The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. The opening of the Bush-Gorbachev summit leads the news this Tuesday. President Bush began the Moscow talks by granting the Soviet Union major trade concessions. We'll have the details in our News Summary in a moment. Judy Woodruff is in New York tonight. Judy.

MS. WOODRUFF: On the NewsHour tonight the summit is our main focus. We'll get the views of four political experts, three American and one Soviet on what the stakes are, and from an economist and businessman on what the new trade agreement will really mean. And we end with a documentary report on a California power struggle between blacks and Hispanics. NEWS SUMMARY

MR. LEHRER: Presidents Bush and Gorbachev opened their two day Moscow summit today. They started with greetings at St. George's Hall in the Kremlin, the Bushes being welcomed by Mr. Gorbachev and his wife, Raisa. Mr. Bush praised Mr. Gorbachev for his reforms and said, "We stand by you." Mr. Gorbachev acknowledged the importance of U.S.-Soviet relations.

MR. GORBACHEV: [Speaking through Interpreter] For the first time ever, our two countries have a chance to build their relations on the natural basis of universal human values and national interests. We are beginning to realize that we need each other, that the security and general stability and dynamic development of each of our two countries benefits both of them. Not only our two nations but the entire world needs this kind of U.S.-Soviet relationship. The world has realized this and has given us support in our joint efforts.

MR. LEHRER: The two leaders then sat down for four hours of talks, the main issues arms control, the Middle East, and Soviet political and economic reforms. Mr. Bush capped the day's meetings by announcing help for the ailing Soviet economy. He said he would grant the Soviets their long sought after goal of Most Favored Trade status with the United States. Later in the afternoon the Presidents and their security entourages took a stroll through Red Square. Mr. Bush told Mr. Gorbachev a new age of progress has dawned. Mr. Gorbachev said the summit would open new frontiers of Soviet-American relations. Earlier in a speech to Soviet intellectuals, Mr. Bush declared the cold war over.

PRES. BUSH: For four long decades our two nations stood locked in conflict as the cold war cast its shadow across an armed and uneasy peace. This summit marks a new beginning, the prospect that we can put an end to a long era as adversaries, write a new chapter in the history of our two nations, forge a new partnership, and a sturdy peace.

MR. LEHRER: The Presidents will sign the Strategic Arms Treaty tomorrow. Today Sec. of State Baker and Foreign Minister Bessmertnykh signed a series of other agreements. They included accords providing the Soviets with technical economic cooperation, assistance in developing housing policy and medical supplies for the Baltic states, plus another on aviation security and disaster aid cooperation. President Bush said the Soviet Union and the United States still did not see eye to eye on all issues. He cited continued Soviet military aid to Cuba as one problem area. He also pressed the Soviet government to negotiate in good faith with the independence minded Baltic republics. Judy.

MS. WOODRUFF: Boris Yeltsin, the President of the Russian republic, today snubbed President Gorbachev's invitation to take part in the summit meeting. Yeltsin said he refused to be part of what he called a faceless mass audience. Instead, Yeltsin had a private meeting with Mr. Bush. After their 40 minute session, the two men spoke to reporters about their talk and the emerging relationship between the U.S. and the Russian republic.

BORIS YELTSIN: [Speaking through Interpreter] I am satisfied.

PRES. BUSH: So am I. And the President has given you a very good and thorough description of the agenda. And the only point I would add is, one, it was a good meeting from the U.S. standpoint and two, President Yeltsin's visit to the United States was a big hit and furthered not only relations and understanding between Russian republic in the states but also the Soviet Union in the states, so we viewed his visit as a very positive step in the overall relationship between the United States and Russia and the United States and the Soviet Union.

MS. WOODRUFF: President Bush will go to Kiev on Thursday to underline the importance of the Soviet republics. Kiev is the capital of the Ukraine, the Soviet Union's second largest republic after Russia. It has a strong independence movement and its continued cooperation in negotiations for a new union treaty is considered critical to Gorbachev's plan to hold the country together.

MR. LEHRER: Sec. of State Baker may return soon to Jerusalem for more talk about a Middle East peace conference. Baker called Israeli Prime Minister Shamir today about such a trip. But U.S. officials said no decision was made on if and when Baker might go. Israel's foreign minister, David Levy, met with Egypt's foreign minister in Cairo today. After two hours of talks, both said there were still differences on their approaches to a Middle East peace conference, among other things over the question of who will represent the Palestinians at those talks.

MS. WOODRUFF: South Africa's President DeKlerk today promised to end all his government's covert funding for political groups. He made the pledge after demoting two cabinet ministers for their involvement in such activity. But DeKlerk also defended secret funding of the conservative Inkatha Party as necessary at the time. The covert funding was designed to thwart the activity of Nelson Mandela's African National Congress, South Africa's main black opposition group. We have more on the story from Johannesburg by Kevin Dunn of Independent Television News.

MR. DUNN: F.W. DeKlerk faced the press with a shadow of Inkathagate darkening his Presidency. He made no apologies for the past, but made clear it would not happen again in the future.

PRES. F.W. DeKLERK: The assurance is given that all special secret projects which could have been considered to constitute support for political parties or organizations have now been cancelled. It remains the government's aim to restrict special secret projects to the minimum. Once again, the scalpel has cut deeply.

MR. DUNN: By shunting Adrian Flock from the ministry of law and order, President DeKlerk will increase his control over a police force which has repeatedly been accused of bias. The nw minister, Herness Krill, immediately pledged today that the police would be impartial. But the most dramatic departure is that of the hardline defense Minister Magnus Milan. Demoted to looking after water, forests, his removal meets a key demand of the African National Congress. In his place comes the youthful reformest Ralph Mayer.

MS. WOODRUFF: Flood waters overran a village in Western India today. As many as 700 people were feared dead. Authorities said a rain swollen river broke through a dike protecting the village. In Eastern India, at least 32 workers at a dam project were killed Sunday when flood waters swept them away. According to Indian news reports, heavy rains have lashed India since the start of the monsoon season five weeks ago.

MR. LEHRER: In this country, the government said today new home sales jumped 7.4 percent in June. Every region of the country felt the increase upset the South where they slipped 1/2 percent. In a separate report, the Federal Deposit Insurance Corporation said real estate markets improved across most of the county over the past three months. The report found signs of a downturn emerging only on the West Coast. FDIC Chairman William Seidman said the improvement should help the banking system which has been hurt by bad real estate loans. Also today Trans World Airlines said it will file for bankruptcy protection early next year. A company spokesman said the carrier will take the action to eliminate $1 billion in debt. Under the deal, TWA Chairman Carl Icahn would lose his majority stake in TWA.

MS. WOODRUFF: The countdown has begun again for the launch of the space shuttle Atlantis. The five astronauts arrived at the Kennedy Space Center in Florida today. The shuttle had been grounded for a week because of a faulty engine computer. It is now scheduled to lift off Thursday morning at 11:01 Eastern Time.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to the Moscow summit and a California political fight between blacks and Hispanics. FOCUS - FACE TO FACE

MR. LEHRER: The Bush-Gorbachev summit is the lead story tonight. This is the sixth time in two and a half years Mr. Bush has met with Mr. Gorbachev either one on one or in multi-nation summits such as the G-7 meeting two weeks ago in London. Four analysts who have helped us before on earlier summit coverage will look at this one and at whether what was once extraordinary is now only ordinary. The follow this sampling of the spirit of this summit, excerpts from Mr. Bush's dinner toast and Mr. Gorbachev's welcoming statement.

MR. GORBACHEV: [Speaking through Interpreter] Mr. President, in recent months and weeks, the Kremlin, a symbol of our nation's centuries old history has been the scene of events that will shape this country's future. Tomorrow it will witness another such event, the signing of the treaty on the reduction of strategic offensive arms. It is more than just a major step in the process of this -- it is a sign of a growing irreversibility of the fundamental change for the better embroiled developments. The results of the G-7 meeting in London first solidified this irreversibility. It was the beginning of a new type of international economic relations which will form the material foundation for world politics in the 21st century.

PRES. BUSH: Dramatic changes have reshaped our world since we first met six years ago, Mr. President. The relationship between our great nations has moved from confrontation to friendship. Our growing ties remind me of an old proverb from your land. "There's no road too long and no obstacle too hard for friendship." Internationally, our growing partnership as peace makers and peace keepers continues to deepen. In the past year, we've worked together to deter aggression and to encourage nations to resolve their differences peacefully. And now our common efforts may help bring peace to the Middle East. In this region where dangerous confrontations once divided our nations, we may consolidate our partnership as peace makers.

MR. LEHRER: Now to our summit analysts. Madeleine Albright is a former National Security Council staff member in the Carter administration, now a professor at Georgetown University and President of the Center for National Policy. William Hyland was deputy National Security adviser in the Ford administration, he's now editor of Foreign Affairs Quarterly Magazine. Jerry Hough is a senior fellow at the Brookings Institution and a professor at Duke University and joining us from Moscow is Andrei Kortunov, an analyst with the U.S.-Canada Institute. I talked to them earlier today. Bill Hyland, is this the first of the new era summits, as they're calling it?

MR. HYLAND: I think so, even though the business is old business, START treaties, Most Favored Nation treatment for Soviet trade and so forth. I think it's actually the end of the cold war was last year and this is the beginning of something, but it's very hard to define it because there's so many uncertainties on the Soviet side and even some on the American side that you don't know what we are beginning in this summit in Moscow.

MR. LEHRER: But is it still an important event?

MR. HYLAND: It's an important event but far less important than it used to be. I think it's becoming more routine. It's less dramatic. It's colorful. It's less significant, though it's not insignificant. It's beginning to, I think, resemble meetings between friendly countries, between Kaifu and Bush or Major and Gorbachev, et cetera. It's not really that confrontational atmosphere and the drama that surrounded previous summits.

MR. LEHRER: Jerry Hough, what would you say about that?

MR. HOUGH: I actually think it's much more important. Obviously, no summit is really important. What's important is the build-up to it, the negotiation that goes up to it. I think the real first post war summit was last September in Finland when essentially we were dealing with a question of how to deal with Iraq. But I think in the past, the summits were symbolic events. They were designed to reassure people we weren't going to war and nothing happened really. As Mr. Arbatov says, after all the arms control negotiations, we have two and a half times as much weapons after this treaty as we had before.

MR. LEHRER: Mr. Arbatov being a top Soviet analyzer of U.S. affairs.

MR. HOUGH: But now we are what the administration would call partners. I am even willing to say that we're an ally, and so now when we get together, we talk about extremely important things. And I think this is going down essentially as the Middle Eastern summit. It's wrapping up old business but it's going to transform the whole policy in the Middle East.

MR. LEHRER: Madeleine Albright.

MS. ALBRIGHT: Well, I think it's a very important summit, but again for somewhat different reasons. It is a transitional summit, but what to me is so fascinating is it's the one in which we are actually talking about Soviet domestic affairs. In the past, just the thought of Soviet domestic affairs kind of got the Soviets' backs up and saying this is not your business, and here basically the President of the United States is right in the middle of a Soviet political domestic fight. And I think that's what makes it very interesting, makes it very complicated, and makes the stakes fairly high in terms of how this minuet is going to be worked out. There are so many interesting parts to it already, Yeltsin standing Gorbachev up and all sorts of interesting parts to look at.

MR. LEHRER: But isn't Bill Hyland right that in the past when there were summit meetings between Soviet and American leaders, the stakes were is there going to be nuclear war and the stakes this time, while they're high, are not even in a league with that?

MS. ALBRIGHT: Absolutely. No. I mean it is not a confrontational summit and -- and Mr. Fitzwater, in fact, characterized it as one in which we have more in common than what we are disputing about. And I think that's important. But in the long run, our relationship with the different republics, how we work our way through the domestic politics of the Soviet Union, is something that has pretty high stakes, not life and death, but pretty high stakes in terms of the future relationship.

MR. LEHRER: Andrei Kortunov in Moscow, how would you characterize the stakes at this summit from the Soviet point of view?

MR. KORTUNOV: Well, I think that for people in Moscow, it is definitely not the only game in the town. They have a lot of things to be concerned of. They are standing in lines. They are thinking about the disintegration of the Soviet Union. They are considering a rise in crime and things like that. But for Gorbachev, it is very important because he needs to show to his own people that he is still the person in charge of the Soviet foreign policy, that he is still the person at the driver's seat and I guess that it might help him to fight a war with his domestic political opponents.

MR. LEHRER: But in this country in the past, Mr. Kortunov, every time a Soviet leader met with a U.S. President everything seem to come to a halt. It was a major, major happening, a major event. How was -- how were they viewed before by the Soviet people and how does this one compare with that?

MR. KORTUNOV: You know, I think that the summits for the Soviet people were especially important in terms of humanizing Soviet- American relations. It was very important for Soviets to see that Ronald Reagan is not a monster, that he is a friendly guy, and that basically we can deal with the Americans. Now I don't think that people expect too much out of the summit in practical terms. They do not think that they can change the situation in the Soviet Union dramatically for the better. But still psychologically, it is important for the Soviet people to understand that they are treated fairly, that the United States is not trying to use the situation of the Soviet weakness in order to undermine the Soviet Union and that the intention of Americans is actually to preserve the Soviet Union and to help the Soviets to overcome their current political and economic difficulties.

MR. LEHRER: Well, now, Bill Hyland, that's a significant thing, is it not, if George Bush can deliver that message through this summit to the Soviet people, that's a big deal, isn't it?

MR. HYLAND: Well, I can't believe that George Bush's message is to preserve the Soviet Union, certainly not the Baltic republics. Meeting with Yeltsin, going down to Kiev, having the leader of Kazikstan in the summit, none of that is directed towards preserving the Soviet Union, at least not the old Soviet Union. Indeed, Gorbachev is not even trying to preserve it. He's trying to rebuild something different. I think this is really the most interesting aspect and perhaps the most crucial aspect of the summit is that on the other side, the Soviet Union's falling apart. There's a crisis going on. Nobody knows if Gorbachev's going to be around. It may not even be important whether he's going to be around. Bush went out of his way to meet Yeltsin. Yeltsin more or less snubbed the President by not going to the meetings today. So there's a lot of chaotic turmoil I think on the Russian side, which means that this -- you can't really characterize the summit very easily.

MR. LEHRER: Mr. Kortunov, is that what you meant as far as the American message about holding the Soviet Union together?

MR. KORTUNOV: Well, I think that still the basic message of President Bush is to show that he's supporting Gorbachev and that he relies on Gorbachev. At the same time, his visit to Kiev and his special meeting with Yeltsin shows that Americans keep close eye on the change in balance between the republics and the union and that if Yeltsin gets the upper hand in the domestic political struggle, the American side will be ready to deal with Yeltsin.

MR. LEHRER: Is that a proper thing, Jerry Hough, for the President to do, to deliver that kind of message?

MR. HOUGH: Well, I think the message that the President delivered is precisely what was said. We've said all along we want the Soviet Union basically to stay together. What was important in the President's speech today --

MR. LEHRER: By stay together, you mean literally stay together?

MR. HOUGH: That's right. I mean in a federal system like the United States, not the only Soviet Union, but I think that's a very clear American policy, as it is in Iraq, as it is in India, as it is elsewhere, and it seems to me that it's an extremely wise one. But it seems to me that we're, we're treating things now as if they are much newer than they were. The fact of the matter is Franklin Roosevelt even accepted the fiction that the Ukraine was so sovereign that it could be in the United Nations, where it still is. President Nixon went to Kiev. So to go to Kiev is nothing new. What's really important is that Nazar Biov is there. What's really important is not Yeltsin --

MR. LEHRER: Why is that important?

MR. HOUGH: Because the nature of this the, what we are now in the process of doing, we've ended essentially the schism between the Byzantine Orthodox Church and Catholic Protestant, that long schism in Christianity we've ended. Now we're going to end the schism between Islam and the Judeo-Christian tradition. And because this is a conference that centers on Arab-Israeli conflict and on the reconciliation of Islam, it's crucial that there be a reconciliation between Russia and the Muslims, that is, Nazar Biov as the symbol, as the leading representative of the Central Asians is an extremely important figure. I think that what Yeltsin was snubbing was Nazar Biov.

MR. LEHRER: Rather than Bush and Gorbachev --

MR. HOUGH: Yeltsin has been a real racist towards essentially the oriental Muslims of Central Asia, and the notion that he's going to be on the same level with a Central Asian I don't think he could take. But I think Nazar Biov is very important in the context of the Middle East policy.

MR. LEHRER: Madeleine Albright, what about Jerry Hough's point earlier that the most significant thing that actually is coming out of this summit or is likely to come out of this summit is a Middle East peace, Middle East peace talks?

MS. ALBRIGHT: Well, I think it's a very important --

MR. KORTUNOV: Well, I don't --

MR. LEHRER: Hold on just a moment. I was just going to ask Madeleine Albright and I'll come right back to you, sir, on that.

MS. ALBRIGHT: I do think that that is a very important part of what is what President Bush and President Gorbachev are trying to establish as a new relationship. Jerry says allies. I think partners is probably still the better way of talking about it. There was a period where we thought that the Soviet Union might be mellow and contained and could, in fact, work with us to help contain regional problems. And there was a beginning with that in terms of Nicaragua, Southern Africa, and I think that is going back to an agenda where we see the Soviet Union as potentially assisting in helping to resolve the Middle Eastern problems. The problem, however, is the Soviet Union is not mellow and contained. It is falling apart and it is seriously weakened in the Middle East, so that whatever great role it could have had in directing its client states I think has disappeared.

MR. LEHRER: Meaning President Bush, if he wants to have Middle East peace talks, did not have to go to a Moscow summit and talk to Mikhail Gorbachev in order to get 'em, is that right?

MS. ALBRIGHT: I think that's right this time and I think that the issue here is that in some ways he's doing a favor to Gorbachev to include him in this. We will need Gorbachev or the Soviet Union in some constituted way to help us on regional disputes, but at this moment, I don't think that Gorbachev is adding that much to the mix.

MR. LEHRER: Is that a fair statement, Mr. Kortunov?

MR. KORTUNOV: I agree with this point. I guess that the role of the Soviet Union in the Middle East crisis will be limited for quite a time and I would personally like to see more discussions here in Moscow about issues like Afghanistan or Central America. I think that for the Soviet Union it is much more important and it deserves to be discussed.

MR. LEHRER: But as a practical matter, Mr. Kortunov, the agenda from the Soviet point of view, items one, two, three, four, five, maybe all the way down to fifteen are we've got problems in our own country right now, is that correct?

MR. KORTUNOV: Yeah, I think you are right.

MR. LEHRER: Yeah. What about -- Bill Hyland, this, the granting today of Most Favored Nation status, the President announced that, that's the first thing he did today at the summit, is that an important event?

MR. HYLAND: Well, it's symbolically important, I guess. After all, we negotiated this at the summit I participated in in 1972. So it's almost 20 years in the process and for them now to be given this status I don't think it means much economically, but it's something that's been hanging fire like the START Treaty, which they'll sign tomorrow. It should be done. It's not going to make a major difference, but not to do it probably would have sent a wrong message. But on the Middle East, if I could just jump in very quickly --

MR. LEHRER: Sure.

MR. HYLAND: -- I don't quite understand why it's important to press the Middle East case in Moscow. As Madeleine Albright said, Gorbachev's really not much of a player in this issue. And I don't understand the pressure on Shamir, especially coming from Bush and Baker at this particular time. I don't see the urgency just to announce it in Moscow. I think this really detracts from the whole issue to make it this kind of gimmick in order to announce it as a summit.

MR. LEHRER: Jerry Hough.

MR. HOUGH: Well, a series of questions are raised. On the Middle East I think President Bush today was extremely clear. He went out of his way in his speech to say just how useful and important, crucial the cooperation of the Soviet Union was in Iraq. And he's right. And it was not an accident. The letter from Syria came during the G-7. That was a sign that the Soviets were delivering their client. We went to Israel. That shows what we're delivering. I think we're way behind the curve on this, that just as we didn't -- were surprised at how fast Germany united, we do not -- and we have not discussed about how the United States and the Soviet Union cooperated in ending the civil war in Lebanon, we don't understand how close we are in Arab-Israeli, but the problem is if the Soviet Union really becomes democratic and 20 percent of its voters are Muslim and you get a democratization of their foreign policy, it's going to be an absolute disaster in Soviet-American relations if there's still an Arab-Israeli conflict, and we're just going to end it.

MR. LEHRER: So you don't think -- you don't agree with Bill Hyland, that it's just a gimmick for the summit?

MR. HOUGH: Absolutely not.

MR. LEHRER: You think it's a real issue. Bill Hyland.

MR. HYLAND: Well, I agree that the Middle East, the Arab-Israeli dispute's a real issue. What I'm saying is to try and announce the conference, which is an extremely important development, to try and rig it to announce it in Moscow is a gimmick, but I disagree very much with the pressure that we're putting on Israel. I do not understand why the United States having won the war against Iraq and the only super power in the Middle East, why we have to use this position to appease people such as Saddam -- such as Assad, who is not really much different than Saddam Hussein. They're two, really two peas in a pod. I just find it a very distasteful and puzzling policy.

MR. HOUGH: But if I just may add one thing, it was Sec. of State Kissinger, Mr. Hyland's Secretary, who went to Moscow to end the 1973 war and to tell Israeli not to move to Cairo.

MR. HYLAND: There was still fighting going on at that --

MR. HOUGH: -- and then we tried to stop a war but --

MR. LEHRER: Speaking of fighting, we're not going to refight that one now. Mr. Kortunov, from a Soviet -- the economics of it we're going to discuss later in the program with some other guests, but just from a Soviet point of view, the granting of Most Favored Nation status, is that an important, an important thing to you?

MR. KORTUNOV: I think that psychologically it is very important because after all almost for 20 years all Soviet leaders were trying to get this Most Favored Nation from the United States. On the other hand, experts here in Moscow do not believe that this regime can be adopted by the United States Congress without attempts to take some major concessions from the Soviet Union. And finally, take into account the current economic situation in the Soviet Union; we do not believe that it will make a tremendous difference for the Soviet-American trade because the expert potential of the Soviet Union is very limited right now and I don't think that the Soviet Union can use this Most Favored Nation regime in the near future.

MR. LEHRER: And so it's more of a psychological gesture than anything else -- welcome for that reason but for very little else, is that what you're saying?

MR. KORTUNOV: Yeah, I think you are right.

MR. LEHRER: All right. I hear you. Mr. Kortunov in Moscow thank you, Bill Hyland in New York thank you, Jerry Hough and Madeleine Albright here in Washington, thank you all. FOCUS - GOOD CUSTOMER?

MS. WOODRUFF: In addition to announcing the move toward Most Favored Nation trading status for the Soviet Union, President Bush spoke about the prospects for economic change. He addressed the Moscow Institute of International Studies.

PRES. BUSH: For most of this century the Soviet Union stood apart from the world market, stood aside as free market forces spawned unprecedented prosperity across the West. The results of that self- imposed isolation from the world economy proved very costly. But now that's begun to change. At this month's London summit, President Gorbachev spoke about the Soviet Union's interest in becoming fully integrated into the world economy. The Soviet Union should become a full participant in the global economy. And the United States will support you in that effort. Though the Soviet Union has recently embarked on its massive reconstruction of economic reform, its importance and its sheer size entitle it to this special status which will speed the day to full qualification for benefits from the international financial institutions. These measures willmake available to the Soviet Union assistance and expertise that can help ease the difficult transition to a market economy and improve the standard of living for the Soviet people. My country stands ready to assist in this new Soviet revolution. In the economic sphere the transformation must come from within. A shortage of foreign capital is not what's plunged your economy into crisis. Nor can your economic ills be cured by a simple infusion of cash. Only through real reform can the Soviet Union abolish the counterproductive command economy, only through real reform can the Soviet Union unleash the ingenuity, the energy, and the entrepreneurial potential of its people.

MS. WOODRUFF: Now two perspectives on all this from the American business community. Robert Hormats is Vice Chairman of Goldman Sachs, a Wall Street investment firm. He is a former assistant secretary of state for economic affairs and he served in various capacities in four administrations. Bob Prezzano is vice chairman of Russian Wood Express, a joint American-Soviet company that imports wood product into the United States from the Soviet Union. Bob Hormats, we just heard the experts, the political analysts, saying that this granting of Most Favored Nation trading status is not really a big deal, that it's symbolically important, but not much else. Do you agree with that?

MR. HORMATS: That's absolutely right. Basically it's more symbolic than substantive. It's symbolic in part because the Soviets have felt discriminated against in the world economy. They've really not been a part of it. And they wanted to end the sort of second class status in American trade law. There will be some benefits, but they'll be very minor and the reason the benefits won't accrue to the Soviets is essentially poor quality of Soviet goods and lack of capacity to produce a lot of goods. If you look at the Soviet shelves, you see there's not enough even to satisfy their own people. So the Soviets really can't sell very much to the United States even if they get MFN. And what MFN really does is lower tariffs. Well, on the goods the Soviets sell already, energy, raw materials, and such things, the tariffs are very low. 90 percent of Soviet goods today come into the United States at below 5 percent.

MS. WOODRUFF: So what are we talking about? I saw the statistics today. The U.S. is now -- they're now selling us $1.1 billion a year, at least that was the figure for last year.

MR. HORMATS: That's right.

MS. WOODRUFF: How much is that going to go up?

MR. HORMATS: It may go up 10 -- if it goes up 10 or 15 percent, that's very small pickings. The United States imports about $500 billion, close to $600 billion now from the rest of the world. So this is really a drop in the bucket from the United States point of view.

MS. WOODRUFF: What products are we talking about here?

MR. HORMATS: Well, there are a number of products.

MS. WOODRUFF: That are going -- that we might be importing more of as a result of this.

MR. HORMATS: The problem now is we important mainly raw materials and the Soviets don't produce very many good quality manufactured goods, some wood products, a number of certain kinds of textiles, but mostly what we import is oil, some refined products like ammonia, a number of things like gold, vodka, caviar, relatively small range of products. Now with the lower tariff they may, may be able to import some manufactured goods in the United States. But that depends on their own reforms. And as long as they have a decrepid economy, an inefficient economy, they are not going to produce the sort of things Americans want to buy.

MS. WOODRUFF: All right. Mr. Prezzano, Mr. Hormats mentioned wood products. Your company just happens to be involved in wood products. How much of a difference is this going to make, assuming now that the Congress is going to grant this -- and everybody assumes that it will?

MR. PREZZANO: Well, I'm not sure I agree with Bob. Russian Wood Express, which is a newly formed joint venture between Plygum Industries and Export Less Moscow, Plygum has been purchasing wood products from the Soviet Union for 25 years and our duties have been -- ranged between 30 and 50 percent. And one thing the Soviet Union has --

MS. WOODRUFF: On top of the price --

MR. PREZZANO: That's correct. And one thing the Soviet Union has that we have a shortage of today in the U.S. is clear fiber, original growth timber. And this will allow the U.S. consumer to access that product and that fiber and that plywood and lumber products that they cannot access here in the U.S.

MS. WOODRUFF: Again, what is the wood and what do you use it for that you're importing?

MR. PREZZANO: Okay. Primarily right now it's a plywood product called Baltic Birch. And it's used in furniture and kitchen cabinets and those uses.

MS. WOODRUFF: And how much of it -- how much money are we talking about here?

MR. PREZZANO: Well, I think I should tell you that our trading partner in Moscow, Export Less, exports $6 billion worth of wood products worldwide. Today the U.S. accesses less than 1 percent of that. And I think with the lower duties, it would allow us to access more products and then allow Plygum Industries to counter- trade machinery that's produced here in the U.S. and housing that's produced here in the U.S. and sell it back into the Soviet Union.

MS. WOODRUFF: So you'll end up with sort of a trade situation here.

MR. PREZZANO: A barter, counter-trade agreement. That's certainly what we're looking for.

MS. WOODRUFF: But you're saying it really make some difference for you.

MR. PREZZANO: Absolutely.

MS. WOODRUFF: Lowering that tariff will really make a difference for you.

MR. PREZZANO: It'll make a big difference and also make a difference to the U.S. consumer on products they can't access here in the U.S.

MS. WOODRUFF: Bob Hormats, how typical is this?

MR. HORMATS: That's not typical. There are certain products where like this, where I'm sure there'll be a big surge in imports, but in a relatively narrow product range. In the area of manufactured goods, which is really very important in terms of global trade in many areas, the Soviets simply can't produce the quality of goods and the amount of goods that are going to make an impact in the American market. They're competing or will be competing against Korean goods, Japanese Goods, German goods, and they have to undertake, as President Bush indicated, a dramatic set of market- oriented reforms to produce the quality and type of goods that are going to sell in this country. Certain areas they'll do very well. In the whole broad range of goods, computers, all sorts of other types of high-tech equipment, they're really not in the game and they know they're not in the game.

MS. WOODRUFF: So when the President talks, as we heard, and we heard the sound clip just now, we talk about the Soviets joining the global economy, improving their standard of living, he said, we want to unleash the entrepreneurial potential of the Soviet people, are we really going to make that kind of a difference with this one Most Favored Nation decision?

MR. HORMATS: We really won't. The Soviets have to unleash this entrepreneurial potential themselves with a lot of market-oriented reforms, which they're moving toward but very, very tentatively. This will give the right incentive. It sends the right signals, but it just opens the door a crack. The Soviets are going to be the ones that have to talk through that door.

MS. WOODRUFF: There was a poll that I saw the results of today done by the Times Mirror, it's called the Center for People in the Press, which showed in essence that a sizeable minority of the Soviet people are not in favor of moving to a free market economy. How does that square with Gorbachev's desire to get these reforms underway?

MR. HORMATS: Well, a lot of Soviets want to protect their positions, people in the party, people in the ministries, people who run big companies or work for big companies who know that if they move toward the market, they're going to lose their jobs. For instance, in the military industrial complex, that's a big portion of the Soviet economy, 20 to 30 percent of the Soviet economy. Those jobs are going to be slashed. They're going to lose 'em and they don't want to move toward the market. There are some entrepreneurs and they're growing, but they're not large in number yet.

MS. WOODRUFF: What's your experience, Mr. Prezzano? We keep hearing there's no incentive to work on the part of many people in the Soviet Union. What's your experience over there?

MR. PREZZANO: Well, I think at some of the mills, the remote mills, there isn't an incentive. However, the trading partners that we have dealt with, Export Less, has had joint ventures around the world since I think 1924 they had a joint venture in the UK, and they have 70 offices around the world, so our partners are maybe a little unique in that they have traveled into the West quite frequently, a lot of their employees have lived in the West, and so they certainly are driven to go towards a market economy.

MS. WOODRUFF: But again you would say that's not a terribly typical situation.

MR. HORMATS: If there were more people like that, the Soviet Union would be in better shape, but it's unfortunately not typical. To give you an example, Germany, which gives the Soviets MFN, is right near them, only does about 3 percent of its trade with the Soviet Union, which is very small. So even if we were to open up completely the amount of trade for the United States would be quite limited.

MS. WOODRUFF: Is there anything else the United States can do at this point? Are there other laws that can be changed? Are there other trading agreements that can be signed that would make a big difference here?

MR. HORMATS: Well, there are things that could help American exporters. For instance, in the 1970s, when we tried to extend MFN to the Soviet Union the first time, as Bill Hyland has indicated, it died because of the Soviet restrictive policies on emigration, particularly Jewish emigration. Now that's been changed and we can do things that were held up at that point like provide Export Import Bank credits for Americans who want to sell to the Soviet Union. Now there's a limit of $300 million. That will probably have to be changed and there is certainly a very narrow limit of only $40 million, a cap of $40 million on the sales of energy production equipment. The Soviets need that to increase oil exports, which we want.

MS. WOODRUFF: And what would have to happen for that to change?

MR. HORMATS: The President has to ask the Congress to approve these changes and a lifting of the cap and I suspect that he will do that when he gets home, because it's good for American exporters and it also helps the Soviets import the technology and equipment they need to boost their economy. But the major reforms in the Soviet Union still have to be done by the Soviets and not much we can do is going to help except at the margin.

MS. WOODRUFF: The Soviets are already importing -- again, the statistics are three times as much -- they're buying from us three times as much as we're buying from them. Is that a ratio of three to one that's going to change do we expect with all these new developments, or will it get even -- will it grow because of their desire for consumer goods that they can't make in their own country?

MR. HORMATS: Well, they have a lot of desire for consumer goods but not much money to buy them. This is one of the problems. They have a hard currency problem. If they overcome that hard currency problem, then we'll be able to sell them more. But that's a real constraint at this point.

MS. WOODRUFF: All right. That's a reference to the ruble, which is their currency, not being convertible to other currencies. How does your company get around that?

MR. PREZZANO: See we're purchasers so we purchase in hard currency and certainly they're very anxious to sell us product for hard currency, but as I said earlier, we hope to set up counter- trade agreements where we trade equipment and product for wood products coming into the U.S.

MS. WOODRUFF: And what are the expectations on this whole convertibility issue? This is something Gorbachev has looked at, but where does it stand?

MR. HORMATS: At this point it's very hard to make the ruble convertible. For instance, the Soviets, themselves, have no confidence in the currency and they've pushed the value of the currency way down and to enable it to be convertible at this point will require the Soviets doing an awful lot of domestic reforms to make the goods they produce salable in the West and the currency can become convertible, not before that. It's a gimmick at this point to do it prematurely. A lot of other things need to be done before it can be genuinely convertible.

MS. WOODRUFF: So a lot of changes needed all the way across-the- board.

MR. HORMATS: Absolutely.

MS. WOODRUFF: Well, Robert Hormats, Bob Prezzano, we thank you both for being with us. FOCUS - NEIGHBORLY QUARREL

MR. LEHRER: Finally tonight another look at the political power struggle between blacks and Hispanics in America's cities. Last week we examined the battle to redraw congressional district lines in Chicago. Tonight Correspondent Jeffrey Kaye of public station KCET-Los Angeles reports from Compton, California, where the target is city hall.

MR. KAYE: Latinos join with blacks to demand better school conditions in the Los Angeles suburb of Compton. Such protests are increasingly common in California as a growing Latino population demands greater civil rights. At Compton City Hall, Latinos complain they're excluded from the decision making process. Generally, Hispanic activists find themselves confronting a white power structure. In this case, the powers that be are African- American. Compton, population 90,000, is a predominantly black run city and it's been that way for 20 years. Walter Tucker recently succeeded his father as mayor of Compton.

MAYOR WALTER TUCKER, Compton, California: African-Americans have fought hard in the city of Compton and in other cities all around the country to gain political clout and political representation, and I don't think that anyone is going to easily say, well, we're just going to leave everything that we've struggled so hard to gain.

MR. KAYE: This June, the present day struggle in Compton between black and Hispanics came to a head on two fronts, in the contest for Centennial High School prom king and queen -- and in the race for an open seat on the Compton City Council. Latinos make up 44 percent of Compton's population. Yet, they account for only 9 percent of city paid jobs. Bakery owner Pedro Pallan wants to change that.

PEDRO PALLAN, City Council Candidate: There's a lot of frustration out in the community. We've asked our city council to implement an affirmative action program. They have refused. We know what that means. I believe they see the writing on the wall. They see the demography changing very rapidly and do not want to share the power.

OMAR BRADLEY, City Council Candidate: [Campaigning Door to Door] I want to leave you a T-shirt that says, "I Support Omar Bradley."

MR. KAYE: Pallan's opponent was high school teacher Omar Bradley, who started in local politics 10 years ago when he managed his aunt's campaign for city treasurer. Bradley's father opened the first black owned gas station in Compton and Bradley is not one to shake up the status quo.

OMAR BRADLEY, City Council Candidate: We represent the dreams and aspirations of this community. And we don't want to come into office and change anything. We just want to reform some things that we think need some focus, the police department, their response time. Our school districts need some assistance.

MR. KAYE: At Compton Centennial High School, students say the racial groups get on well together, although they often keep to themselves. That's the way it was in this class where Hispanics and blacks sat separately. Bridgette Westbrooke was senior class president and a candidate for prom queen.

BRIDGETTE WESTBROOKE, Prom Queen Candidate: We get along fine, but on lunch it's like, you know, the Hispanics are over by the football field and then we're by the lunch area, and in class, we get together, but, you know, it's still separate. We're just -- it's like we're learning to bear with it, but we have to, you know, do it one step at a time, you know.

MR. KAYE: Bridgette's rival for prom queen was Elizabeth Farios who was talked into running by her sister Jeannette.

JEANNETTE FARIOS: The reason I got into it was because I said, you know, there was no Mexicans running and she had a pretty good chance of winning so I told her, go for it, you know.

ELIZABETH FARIOS: I'm pretty kind of nervous because about the voting.

MR. KAYE: Prom King candidate Arthur Satterfield.

ARTHUR SATTERFIELD: You know, I'm pretty excited. I'm pretty excited. I've kind of got butterflies. I thought about it. I said, well, there's not going to be too many Hispanics at the prom, and that's where they're going to need to vote. So, see, I got the upper hand and I should pull it off.

SPOKESPERSON: Cast your vote Elizabeth. We've got to turn this over.

MR. KAYE: Prom night. Arthur Satterfield vs. Sergio LeDesma for king. Bridgette Westbrooke vs. Elizabeth Farios for queen. Once again Latinos sit separately from blacks. Yet, each has learned about the other's culture. African-Americans danced to Salsa music at Centennial High School's prom night and joined in the school's celebration of Cinqo DeMaio, a Mexican national holiday videotaped by a student. These are powerful symbols of a community that has undergone spectacular transitions in its century long history. Compton was once a predominantly white city. Its population nearly tripled during the 1940s when the booming Los Angeles area underwent rapid industrialization as a result of World War II. Blacks attracted by factory jobs nearby moved into suburban Compton but found racism reminiscent of the South.

MAXCY EILER, Former Compton Councilman: It was really a segregated city at that particular time.

MR. KAYE: Long time activist Maxcy Eiler is a former Compton City Council member.

MR. EILER: They didn't serve colored in the restaurants. That was the phrase that they used. And they of course enforced that. You couldn't get a haircut in the barber shops. We had to have our own. And we couldn't go to the churches. We had to have our own churches.

MR. KAYE: As blacks moved in, whites moved out. The power structure changed. Blacks joined the police force, got elected to the city council. Then in 1965 the Watts riots erupted. The violence came within a mile of Compton. Most of the remaining whites fled.

MR. EILER: Nothing happened in Compton. Now right after Watts, whites left in droves. It was one of those things you would look up today and a whole community was gone.

MR. KAYE: Compton came a predominantly black city. Nearby factories such as Bethlehem Steel continued to provide employment. But industrial decline beginning in the late 1970s once again brought change. Bethlehem and other factories closed down. Blacks started moving out of Compton. In the last decade, Compton's African-American population dropped by 8 percent. During the same time, Latinos doubled in numbers. The attraction, accessible public transportation and comparatively cheap housing.

MAYOR WALTER TUCKER, Compton, California: I think that there have been blacks who moved out because of the economic crunch. It's caused certain ramifications in our community, as it has in most inner-cities, higher crime, graffiti, gangs, dope. And I think the perception is it's not getting any better, let me go and move to the suburbs.

MR. KAYE: At his campaign office next door to his bakery, City Council candidate Pedro Pallan maps strategy.

MR. PALLAN: These red areas are the heaviest populated areas of Latinos within the city of Compton.

MR. KAYE: Your power base?

MR. PALLAN: Yes.

MR. KAYE: The Pallan campaign attempted to tap Latino resentment of the Compton power structure.

JOE OCHOA: This is Joe Ochoa from --

MR. KAYE: Pallan's fundraiser, Joe Ochoa voiced complaints that echoed those of black activists 35 years ago.

JOE OCHOA, Pallan Fundraiser: We've never had any representation in the city of Compton. It's always been a black community. They have never included us here in any of the functions at all and kind of ignored us, not only in the city, in the college, and also in the school district.

MR. KAYE: At Centennial High, prom king candidate Sergio LeDesma prepared a car for painting. His body shop teacher was Richard Gayton, one of a handful of Latino teachers at the Compton school. Gayton feels the lack of Spanish speaking staff handicaps many Hispanic students.

RICHARD GAYTON, Teacher: I've had students come in here that wish they were, wish that they would have a change in their program because perhaps they don't understand the teacher, and my answer to them was go to your counselor.

MR. KAYE: Are there any Hispanic counselors?

MR. GAYTON: No. No.

MR. KAYE: Council candidate Omar Bradley questions whether Compton's Spanish speaking students should be accorded special treatment.

OMAR BRADLEY: Their needs are being met while the students who are African-Americans, their needs are going unmet and unnoticed, and one old man asked me the other day, he says, Bradley, the only thing I can say is how do you think Mexico would respond if 3 million black people showed up one day, would they go through extraordinary means to prepare their educational system to take care of African-Americans, and I think the overwhelming and honest answer to that is no. I don't think that Mexico would take the burden of trying to prepare for us and I don't think that out of all the communities in Southern California, that the black community can handle the burden of influx of Hispanics.

MR. KAYE: The Bradley campaign confident of victory worked to get the support of registered voters, but there was an occasional communication glitch. [BLACK VOLUNTEER ATTEMPTING TO SPEAK ON PHONE WITH HISPANIC VOTER]

MR. KAYE: No such problem for Pallan's campaign workers. [HISPANIC VOLUNTEER SPEAKING SPANISH ON PHONE WITH HISPANIC VOTER]

MR. KAYE: Pallan's phone canvasses concentrated on registered voters with Spanish surnames.

MR. PALLAN: People say, well, Latinos don't come out to vote, but Latinos have not had a candidate to come out and vote for. I believe with this campaign I do not believe Compton will ever be the same. Compton is at the crossroads of change.

MR. KAYE: And with the promise of change, on election day a majority of the registered Latino voters cast ballots. However, blacks registered to vote outnumber Latinos, many of whom are not citizens, and in raw numbers, perhaps twice as many blacks as Hispanics cast ballots. If race was to be a factor, Bradley seemed to have the election sewn up. It was the same story at the prom. Black prom guests outnumbered Latinos possibly because of the high cost of tickets.

SPOKESPERSON: The winners are Bridgette Westbrooke and Arthur Satterfield.

BRIDGETTE WESTBROOKE: I'm speechless. I can't say anything else. I'm just happy.

ARTHUR SATTERFIELD: I'm tired and hot and ready to come out of this, ready to get out of these clothes.

ELIZABETH FARIOS: It was more blacks than Hispanics and you know how always blacks vote for blacks and Mexicans vote for Mexicans, that's what I think.

MR. KAYE: The same appeared to be true in the city council race. As the votes were counted, then announced, the candidates looked on, but the numbers were against Pedro Pallan.

COUNCIL SPOKESMAN: Pallan -- percent was 35.2 percent. Bradley - - 2,904 --

MR. KAYE: Omar Bradley was declared the winner and a handshake ended the campaigns. But even as Bradley savored victory, Pallan's supporters were looking to the next election, one in which more Latinos will be eligible to vote.

SPOKESPERSON: What's next? What's next for you?

MR. PALLAN: What's next for me? Well, I have three and a half years before the next time around.

SPOKESPERSON: You're going to run again?

MR. PALLAN: Yes, absolutely.

MR. KAYE: Not long after the election, Pallan was again pushing for change at the city council and change, according to Mayor Tucker, is inevitable.

MAYOR WALTER TUCKER: We've had some leadership that has been a little out of touch -- some people on the council. Now, of course, my father was the mayor before me and he died in October 1, 1990. And I would not be indicting him as being one of those people. And so what I'm saying is we are definitely in the city of Compton are going to be sensitive to the needs of our community which, let's face it, is a majority African-American, and by the same token, I think we have the type of leadership in place now, realizing the changes, that says we can come to the table and also respond in a fair way, respond to the needs of our Latino brothers.

MR. KAYE: Tucker who speaks Spanish promises it will be easier for Latinos to obtain political representation than it was for blacks. Compton is a poor community and Tucker says he'll sit down with anyone who can help solve the city's problems. RECAP

MS. WOODRUFF: Again the main stories of this Tuesday, Presidents Bush and Gorbachev opened their two day Moscow summit. Mr. Bush capped the day's talks by granting the Soviet Union long sought after trade concessions with the U.S. And late today the United Nations said Iraq has as much as four times the chemical weapons it has admitted to. A UN official said that his inspection team found 46,000 chemical devices and 3,000 tons of chemicals to make weapons. He said they also found a number of Scud missiles fitted with warheads containing nerve gas. Good night, Jim.

MR. LEHRER: Good night, Judy. We'll see you tomorrow night with a look at the summit's arms control agreement among other things. I'm Jim Lehrer. Thank you and good night.