. It allows for a smoother transition to a workforce that may be smaller in the years to come. It's not the kind of thing where you'll be firing or laying off in large numbers to the extent that you can pace this through increased retirement, and there are incentives for that in the current agreement.

MR. MUDD: Ms. Keller, is, is General Motors so weak that it cannot take a strike, cannot afford a strike?

MS. KELLER: GM could not afford a strike.

MR. MUDD: It could not. So it's trapped into, into accepting what UAW demands?

MS. KELLER: General Motors is in a difficult cash flow situation. One has to understand that General Motors not only has to put money into the pension fund, it has to spend a great deal more money in the future to bring out new products which it neglected over the last few years. So General Motors is faced not with -- well, not with a contract that Wall Street wants to write. That's nonsense. General Motors simply has to write a contract that's going to make it more efficient. It is now the high cost producer in the industry. This contract will serve to make it a higher cost producer relative to Ford.

MR. MUDD: A final question about pattern bargaining, which is the phrase used to describe what UAW is going through now, picking out one and then setting the pattern for the industry. What's the future of pattern bargaining? Is it good for the industry or not?

MS. KELLER: I can't see -- you know, I'm not a labor expert -- but I can't see that it is good for the union to allow one company to exercise its judgment over a contract which will then apply to its competitors. That's, in effect, what pattern bargaining is. You're not dealing with a homogeneous industry. You are not dealing with three exactly alike companies, and even though the union allows or takes into consideration the needs of the other companies in negotiating this, they cannot precisely do it. It's going to, it's going to affect each company differently, and this contract surely will.

MR. MUDD: Any comment from you on pattern bargaining, Professor?

PROF. SHAIKEN: Well, I would disagree with that. I think pattern bargaining over the years has been a historic point of stability in this and many other industries. Pattern bargaining is not identical bargaining. There have always been differences in what happens to the company's fates and very often differences in the specifics of the agreements, themselves, but it creates a broad measure and takes wages out of contention as the major bases in which companies compete. They compete based on superior products, based on better production processes, based on innovation, based on a variety of things, but it removes the incentive for having the biggest club when it comes to labor costs. Out of this, cost at GM, in fact, may not go up if productivity and quality are rising as a result of this agreement. So I think what we have here is an opportunity to add some stability and to remove an important element of confrontation from the industry, rather than to be put in the position where the confrontation between the UAW and GM is what consumes the next three years.

MR. MUDD: All right.

PROF. SHAIKEN: This pattern agreement can take an important element of that away.

MR. MUDD: Good. Thank you. Thank you both very much. I enjoyed talking to you. UPDATE - THE PEOPLE REST

MS. WARNER: Next, the trial of the man charged with beating truck driver Reginald Denny during the Los Angeles riots last year. On Friday, the prosecution rested. Correspondent Jeffrey Kaye of public station KCET-Los Angeles has an update.

MR. KAYE: The televised beatings at the intersection of Florence and Normandy Avenues have become searing symbols of the 1992 Los Angeles riots, and in the prosecution phase of the trial of two men charged with those assaults, television time and again took center stage.

LAWRENCE MORRISON, Prosecutor: We will be presenting in addition to the live testimony of witnesses, as I said, videos. You will see a large number of exhibits which are photographs of individual frames from those various videos.

MR. KAYE: True to his opening statement, prosecutor Lawrence Morrison and co-counsel Janet Moore presented a long series of pictures, stills and video, amateur, and professional. The image, according to prosecutors, show defendants Damian Williams and Henry Watson attacking and robbing eight people, including truck driver Reginald Denny. The two are charged with the attempted murder of Denny and other felonies. At times, the intersection was crowded during the assaults, but in nearly four weeks of testimony, prosecutors produced only three witnesses there at the time who said they could positively identify the defendants.

GABRIEL QUINTANA, Gas Station Attendant: [speaking through interpreter] He's there, in front. Shirt and tie.

JANET MOORE: I'm going to walk behind the person that you pointed to. Is this the person that you saw throw the brick into the head of the truck driver?

GABRIEL QUINTANA: [speaking through interpreter] Yes.

MR. KAYE: Gas station attendant Gabriel Quintana was the only person on the ground to identify Williams. The other two eyewitnesses who identified the defendants were in a helicopter over the scene.

JANET MOORE: Are you absolutely certain that this man in court, defendant Williams, is the person that threw the brick into Reginald Denny's head?

ROBERT TUR, Cameraman/Reporter: There's no doubt.

JANET MOORE: Are you absolutely certain that the person that you saw take his leg and place it on the neck of Reginald Denny, apparently holding him to the ground while others went through his pockets, are you absolutely sure that that is defendant Watson at the end of the counsel table?

ROBERT TUR: It was.

MR. KAYE: Cameraman/reporter Robert Tur shot the helicopter pictures of the beatings, video that was broadcast live.

ROBERT TUR: What I saw is what I saw, therefore, to be honest, I do have a bias.

ATTORNEY: And your bias is against Mr. Williams, is that not true?

ROBERT TUR: Mr. Williams beat a lot of people up.

MR. KAYE: The other eyewitness was newspaper photographer Robert Clark, who took pictures from Tur's helicopter.

JANET MOORE: In this photograph, can you see defendant Watson?

ROBERT CLARK, Photographer: Yes.

JANET MOORE: And what is he doing in this photograph?

ROBERT CLARK: His right foot is pressed down on the neck of the man on the ground.

JANET MOORE: And do you see defendant Williams in this photograph?

ROBERT CLARK: Yes.

MR. KAYE: Clark said he saw Williams throw a brick and Denny and saw Watson put his foot on Denny's neck. Clark's telephoto pictures show one of the men who assaulted Denny had a tattoo on his left forearm.

ROBERT CLARK: The tattoo is a general gray area on his arm, and when I magnified it, it appeared to be some kind of weave or floral design.

MR. KAYE: Prosecutors introduced blown up and enhanced pictures of the tattoo on the forearm of the man they claim is Williams, and at the request of prosecutor Moore, Damian Williams revealed a floral tattoo on his left arm. Several witnesses who know Williams and Watson but who were not at the scene of the riots identified the defendants based on pictures. Among them, LA Police Officer Timothy McRath said he had contacts with the men when he patrolled the area.

JANET MOORE: When you made these contacts, would you talk with him?

TIMOTHY McRATH, Los Angeles Police Department: Yes.

JANET MOORE: Would you get close to him so that you could see his face, his face?

TIMOTHY McRATH: Yes.

JANET MOORE: And you could see his features clearly during the force of that contact?

TIMOTHY McRATH: Yes.

JANET MOORE: When you saw this footage, did you recognize anyone?

TIMOTHY McRATH: Yes.

JANET MOORE: Who did you recognize?

TIMOTHY McRATH: I recognized Damian Williams.

JANET MOORE: Did you recognize him as the person that threw the brick?

TIMOTHY McRATH: Yes.

ATTORNEY: Who was the person that you recognized in the videotape?

MICHAEL ALEXANDER: I recognized Mr. Watson, sir.

MR. KAYE: Michael Alexander was one of three of Henry Watson's former coworkers at an armored car firm who also identified Watson from videotapes, and an assistant high school principal from Mississippi said he recognized Williams and his distinctive walk from videos as the same student he had disciplined in the late 1980s.

ATTORNEY: When you first saw Reginald Denny could you explain what your observations were?

DR. PAUL TOFFEL, Surgeon: Well, I saw the patient in bed in the intensive care unit with a tube, a breathing tube in his mouth -- this is called an endo-tracheal tube, with assisted respirations. He was in coma, not able to breathe on his own, so his respirations were being assisted. He had evidence of multiple facial fractures and contusions and evidence --

MR. KAYE: Doctors testified about injuries suffered by the victims, as did the victims, themselves.

LARRY TARVIN, Truck Driver: I know my lips were hurting, my face was bleeding, because I was wiping blood off my face.

JANET MOORE: And do you remember anything else at that time?

LARRY TARVIN: No, ma'am.

MR. KAYE: Larry Tarvin was pulled from his truck and beaten unconscious.

ALICIA MALDONADO DOBY: I just heard, "Get her," and they got me, you know.

MR. KAYE: Alicia Maldonado Doby was pelted by rocks, and her purse was stolen as she drove through the intersection.

ALICIA MALDONADO DOBY: He hit my car. He hit the windshield of my car with something, and it cracked it, and all my glass was shattered at that time, the back window, the side window, and then while I was trying to swerve and get out of there, another brick was thrown through my windshield from the right side.

MR. KAYE: Fidel Lopez was beaten and spray painted.

FIDEL LOPEZ: And some guy passed me from my block and beat me, beat me in my left ear, and after that, I don't remember nothing.

MR. KAYE: None of the victims could identify their attackers. Truck driver Reginald Denny said that 97 bones in his face were broken. Denny, like other victims, said he blacked out during the attack.

JANET MOORE: Do you remember being removed from your vehicle?

REGINALD DENNY: No.

JANET MOORE: Do you remember being kicked or beaten?

REGINALD DENNY: No.

JANET MOORE: Do you remember your face being held to the ground by someone's foot?

REGINALD DENNY: No.

MR. KAYE: With victims unable to recall their attackers, much of the prosecution's case relies on tracking clothing, allegedly worn by the defendants at the time of the assaults.

JANET MOORE: You also mentioned some type of logo involving the words "hooker" and "bar and grill." Do you see that logo on the back of defendant Watson's shirt?

NIKE OFFICIAL: Right here. This is the NIKE trademark, or one of them.

MR. KAYE: An official from NIKE shoes was even used to identify sneakers on the man prosecutors believe is Williams. But the clothing strategy also proved problematic to prosecutors.

EDI FAAL, Defense Lawyer: Do you see Damian Williams in that frame?

WITNESS: Yes.

EDI FAAL: Do you see this part here at the back of the T-shirt?

WITNESS: Yes.

EDI FAAL: It appears to be a blood stain?

MR. KAYE: Williams was repeatedly identified by a stain on the back of his T-shirt, a shirt which defense lawyer Edi Faal showed the jury.

EDI FAAL: Okay. Can we play it?

MR. KAYE: But the stain does not appear on the back of the man who threw a brick at Denny whom prosecutors contend is also Williams.

EDI FAAL: Do you see a stain on the back of that T-shirt?

WITNESS: No.

EDI FAAL: Okay, thank you.

MR. KAYE: Prosecutors have tried to explain away the disappearing stain by suggesting that Williams may have changed his T-shirt during the riot. Outside court, defense lawyer Faal admitted his client was near the riot scene, but he said Williams did not attack Denny.

EDI FAAL: In the vicinity of Normandy and 74th was Damian Williams, and he was wearing a shirt that has a stain. That, in fact, is Damian Williams. He was there, but the person that attacked Mr. Denny is a different individual.

MR. KAYE: Several good samaritans spoke movingly about saving victims after seeing the beatings on live TV.

JANET MOORE: Did you know this individual?

TITUS MURPHY, Engineer: No, I didn't.

JANET MOORE: From what you saw on television, did you think he needed some help?

TITUS MURPHY: Yes.

ATTORNEY: Did you form any opinion as to how they were selecting their targets?

DONALD JONES, Firefighter: Yes.

ATTORNEY: And what basis was that?

DONALD JONES: On race.

ATTORNEY: And could you explain what you mean, that they were selecting their targets on the basis of race.

DONALD JONES: That the people that were, that you would indicate as being African-American or black were being let through the intersections. People that were non-African-American or non-black were being hit, targeted.

MR. KAYE: Donald Jones, an off duty firefighter, who saved bookkeeper Choi Tsai Choi, was one of several who testified that victims were selected on the basis of race. Prosecutors used this line of questioning to try to prove the defendants acted with premeditated intent. But defense lawyers in their cross- examinations elicited descriptions of chaos from the same witnesses.

ATTORNEY: And you saw, as you saw on the videotape, a lot of people looting and moving about, si that right, sir?

DONALD JONES: Yes.

ATTORNEY: And it seemed, in your mind, that they were out of control?

DONALD JONES: Yes.

ATTORNEY: And they appeared to be angry?

DONALD JONES: Yes.

ATTORNEY: They appeared to react to the adverse verdict of the Rodney King case, would that be fair to say?

PROSECUTOR: Objection.

JUDGE: Sustained.

ATTORNEY: Did it seem to be chaotic?

DONALD JONES: Yes.

MR. KAYE: Amidst the depictions of hate and violence during this trial, there was one poignant moment of reconciliation that came on the third day of testimony. After Reginald Denny left the stand, he hugged and greeted the defendants' parents. If convicted, their sons could be sentenced to life in prison.

MS. WARNER: Late Friday, the defense opened its case and immediately attacked the credibility of the eyewitnesses presented by the prosecution. The case is expected to go to the jury by the end of the month. RECAP

MR. MUDD: Again, the main stories of this Monday, President Clinton and members of his administration continued a PR blitz for the soon-to-be-announced health care plan. Former Surgeon General C. Everett Koop announced his support for the plan, and said he will campaign for it with health professionals. Secretary of State Warren Christopher announced a conference of wealthy nations to raise up to $3 billion to implement the Israeli-Palestinian Peace Agreement. And tomorrow's anticipated signing of a Bosnian peace agreement was called off when the warring parties failed to make concessions in their negotiating positions. Good night, Margaret.

MS. WARNER: Good night, Roger. That's the NewsHour for tonight. We'll be back tomorrow with a report on the controversy over China's campaign to host the Olympics in the year 2000. I'm Margaret Warner. Thank you, and good night.