The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in New York. And I'm Margaret Warner in Washington. After the News Summary tonight, we look first at the nuclear confrontation with North Korea. Has the Carter visit cooled it down? Then Spencer Michels reports on the high-tech, big money race to develop new computer screens, and Roger Mudd looks at the controversy over plans to build a Disney theme park in historic Virginia. NEWS SUMMARY

MS. WARNER: The head of the Food & Drug Administration told Congress today that a leading tobacco company is growing a special high nicotine in Brazil and using it in several American cigarette brands. Dr. David Kessler says the Brown & Williamson Tobacco Company secretly developed this tobacco plant with nearly twice the usual nicotine content under the code name Y-1. He further alleged that the company told researchers to lie to the FDA about its commercial use and that the government had only verified it four days ago. He spoke before a House Energy & Commerce Subcommittee.

DAVID KESSLER, Commissioner, Food & Drug Administration: Mr. Chairman, the control and manipulation of nicotine I have described raises important questions. Why spend a decade developing through genetic breeding high nicotine tobacco and adding it to cigarettes if you are not interested in controlling and manipulating nicotine?

MS. WARNER: Brown and Williamson issued a statement denying that anyone had been instructed to lie about the new tobacco. It described Y-1 as a blending tool for flavor and said it delivered essentially the same nicotine as the products it replaced. Kessler also said today his investigation showed that other cigarette makers use additives to boost nicotine levels in cigarettes. The tobacco industry has insisted that does not manipulate nicotine levels. Jim.

MR. LEHRER: Four people were killed, twenty-two others wounded by a gunman near Spokane, Washington, late yesterday. Twenty-year- old Dean Mellberg used an assault rifle in the rampage at Fairchild Air Force Base. He was killed by a military police officer. Officials said Mellberg had been discharged from the air force on psychiatric grounds. One of the first people killed was the doctor who recommended that discharge. The victims also included three children.

MS. WARNER: Police today ended their two-day search of a field near Chicago's O'Hare Airport. They were reportedly looking for the murder weapon or other evidence related to the O.J. Simpson case. Police officials said they didn't find anything linked to Simpson. Simpson flew to Chicago last week shortly after his ex-wife and a friend were slain. Yesterday, Simpson pleaded "not guilty" to the murders. A Virginia state appeals court today granted a lesbian woman custody of her two-year-old son. The decision reversed an earlier ruling awarding custody to the child's grandmother. The appeals court dismissed the lower court finding that the woman should be denied custody because homosexuality is illegal in Virginia. The child's grandmother has indicated she will appeal the decision.

MR. LEHRER: The House of Representatives voted new life for the Independent Counsel Law today. It set up a mechanism for the appointment of an independent counsel when charges are leveled against the President, the Vice President, or other high government officials. The bill passed the Senate in May. President Clinton has said he will sign it. Mr. Clinton made another appeal today for health care reform. Several House and Senate committees have been struggling over various proposals. The President expressed frustration with the process, and he told a business group America's economic competitors were way ahead of the United States in the health care field.

PRESIDENT CLINTON: Our competitors, not a single, solitary one of them spends more than 10 percent of GDP on health care. We spend 14, and we're the only people who can't figure out how to cover everybody. Now, I refuse to declare defeat. Why should we jump in the tank? We look around the world. We know there are all kinds of fixes here. We may have to do more for small business. I'm willing to do that. We may have to do more, and we should, to make the thing less regulatory. I've already made a lot of those changes. But let us not walk away.

MR. LEHRER: The U.S. trade deficit jumped 22 percent in April to nearly $8.5 billion. The Commerce Department said today both imports and exports fell during the month. Some 14,000 workers at Caterpillar Tractor plants in four states are set to strike late tonight. Some have already walked off the job. They are members of the United Auto Workers Union. At issue are about 90 unfair labor practices complaints. Talks aimed at averting the strike broke down yesterday.

MS. WARNER: Occidental Chemical Corporation has agreed to pay the State of New York $98 million toward cleanup costs at the Love Canal toxic dump site. The payment will settle the 14 year old lawsuit against the company. Families were forced to evacuate the area in up state New York in the 1970's and 80's when leaking chemicals were discovered in the ground. The chemicals were buried years earlier by the Hooker Chemical Company, a predecessor of Occidental. Federal government and private suits against Occidental are still pending.

MR. LEHRER: President Clinton said today there is still no confirmation North Korea will freeze its nuclear program. North Korea's leader, Kim Il Sung, told former President Jimmy Carter last week that it would halt the program. President Clinton spoke at the White House.

PRESIDENT CLINTON: We have a channel of communications to them, and we have followed up President Carter's statements to me and his letter of understanding with a communication to the North Koreans, and we'll be waiting to hear back, and we expect and hope to hear back within a couple of days about whether President Carter's understanding of what they said is correct.

MR. LEHRER: North Korea today extended the visas of two United Nations nuclear inspectors. They will be able to continue monitoring the refueling of one of the country's atomic reactors. We'll have more on the Korea story right after this News Summary. Michael Fay maintained his innocence after being released from a Singapore prison early today. The 19-year-old American teenager received four lashes for vandalism. Fay said his earlier admission of guilt was coerced, a charge that has been denied by Singapore officials.

MS. WARNER: That ends our summary of the day's top stories. Ahead on the NewsHour, the North Korea confrontation, high-tech competition with Japan, and Disney's plans for a history theme park. FOCUS - MISSION ACCOMPLISHED?

MS. WARNER: First tonight, the nuclear stand-off between the United States and North Korea. Does former President Jimmy Carter's diplomatic mission to North Korea offer a way out? North Korean President Kim Il Sung told Mr. Carter he would freeze his country's nuclear program and let international inspectors stay in North Korea if Washington would resume highlevel talks with Pyongyang. The administration is now trying to verify just what Kim Il Sung meant by his offer. At the same time, President Clinton and his advisers met with a group of Korea experts yesterday to talk about what Washington's next step should be. The two who attended that meeting join us now. They are Donald Gregg, a former U.S. ambassador to South Korea, now chairman of the U.S.-Korea Society, and Selig Harrison of the Carnegie Endowment for International Peace, who was recently in North Korea. Also joining us are Sen. John McCain, Republican of Arizona, who just returned from South Korea, and William Taylor of the Center for Strategic & International Studies, who has met with Kim Il Sung several times. Welcome, gentlemen. Amb. Gregg, let's take a look at this Carter mission to North Korea. Would you say that as a result of that mission the situation is more or less dangerous now than it was two weeks ago?

AMB. GREGG: Well, I think on balance it's less dangerous than it was, but the truly interesting thing about the Carter visit is that by taking a qualified linguist with him, we now have a verifiable record against which to hold the North Koreans to account. Kim Il Sung is a very charming old rogue, and he has a record, I think, of luring people into his lair, telling them what they want to hear, and then not really following up. Now, someone was smart enough when President Carter went to North Korea to have him take Dick Christianson with him, a wonderful foreign service officer absolutely fluent in Korean, and he is available to check what is said. And so when we're waiting now to have the North Koreans confirm what Kim Il Sung said, we have a verifiable record of our own by a qualified linguist to hold him to account. I think that's a new development, because I have talked to other people such as Steve Solarz, who's been to the North, has had Kim Il Sung say all kinds of things to him, and there was really no way of verifying or following up. Now we have it, and I think as a result we're a step ahead.

MS. WARNER: Well, Mr. Harrison, you met recently with Kim Il Sung, and he essentially made this offer to you, did he not?

MR. HARRISON: That's right. He made some other offers having to do with the freeze of their nuclear program in exchange for light water reactors.

MS. WARNER: But let me ask you -- do you think the situation is more or less dangerous in the stand-off today?

MR. HARRISON: Well, I think it's very definitely less dangerous. I think President Carter has performed a great service, however, when he said that the crisis is over, those were his words, I think he might have pre-judged the situation because it's going to be a very difficult negotiation between the United States and North Korea, far from clear that it will be successful. I think that the North Koreans have expectations that are very clear, that want diplomatic recognition. They want some economic cooperation. They want the United States to make a pledge not to use nuclear weapons first in the Korean Peninsula, and they said that they would like that confirmed by the Congress. So it's not just a piece of paper as they put it. And it's far from clear that the administration has been ready to bite the bullet and really go into these negotiations with a clear and complete enough posture to really make a deal. And I think that there's a time line here, a definite limit. You know, for two months the fuel rods that were taken out of that reactor are going to be in what are called cooling ponds. And beginning at around 2 months, according to what the North Koreans told me, they will have had to start taking those rods out.

MS. WARNER: Because right now, in fact, they're too radioactive to handle, isn't that right?

MR. HARRISON: That is right. And so the danger or the possibility, the technical possibility of reprocessing would come at that time. So when we talk about a freeze of North Korea's nuclear program during the period that talks are held, we really are talking about two months from a technical point of view. It's going to be hard for North Koreans to freeze longer than that, and there are going to be arguments right away when they sit down to negotiate over what happens after those two months.

MS. WARNER: But wouldn't you say the fact that they can't do anything with those fuel rods for two months anyway means that North Korea isn't losing anything right now?

MR. HARRISON: That's right. I think that the freeze idea may actually happen during that length of time. Whether it can be extended much beyond that is another question. So they're going to have to have a real -- the administration is going to have to go in with a really comprehensive approach that really meets, really tests whether the North Koreans mean what they say, which is that they're ready to really resolve this controversy if we are.

MS. WARNER: Well, Col. Taylor, do you agree with Mr. Harrison and Mr. Gregg the situation has eased here?

COL. TAYLOR: I wish I could agree, and I wish I could be more optimistic than I am. I think the situation is at least as dangerous as it was a week and a half or two weeks ago. We can debate angels on the head of a pin, but I don't think there's been one new thing that's been brought back by our former President from that meeting with Kim Il Sung. The offer to meet with Kim any time, any place, he said that before. In fact, on April 16th in Pyongyang, all over the world, on another television network. He has offered to do all kinds of things in exchange for light water, nuclear-based technology and the funding that goes with it. There's not a thing new in that proposal. Yet, what we have is an enormously confused American foreign policy right now. The President has been put in a box where it's almost impossible to move now on sanctions because there's some kind of peace overture out there. I would like to be optimistic, but unfortunately I'm not.

MS. WARNER: Sen. McCain, where do you come down on this question about whether it's more or less dangerous today than it was a week or two ago?

SEN. McCAIN: Well, it obviously will depend on what unfolds. It's not clear now. But I would mention a couple of points. And one of them is that it's not helpful for any administration to have an emissary, especially a former President, who repudiates and condemns a policy of the administration, as President Carter did about the Clinton policy on sanctions. That's bound to send some mixed signals. I think the other aspect of it we've got to consider is that Kim Il Sung has won because the reason we went into sanctions, as you know, was because of the diversion of the 1989 shutdown of the reactor, and now a freezing of his nuclear capacity as he described it disregards what happened to the material, it's sufficient to construct one or two bombs. So he has, I think, succeeded. And as Col. Taylor pointed out, sanctions, if not completely cancelled at this time, have been solved. And I thought we were moving towards at least mild sanctions from the U.N. Obviously, that's not going to happen for some period of time, at least until we ascertain what Kim Il Sung's true intentions are.

MS. WARNER: Well, Mr. Gregg, what about that point that really at this point the Carter mission has put the administration in kind of a box, that it's hard to get sanctions at the U.N., certainly talk of a preemptive military strike would have a difficult time winning international approval in this atmosphere? Did you sense in your meeting yesterday with the President and his advisers that they felt their options had been kind of hemmed in and limited here?

AMB. GREGG: I didn't get that impression. I think that they had talked with former President Carter. They had sorted out where the confusion had arisen, and I got the sense that they were looking for incremental add-ons to an approach to a very difficult problem. But I got no sense that they found themselves in a box. I think that they are beginning to explore a somewhat broader dialogue with North Korea, if Kim Il Sung's statements to former President Carter can be verified and can be confirmed. And I happen to think that that's all to the good.

MS. WARNER: As a former ambassador, how long do you think it should take, by the way, to verify this?

AMB. GREGG: The dialogue?

MS. WARNER: Yes. What Kim Il Sung really offered.

AMB. GREGG: If the North Koreans have their act together, it should be within two or three days. I think that North Korean communications among themselves is contentious. I think that the interpretation and the translation of remarks made by outsiders is also politically contaminated. I think that's the value of having a high level emissary if you trust him and can fully control him because by doing that you get your word directly into the ears of the man you want to hear it.

MS. WARNER: All right, let's look -- let me ask Mr. Harrison about the first half of this offer, which was that though North Korea would freeze its current program in place, there is no mention or no agreement to let the inspectors go back in and look at the evidence that would tell us whether they built a bomb or extracted the fuel they needed in '89 for a bomb. Do you think that was a good -- and the administration seems to be ready to go along with this -- is that a good deal for the U.S.?

MR. HARRISON: Well, I think you have to take things one step at a time. The first step is to get the North Koreans back into the nuclear non-proliferation treaty, and they'll have to submit to regular inspections of the kind they hadn't been ready for in the past year or two, and it's after that that you can then turn to the next question. After we normalize relations with them, after we're no longer in a technical state of war with them as we are now, I mean, how can you ask them for what the IAEA calls, special inspections, which have never occurred in any other country before, which would be necessary to find out about the history of the nuclear activities? When we're in a state of war with them, that's what they say. They say that will come when we normalize diplomatic relations, when you've given us a pledge not to use nuclear weapons, first in the Korean Peninsula, when we've begun to have -- you remove the economic restrictions on us, then we'll talk about that. For the present, they're quite happy to keep the U.S. and the world guessing about how much plutonium they may have accumulated, and there's nothing we can do about it.

MS. WARNER: You're saying, in other words, that the administration's earlier insistence that getting to the bottom of what happened in '89 should be top on the agenda, that they were putting the cart before the horse?

MR. HARRISON: They wereputting the cart before the horse, and I don't agree with Bill Taylor, by the way, that there's nothing new on the table. This is quite wrong, because although the idea of light water reactors has been mentioned before, the big problem has been that it takes six years from the time you sign a deal for these light water reactors which are less dangerous from a nuclear weapons point of view, takes six years before you can get them into place, and during that period, the North Koreans would be free to continue their program. So what, what I raised with the North Koreans and what resulted was the commitment that once the contract is signed, as soon as it's signed, as soon as credit is arranged - - it's about a $2 billion deal -- at that point, they would freeze the reprocessing plant which would be under NPT, IAEA inspection. They'll stop expanding the construction of their plutonium capacity, building a big new reactor. That's very new, and, in effect, as a columnist wrote the other day, it would amount to nuclear disarmament. They're saying, look, we're willing to change our whole program over to one that you have no suspicions about if you're willing to meet some of our concerns.

MS. WARNER: Let me ask Col. Taylor about that. First, before we look at what Mr. Harrison was just talking about, let's go back to the original question which is: Was it a good deal to exchange, to put aside the questions about the 1989 -- do they really have a bomb now -- in order to get the kind of promises Mr. Harrison just outlined about their future activity?

COL. TAYLOR: I don't think it is. If you forget about past activities, you forget about the fact that if the CIA has it right, the majority analysis, that they have one to two weapons, that means that once it becomes known that they have those weapons, you can be guaranteed that South Korea and Japan will also go nuclear, and one of our top four foreign policy objectives, nuclear non-proliferation, is undercut. But I go back to something that Sig Harrison said, that the North Koreans are willing to freeze their program if we will do a number of things. He had every one of them right. He forgot one, the next step, all U.S. troops out of South Korea.

MR. HARRISON: It's not one of their conditions, Bill.

COL. TAYLOR: Well, I've only heard it about 10 times.

MR. HARRISON: No. I heard some other things.

MS. WARNER: Sen. McCain, let me ask you, what if North Korea is ready to do absolutely everything that Mr. Harrison just outlined and the administration says they want? Is that good enough to absolutely positively guarantee the world that they aren't pursuing a nuclear program, or could they have some totally secret project going on somewhere else that we wouldn't know about?

SEN. McCAIN: I would doubt that they would have a secret program that we could know about but Mr. Harrison's dismissal to the possibility of two nuclear weapons is somewhat amusing to me, especially in light of the fact that it's a gross violation of the NPT to which their signatories. The fact that they -- that Mr. Harrison wants the IAEA not to be allowed special inspections, the reason why they needed special inspections is because they were not allowed routine inspections. And I, again, am glad to hear of these commitments that have been made to Mr. Harrison. I'm glad of the commitments that were made to Billy Graham. I'm glad the ones that were made to everybody else who's visited Kim Il Sung. But we've got to look at the history of this individual, the same one who blows up airliners and captures U.S. ships, and expect at least some kind of concrete results before we take what he says as an article of faith.

MS. WARNER: But Sen. McCain, what about the point that say Sen. Nunn made I think yesterday, which was that given the fact that North Korea was not going to permit inspectors to look at the '89 evidence that to mortgage our ability to understand what they're doing now and in the future for that was really counterproductive?

SEN. McCAIN: Then Sen. Nunn assumes, I guess, and every other nation in the world, Iraq, Iran, and others, can build two nuclear weapons, and that'll be all right, and we'll allow that to happen. The fact is we still can find out at least some idea of what happened to that diversion if they will allow such a thing. They're the signatories to the treaty. They signed that treaty. They should be forced to abide by it, in my view.

MR. HARRISON: I completely agree, but you've got to first get the thing down to the present and the future. When you do that, and you start giving them economic cooperation and diplomatic recognition - -

SEN. McCAIN: If you think they're interested in economic assistance. I happen to believe, Mr. Harrison, that they're interested in survival, and they view that survival based on becoming a nuclear power, and everything that they have done indicates that to be the case.

MS. WARNER: Let me ask Don Gregg. You said on this show just two weeks ago that you thought what Kim Il Sung wants is both economic assistance and the bomb. If the administration --

AMB. GREGG: If we're stupid enough to allow that to happen.

MS. WARNER: Yeah, to allow that to happen. If the administration manages to make -- North Korea -- make a choice -- which choice do you think they'll make?

AMB. GREGG: Well, I think there's a debate going on within North Korea now. I've been very interested to read an analysis of North Korea's decision making process by a Soviet who was in Pyongyang for three years, and he describes the system of decision making as being very contentious, sort of like a sack full of tom cats, and very contentious, with people saying hold on to the bomb, other people saying, oh, we should trade it for some kind of evolution. The North Koreans don't want to be swallowed by South Korea as East Germany does by West. The South Koreans don't want North Korea to collapse. So there is a school of thought in North Korea that says we should move for economic evolution. There are still hard-liners who say, no, we should hang on to the bomb at all costs.

MS. WARNER: It sounds like you're not willing to make a wager on which way they go.

AMB. GREGG: I think they can be talked out of their nuclear capacity if we are clear enough in terms of what we will do for them in terms of recognition. If we're ambiguous, if we keep putting the NPT and the IAEA first, I think we're going to have a long and possibly fruitless series of negotiations.

MR. HARRISON: I think he's absolutely right. We're in a very tough situation. There are hard-liners there who do want the bomb. They undoubtedly do have a little more plutonium than they've admitted, though we don't really know, Senator, how much it is. It's a question of what we do. I think if we strengthen the moderates in North Korea by really going in there with a positive posture of diplomatic recognition, helping them with light water reactors and really helping them to join the world after the Cold War, we can help to liberalize that place and keep pushing hard to find out about the past. We certainly shouldn't give that up. I don't want to be misunderstood on this.We have to find out how much they have, because it does have a bearing on Japan and South Korea and the nuclear hawks there. But let's put first things first, get the present and the future under control, and then let's push for the evidence about the past.

MS. WARNER: Col. Taylor, where do you come down on this question, that if the choice is really put to North Korea, where which way they'll go?

COL. TAYLOR: For a long time, I wanted one more push on patient diplomacy, a comprehensive approach toward North Korea. I saw it the end of March, April, and May, and the response by the North Koreans was in your face diplomacy when they pull the fuel rods out. I changed my mind. I think it's time to stop going through the brinkmanship that the North Koreans put us through. They're letting us down again right now off the brink, using one more emissary to do it. Now is a time to use what they understand, and that happens to be power, pure and simple, but keep the dialogue open so they know exactly what we're going to do if we have a determined game plan, and that's up to President Clinton.

MS. WARNER: And Sen. McCain, what do you think a game plan could be that the administration could adopt that would, on the one hand, capitalize on this offer, if it's for real, but on the other hand, guard against being essentially snookered if, in fact, the offer isn't for real?

SEN. McCAIN: First of all, I'm somewhat entertained by all the talk of the power of the moderates in North Korea. I've yet to detect any of their influences in the last 45 years. But the problem so far, Margaret, has been is we have extended carrot after carrot after carrot. Seven or eight times we've offered to cancel or reschedule team spirit, high level talks, et cetera. Whereas, the North Koreans have extended stick after stick after stick, threatening to withdraw from the treaty, to throw out the inspectors, economic sanctions as an act of war, et cetera, and they have drawn -- withdrawn that from time to time in the latest episode with President Carter. What we need is the carrot and the stick, the carrot, all the things that Mr. Harrison wants, but besides that, strong sanctions, and I mean total sanctions, with the cooperation of Japan and China, which by the way can be achieved, and if not, the implicit threat of air operations to disable and wipe out their capacity to produce nuclear weapons. The prospect of a nuclear armed North Korea with the missiles to deliver them is a de-stabilizing situation, the point where frankly I don't know how we cope with it.

MS. WARNER: Senator, I'm afraid that's all the time we have. Thank you. Col. Taylor, thank you very much, Mr. Gregg, and Mr. Harrison, thanks a lot. Jim.

MR. LEHRER: Still to come on the NewsHour tonight, fights over flat panel computer screens and Disney America. FOCUS - COMPETITIVE EDGE

MR. LEHRER: Flat panel computer screens, it's an area of technical competition where the Defense Department plans to spend $1/2 billion to help the American manufacturers get the jump on the Japanese and other foreign competitors. Spencer Michels reports.

MR. MICHELS: The clerks at your neighborhood consumer electronics store are touting the latest in thin screens, otherwise known as "flat panel displays." Those displays are being used in a variety of electronic game machines and small televisions.

SPOKESMAN: It's very easy to use, very light weight.

MR. MICHELS: They provide the viewing screens on small video recorders. The displays are all imported, mostly from Japan, because there is virtually no American flat panel display manufacturing industry. The exploding market for notebook or laptop computers has been made possible by thin screens, helping make flat panel displays a $5 billion a year industry now but is expected to grow to 20 to 40 billion dollars by the year 2,000. That phenomenal growth will come, industry experts say, because flat screens like this will eventually surround us. They will probably replace the conventional picture tubes that make television sets and desktop computers so fat and bulky. 95 percent of all the flat panel displays in the world are manufactured in Japanese factories, even though the technology was invented in the U.S. Apple Computer uses Japanese screens in its fast-selling laptop computers. The screens cost a thousand to fifteen hundred dollars each, the most expensive element in the laptop. Tom Credelle is an Apple engineer.

TOM CREDELLE, Engineer, Apple Computer. We've sold over a million of these LCD screens in the past two years and expect our business to grow. We'd like to have manufacturing sites near our factories. It's important in our business for quick time to market.

MR. MICHELS: The problem has been that while Americans have excelled at research and development, they originally underestimated the potential for flat screens, so they failed early on to invest in manufacturing technology and factories. The lack of a domestic supply worries the Pentagon. Even though it uses only 5 percent of the total output, the Defense Department wants some flat panel displays made in America because they're increasingly vital to modern warfare. The information that pilots or tank commanders rely on to find their way or their target appears on thin screens in the cockpit or in their helmets.

KENNETH FLAMM, Economist, Defense Department: A recent experience in Desert Storm dramatized the fact that the battlefield of the future is going to be a battlefield in which a torrent of data is pouring in on the individual combatant.

MR. MICHELS: Kenneth Flamm is an economist at the Department of Defense.

KENNETH FLAMM: The individual combatant is going to be required to interface with this huge stream of data pouring in on him, and the key point of interface between the combatant and that data is going to be the display.

MR. MICHELS: Flamm, a Clinton appointee, developed the Pentagon's recently announced flat panel display strategy. Its aim is to start a manufacturing industry in this country that can reliably supply the military. Defense will provide more than $1/2 billion for advanced research, provided that the recipient commits to build American flat panel display factories.

KENNETH FLAMM: Defense is going to step up to the plate and say if you are willing to commit, we are going to be willing to provide research and development, match your investment in research and development in Syria into the future.

MR. MICHELS: Silicon Video Corporation, a start-up company with backing from some industry heavies, intends to enter the competition for government money. It hopes to mass produce thin screens in the United States by 1997. Chairman and CEO Harry Marshall.

HARRY MARSHALL, CEO, Silicon Video Corporation: What the government is doing is allowing us to accelerate that concurrent engineering, to get into these manufacturing facilities that are not cheap earlier and hopefully, that takes a lot of the risk out of the project. It also gets product out a lot sooner. This company will invest and its partners will invest $2 for every 1 that would come from government.

MR. MICHELS: Marshall has laid out on the walls of his headquarters the nearly 500 steps necessary to begin large scale manufacturing. It's a complicated, capital intensive path.

HARRY MARSHALL: The Japanese spend -- depending on who you believe -- somewhere between 600 million and a billion dollars on a facility that will process a million units per year.

MR. MICHELS: Silicon Video is developing the flat panel display technology based on conventional television engineering, using a compressed version of the familiar cathode ray tube. That is one of the many technologies that will be competing for government funds. The giant Xerox Corporation also intends to apply for federal support using a different flat panel technology, sophisticated liquid crystal displays. Malcolm Thompson directs the electronics and imaging laboratory at Xerox in Palo Alto. Using some federal grant money, his team has developed but not mass produced what he calls revolutionary improvements in flat screens. Xerox is turning the screen, itself, into a computer using tiny points of light as on-off switches.

MALCOLM THOMPSON, Director, Xerox Lab: What we've had to do is to radically transform and improve the technology from where it is or it was three or four years ago. We take pieces of glass, and we had to make 6 million transistors on that piece of glass. We created a screen which has the resolution of a piece of paper. In fact, people like to look at it, they want to look at it, and of course, it's an electronic image.

MR. MICHELS: Xerox has invented a flat screen that can serve as an electronic slide projecting extremely clear pictures fed from a computer.

MALCOLM THOMPSON: Imagine this being in your automobile, giving you all the information that you now have on the dash board. It'll be in aircraft, in cockpits. It'll be in your home. It'll be in your office.

MR. MICHELS: As exciting as that appears, critics warn that subsidies to support high tech are potentially dangerous. They force the government to choose what will work from competing technologies.

ROGER NOLL, Economics Professor: Government has put itself in the position of picking the winner before the research is done.

MR. MICHELS: On the Stanford University Campus in the heart of Silicon Valley, economics professor Roger Noll sees big problems when the government tries to pick the best technology. He points to the recently cancelled supercollider as an example of how government can overcommit to very expensive technology.

ROGER NOLL: It can become a waste of money. Federal R&D commercialization projects have a tendency to last longer than they should when they're failures. The government will have a hard time pulling out because they'll be a multi-billion dollar industry with thousands or hundreds of thousands of employees whose job depends upon the continuation of the program, and that will likely cause the program to survive longer than it would if it were -- if the decision were based on a business decision of is it worth it.

SPOKESMAN: Three, two, one, and lift-off of the space shuttle - -

MR. MICHELS: The U.S. has been subsidizing selected industries for decades. The space shuttle wouldn't have gotten off the ground without profit making firms using taxpayer money. And the semiconductor business was in the doldrums until the federal government began subsidizing an industrywide research consortium called Sematech. Such federal involvement in industry is often called industrial policy, a term policy makers like the Defense Department's Ken Flamm usually avoid as alien to America's free market economy.

KENNETH FLAMM: They throw industrial policy around when there's always illegitimate activities they'd like to throw you into the same bucket with. Okay. We don't want to be in that bucket. We want to be in the technology bucket, because there's a legitimate, strong argument for a role of government in technology.

MR. MICHELS: However, American firms in the flat panel display industry have to consider whether the Japanese have too large a lead for the U.S. to break into the market. Photon Dynamics is an American firm that makes testing and repair equipment used by Japanese, Korean, and Taiwanese companies in the fabrication of flat screens. CEO Francois Henley is an industry insider.

FRANCOIS HENLEY, CEO, Photon Dynamics: And just like any new industry, there is room for people coming in even after the early innovators in manufacturing have started producing panels.

MALCOLM THOMPSON: We're going to jump on a second and third generation technology rather like the Japanese did with the integrated circuit business when they jumped on at a later phase than us.

MR. MICHELS: Xerox's Malcolm Thompson claims the time is right now.

MALCOLM THOMPSON: If the United States wants to basically survive in the computer business, it'd better take an intense interest in the screen business, because that will be the computer of the future.

MR. MICHELS: A few specialized American-made flat panel displays are already on the market, including monitors for vital signs used in ambulances and hospitals. Meanwhile, the Defense Department will begin accepting proposals in the fall from risk taking companies who will try to mass produce high quality thin screens in America cheaply enough to compete with the Japanese. SECOND LOOK - BATTLE LINES

MS. WARNER: Finally tonight, plans by the Disney Company to build an American history theme park outside Washington. The Disney project has become the center of a growing controversy sparked in part by historians concerned about its impact on Civil War battle sites in the Virginia countryside. The argument reached a Senate subcommittee today. Among the witnesses was Virginia Governor George Allen, a strong backer of the Disney Project.

GOV. GEORGE ALLEN, [R] Virginia: What we have, Mr. Chairman, from the opponents of this project is one pretext after another, one excuse after another for attempting to override unilaterally the zoning decisions of a duly elected local public servant's. The only bypass that they support is a bypass of the rights and prerogatives of local and elected officials and ignore property rights. Obviously, the opponents do not trust locally elected officials. Well, I do. Finally, with all their other arguments against the park faltering the opponents listed the support of a number of historians who do not like the idea of history-based theme parks. In fact, one highly esteemed historian actually said on the MacNeil-Lehrer NewsHour that Disney's portrayal of chipmunks was dangerous because someone might actually pick one up and get bitten by a chipmunk. Historians, Mr. Chairman, have the same right as every other American to express their point of view. But in arguing that this project ought to be blocked because the fear that the Walt Disney Company will not interpret history to their satisfaction, when they do that, when they do that, Mr. Chairman, they're practicing censorship. If they want to preserve history, these notable historians and professors ought to take another look at one of the more important historical documents, our Constitution, in particular the Bill of Rights, because that document denies to all governments, including this Congress, the right to control the content of private artistic expression or historical interpretation.

MS. WARNER: The report the governor mentioned in his testimony aired on Memorial Day. Roger Mudd was the correspondent. Here's a second look.

MR. MUDD: Stand in the middle of this Virginia hamlet, it's called Haymarket, almost 200 years old, population 473, and look to the East, look East along Interstate Route 66. Thirty-five miles away is the nation's capital and the shrines of government. Four miles to the East is the battlefield of Second Manassas, considered Robert E. Lee's best-executed battle. To the Southeast, on the Potomac River, is Mt. Vernon, the plantation home of George Washington. Due South within an hour is the battlefield of Chancellorsville, where Stonewall Jackson died. To the Southwest is Monticello, the mountaintop home of Thomas Jefferson. To the West, the Blue Ridge Mountains, the Skyline Drive, and the Shenandoah National Park. To the North, just 15 miles away is Oak Hill, the home of James Monroe, where he wrote the Monroe Doctrine in 1823. And in all directions from Haymarket are the soft hills and gentle slopes of a countryside that George Washington would probably still recognize. Now comes into the center of this intensely historic region the Disney Corporation to build an history theme park which Disney says will be serious fun and will leave its customers feeling good about their country. Mark Pacala is senior vice president and general manager of the project.

MARK PACALA, Disney America: We are intrigued with the way you can merge education and serious content and entertainment and have a very insightful, a very inspiring, and very fun experience.

MR. MUDD: But the theme park, with a payroll of several thousand, would occupy only 200 acres of the 3000 acre tract which lies just North and West of Haymarket. The balance, 2800 acres, would be for 2 million square feet of commercial space, 1500 hotel rooms, a golf course, a 283 acre camp site, and 2500 houses. On display in what's called the Community Room at Disney's headquarters in Haymarket are picture boards suggesting what the theme park might look like, a Lewis & Clark water trip, a factory town, a state fair with a ferris wheel and roller coaster, a civil war fort, a working farm, and a World War II victory field. When Disney announced its plans last November, it got immediate support from the outgoing Democratic governor, Douglas Wilder, and the incoming Republican governor, George Allen, Jr. Disney quickly put together "Welcome Disney" committees in Prince William and the neighboring counties, groups called "Patriots for Disney," and "Friends of the Mouse." And it enlisted the Board of Realtors and the Greater Manassas Chamber of Commerce. The "Welcome Disney" chairman is Robert Singletary, a business consultant who moved to Haymarket 18 years ago.

ROBERT SINGLETARY, Welcome Disney: The latest figures from the Bureau of Business Research at William and Mary indicate there will be 19,000 jobs created. The second would be taxes, tax revenue. Disney will give to the state, generate to the state, $48 million a year in revenues that they do not now have. And the third benefit would be to the existing business of Disney, people coming in to visit Disney would increase the existing business, and that would also be an economic stimulus.

MR. MUDD: Disney also hired some very well-connected lobbyists, including former Democratic Congressman Beryl Anthony of Arkansas and Jody Powell, former President Carter's press secretary, to handle public relations. Six years ago, Powell played a different role. It was his dramatic testimony which helped kill plans for a shopping mall on the Manassas Battlefield.

JODY POWELL, Former Carter Press Secretary: [1988] On that little hill, Mr. Chairman, history is palpable. Today you can see it and feel it, a blood-soaked piece of Virginia countryside.

MR. MUDD: On the Hill, when you were in the battle of the Third Manassas, and I remember your saying, "You can stand on Stuart's Hill and the sense of history is palpable." You don't think there's the sense of history at Haymarket?

JODY POWELL, Disney Consultant: Certainly not. Those 300 acres where Disney is going to put this park, no. In a way, I suppose it would be nice if we could preserve everything the way that it was. But I don't think we can ask society for that. There's a tremendous difference to me between Stuart's Hill or any one of a number of other places in this country where historic events of major proportions took place and areas that may be a few miles from or that someone, that someone walked over.

MR. MUDD: Also hired by Disney were professional historians James Horton of George Washington University and Eric Fonner of Columbia. Horton is a professor of American history and American studies.

MR. MUDD: What do you think Disney's intentions are vis-a-vis serious history?

JAMES HORTON, Disney Consultant: I think that based on the conservations I had -- and, admittedly, there have been very many. But on the conversations I've had, i would have to say that there is a commitment to, to doing serious history. I think it's encouraging that they have come to professional historians in the first place. I think that similar projects a couple of generations might have been done without this kind of -- without this kind of concern.

MR. MUDD: Do you feel bought by Disney?

JAMES HORTON: Not at all.

MR. MUDD: Are they paying you?

JAMES HORTON: Well, certainly, but not nearly enough to feel bought by. And, in fact, I think this is very important. I think it is important that I and other consultants who are working this project maintain as much independence as possible, because otherwise you don't have credibility.

MR. MUDD: The historian Disney really wanted was the highly regarded author of three volumes on the Civil War and the raconteur of the PBS series on the war, Shelby Foote of Memphis. Foote turned Disney down flat.

SHELBY FOOTE, Historian: I was raised on Disney. Mickey Mouse and I grew up together. I have some, some true objections to the Disney approach to life. I think it affected us in a bad way. I think it sentimentalizes the animal kingdom, for instance. And you might think that's all right for children and good, but I have some serious doubts about it.

MR. MUDD: What are the doubts beyond sentimentalizing?

SHELBY FOOTE: Well, those little chipmunks that are singing, those cute little things, if you fool with a real chipmunk, you can get hurt. I realize the futility of trying to stop making room for entertaining people and all that, but there's something about a theme park, there's something about a recreation, there's something about a reproduction that offends me deeply.

MR. MUDD: The Disney lobbying operation may not have paid off with Foote in Memphis, but its blitz in Richmond got the company almost everything it wanted from Virginia's legislature and governor; a $163 million package for roads, highway signs, worker training, visitor center, and tourism promotion. From the beginning, Gov. Allen, Jody Powell, and the Disney operation tried to isolate the opponents by painting them as millionaires, horsey elitists, outsiders, and no-growthers. Indeed, the surrounding counties of Northwest Virginia, called the Piedmont, have some of each. This is horse country. Each spring, the Point to Point Race and the Steeplechase draw thousands. This is also hunt country where hounds, foxes, pink coats, and love of the English are on full display. The grand homes, the estates, the hunt breakfasts all bespeak money, and there's no question that money has kept this countryside beautifully intact. The Piedmont Environmental Council, funded in party by Mellon, DuPont, and Firestone conservancy land trusts was one of Disney's early opponents. Charles Whitehouse, a former ambassador to Thailand, whose home is 12 miles West of the Disney site, is president of the Piedmont Environmental Council. He says the effect of Disney on the Piedmont will be very deleterious.

CHARLES WHITEHOUSE, Piedmont Environmental Council: Disney brings with it sprawl. And I'm sure you'll agree that the various fast food joints, motels, shops selling T-shirts, and all of that stuff which has followed them in their other enterprises like in Orlando is sure to come here.

MR. MUDD: How have the Disney people, Mr. Whitehouse, been able to portray the opposition as elitists? How have they done that?

CHARLES WHITEHOUSE: They just keep using those same words. I was talking with my dear wife this morning before you came, and I said to her, "You know, as we speak, Chesapeake Bay is covered with motor boats." And a motor boat costs just about as much as a horse, and, yet, none of the people in the press ever refer to "rich elitist water skiers."

MR. MUDD: Are you an elitist, Mr. Whitehouse?

CHARLES WHITEHOUSE: I suppose some people might say so because ex-ambassadors are thought to be. I think it's just a way of pretending that this very pretty part of our country in which there are some very well-to-do people -- it is also full of citizens. We have every kind of person you can think of. We have farmers and plumbers and carpenters and lawyers and real estate agents and doctors and nurses --

MR. MUDD: At a recent rally in Haymarket, the resistance to Disney included not only Mickey Mouse and Goofy pickets leading Gov. Allen around by the nose, but also speakers from the Black History Action Coalition, the American Farmland Trust, the Audubon Society, the Sierra Club, Clean Water Action, and James Price, a federal oceanographer who lives about eight miles from the Disney site, and who is head of the newly formed group called "PROTECT."

JAMES PRICE, PROTECT: There are some wealthy people out here, and many of them are against the project. But that doesn't characterize the opposition. It's the average citizen who's afraid of all the implications of this project, the traffic, the pollution, the taxes that we know are going to go up, not down, because of this.

MR. MUDD: If this Disney project is going to be so damaging to the county as you say, how do you account for the fact that seven of the eight supervisors in Prince William County are in favor of it?

JAMES PRICE: They feel that Disney has capitalized a lot both on its name and its financial influence and has bought a tremendous amount of influence in this county and in the state government in general.

MR. MUDD: The opposition, of course, is not without money. A full page ad in the May 2nd Washington Post by the National Trust for Historic Preservation cost $50,000.

COMMERCIAL SPOKESMAN: Gridlock.You think traffic's bad now?

MR. MUDD: A group calling itself Citizens Against Gridlock recently unveiled a TV ad.

COMMERCIAL SPOKESMAN: 77,000 more cars to area roads.

MR. MUDD: Neither side in the dispute has been willing to accept the other's projections on traffic, taxes, jobs, pollution, water, sewage, or electricity. Neither can they agree on how Disney should portray history. When Disney's chief imagineer, Bob Weiss, said last year the exhibit would let the tourist feel what it was like to be a slave, some historians and social critics were aghast. Weiss, who says he can visualize the park when he looks out over the property, is now cautious when asked to describe what he sees.

BOB WEISS, Disney Imagineer: I would say the design evolved quite a bit in the last six months; it will evolve in the next six months, as we continue this process. And then we go through a process of storyboarding and building models and developing scripts that will really define what those shows are.

MR. MUDD: Whatever historical interpretation Disney comes up with will probably displease this group of professional historians newly organized by ex-journalist Nick Katz, who owns a cattle farm near the park's site. The group's spokesman was historian David McCullough.

DAVID McCULLOUGH, Protect Historic America: Would we as a country allow anybody to build an amusement park at Omaha Beach? Would we, in the name of creating jobs, make splinters of Mount Vernon? There is, there is really no difference.

MR. MUDD: Despite the celebrity of the opposition, support for Disney is substantial, especially among the local commercial interests in Prince William County which are still thanking Gov. Allen for welcoming Disney to Virginia. The opponents say they cannot count on the Prince William County Board of Supervisors or the county's business community to limit growth or block creation of a satellite or edge city. They simply point to what has already happened a few miles away in Manassas, the county seat, now rent by strip malls, and they point to mile upon mile of tract housing in the middle of what was once farmland and pasture. Mark Pacala, the general manager of Disney's America, says the problem is a local one, i.e., it rests with the Board of Supervisors.

MR. MUDD: What assurance can you give to people who are worried about Disney that this part of Virginia will not become another Orlando or another Anaheim?

MARK PACALA: The good news that I can relate to the viewers is that we are as concerned as anybody else about this, and the infrastructure and procedures are already in place to help control the peripheral development.

MR. MUDD: But is it not inevitable that Disney's presence here would attract along the adjoining highways an edge city, strip malls, Joe's Alligator Farm, T-shirt shops?

MARK PACALA: It's not inevitable at all.

MR. MUDD: Not inevitable?

MARK PACALA: Not inevitable at all. I mean, it could happen if it's allowed to happen.

MR. MUDD: And who would allow that?

MARK PACALA: Let's remember that the citizens through their elected officials, planning commissions, board of county supervisors, advisory task forces, you name it, have all the, the resources at their fingertips to hopefully discourage things that perhaps aren't compatible with what they want to accomplish.

MR. MUDD: So it would not be Disney's responsibility to stop it?

MARK PACALA: It's our responsibility as a citizen of Northern Virginia. Let's not forget, we're going to be neighbors too.

MR. MUDD: But you don't have the power to stop it?

MARK PACALA: No, because it's a local issue.

MR. MUDD: The fight to keep Disney out is moving toward a climax in Prince William County. Disney's rezoning applications are almost certain to be approved by the Board of Supervisors in the fall. So for the opponents their main hope now lies with the federal government which can order environmental and transportation impact studies that could tie the project up for years. In Piedmont, Virginia, both sides are holding their breath. RECAP

MR. LEHRER: Again, the major story of this Tuesday, the head of the Food & Drug Administration said a major cigarette company has secretly developed tobacco with twice the usual nicotine content. Dr. David Kessler told a congressional committee the Brown & Williamson Tobacco Company is selling the high nicotine cigarettes in this country. The company disputed Kessler's charge. Good night, Margaret. Good night, Jim. That's it for the NewsHour tonight. We'll see you tomorrow evening. I'm Margaret Warner. Good night.