The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After the News Summary this Thursday, we examine prospects for better trade with Japan with a report on the frustrations of U.S. apple growers and a discussion with Trade Rep. Mickey Kantor and others. Next, for April 15th, a report on new attitudes to taxes among Californians, and Charlayne Hunter-Gault revisits an American aid worker in Somalia. NEWS SUMMARY

MR. MacNeil: The body of a hostage prison guard was found today on the fifth day of the prison uprising in Lucasville, Ohio. Authorities would not say how he died. Seven other guards remain hostages and seven inmates have been killed since prisoners took over the maximum security prison in Southern Ohio. A state corrections department spokeswoman made the announcement.

SHARRON KORNEGAY, State Corrections Spokeswoman: The body of correctional officer Robert R. Valandingham was recovered from the yard of the Southern Ohio Correctional Facility at 12:20 this afternoon. His family has been notified. Valandingham has been an employee at the prison since 1991. He was 40 years old.

MR. MacNeil: She also said a major breakthrough had been achieved in the negotiations but would not elaborate. A local TV anchorman was allowed inside the prison today. Afterwards, he said he thought the crisis could be resolved if the inmates were allowed to talk to the media. Jim.

MR. LEHRER: President Clinton today proposed adding $200 million to his economic stimulus package to help communities hire police officers. He said it would put 10,000 officers to work at a time when cities were seeing a dramatic increase in violent crime. Mr. Clinton also said he was willing to compromise with Republican Senators filibustering against the stimulus plan. He said he believed all the programs in the package were worthwhile but he would accept a smaller amount than the $16.3 billion he has requested. He made this appeal to Republicans during an appearance in the White House Rose Garden.

PRESIDENT CLINTON: Let's work together. I can accept a reduced package if you will increase your commitment to safe streets. I do not accept the fact that we should reduce our commitment to summer jobs or to building our infrastructure or to doing those other things that will create real and lasting prosperity for our people. I have done my part now to end the gridlock. I ask you to do yours.

MR. LEHRER: Senate Republican Leader Bob Dole said there was no compromise in the works. In New Hampshire for a visit, Dole said today he continued to oppose the stimulus plan. Also today, Mr. Clinton said he had made no decision on a so-called "value added tax" to pay for health care reform. He said many business and labor leaders had asked him to consider it but he had not yet reviewed the idea.

MR. MacNeil: The world's seven largest industrial nations today offered Russia a big aid package to support its free market reforms. It includes more than $28 billion in loans and some direct grants in addition to $15 billion in rescheduling of debts. Officials of the so-called "Group of 7" made the commitments at a Tokyo meeting. The U.S. promised $1.8 billion over and above the 1.6 billion committed at the U.S./Russian summit in Vancouver earlier this month. Sec. of State Warren Christopher spoke at the close of the meeting.

WARREN CHRISTOPHER, Secretary of State: The President has decided it's in the interests of the United States and its citizens to build on the earlier package of assistance announced in Vancouver in order to promote even greater Western support for reform in Russia. Accordingly, I'm announcing here today for the first time that the President will request an additional 1.8 billion in support for Russian reform.

MR. MacNeil: Among other things, the new aid is intended to help Russia purchase essential imports, privatize state-run industries and stabilize the Russian ruble.

MR. LEHRER: United Nations Secretary General Boutros Boutros- Ghali today condemned Bosnian Serb attacks on Srebrenica. He said the Monday shelling that killed 56 people was an inexcusable assault on civilians. More shells hit the town today. A U.N. convoy brought in aid but left Srebrenica with just five elderly people. Local Muslim commanders blocked a planned evacuation of hundreds more. They demanded wounded soldiers be flown out first. The civilian victims of Monday's attack are getting medical treatment in the town of Tuzla. Paul Davies of Independent Television News reports from Tuzla.

PAUL DAVIES: They were expecting the worst, these mothers from Srebrenica, as they entered the hospital where they'd been told their injured children had been taken. Munia Vekeric brought her son, Enka, with her. They were looking for his older brother, Said. She'd been told that Said's face and his terrible injuries had been seen around the world. But she hadn't seen him since they became separated from the convoy that brought them out of Srebrenica. Munia was at Said's bedside before he was aware of her presence. "Where have you been?" he asked her. "Not far away," she replied. "Is Enco there?" he said, asking for his little brother. Feeling the boy's face and telling him not to cry, "Am I horrible to look at?" he asked his mother. "No, son, no, son," she told him, as Enco tried to hold back his tears. The doctors at Tuzla Hospital have now had time to make a full examination of Said's wounds. The news is not good. But Said's mother wanted to know the truth. She asked to see the chief surgeon. He told her the blast from a shell had destroyed Said's eyes. There's nothing left to say. He'll never see again.

MR. MacNeil: A powerful car bomb exploded today in a Bogata, Colombia, shopping center. At least eight people were killed and eighty others injured. Later a report said buildings in a three block radius were damaged. There was no immediate claim of responsibility, but four men were reportedly arrested. The government has accused fugitive drug lord Pablo Escobar of ten other car bombings earlier this year in which more than 50 people were killed. That's our News Summary. Now it's on to aid with Japan, Californians and taxes, and Charlayne in Somalia. FOCUS - OCEANS APART

MR. MacNeil: Tomorrow President Clinton meets Japanese Prime Minister Kiichi Miazawa at the White House and trade problems will top the agenda. Tonight we examine the persistent and growing trade deficit with Japan and what the Clinton administration can do about it. Last year, the Japanese sold us nearly $50 billion more in goods than we sold them. One solution to the trade imbalance would be for the Japanese to buy more U.S. goods but historically Japan has erected procedural and bureaucratic barriers to many American products. Even a product as basic as the apple is difficult to export as Correspondent Greg Hirakawa of public station KCTS in Seattle reports.

MR. HIRAKAWA: Washington State apple growers export more than 800 million pounds of apples each year. More than 50 countries, including many in Asia, import the fruit but not Japan. The Japanese government has prohibited the import of U.S. apples for 22 years. Washington State apple growers Clayton Udell and Tom Mathison have been trying to get their product into the Japanese market for 18 years.

CLAYTON UDELL, Apple Grover: We thought that once we met the technical issues and solved the problems that we would be allowed access to the market, but every time we have solved an issue or another problem they presented us with another problem, so I guess one word would be frustrating.

MR. HIRAKAWA: The problems say Japanese agricultural officials is a small insect known as the coddling moth. While the insect is indigenous to the U.S., it is not found in Japan. Japanese officials have set strict quarantine standards on imported fruit that could carry the destructive pest. Washington apple growers like Udell and Mathison have spent $1 million establishing test workers trying to prove they can meet the Japanese quarantine standards. USDA entomologist Hal Moffitt says chemical pesticides have proven effective against the insect. The coddling moth is now found in less than 1/2 percent of the state's apples. The few apples that are infested are easily spotted and thrown away.

HAL MOFFITT, USDA Entomologist: An apple at harvest time, that exit hole where the larva has been will be much larger than this so it's readily visible to the people doing the sorting and grading.

MR. HIRAKAWA: Such assurances have not been enough for the Japanese government.

HAL MOFFITT: We have a number of small research size fumigation chambers.

MR. HIRAKAWA: So to meet Japanese quarantine requirements, Moffitt and other scientists in 1988 developed a second treatment to kill the coddling moth. Boxes of apples were stored in refrigerator containers, then fumigated with another pesticide. Japanese agriculture officials have been invited to observe large scale testing of the proposed procedure. They have yet to accept. Moffitt has no doubt the procedure will work.

HAL MOFFITT: Being that we anticipate there will be no coddling moth in the packed box in the first place, if you superimpose the treatment over that, zero and zero are still zero.

MR. HIRAKAWA: U.S. government and apple industry officials have complained about the numerous delays and rigorous testing required by the Japanese. Washington Senator Republican Slade Gorton charges the Japanese government is simply protecting its own apple industry from competition.

SEN. SLADE GORTON, [R] Washington: These restrictions have been totally and purely protectionist. They're restrictions that exist nowhere in the United States and nowhere else in the world. We produce the best and healthiest apples there are. The reason they're not in the Japanese market is that they're entirely too competitive with Japanese grown apples.

MR. HIRAKAWA: William Bryant has been trying to negotiate a trade agreement on U.S. apples with Japan for more than seven years.

WILLIAM BRYANT, Trade Consultant: The big issue is that Japan's quarantine law is not designed to provide the islands with a certain level of quarantine security. The quarantine laws in Japan are designed to keep products out. I think Japan is one of the worst offenders in manipulating technical standards for protectionist reasons.

MR. HIRAKAWA: Japanese agriculture and apple industry officials declined interviews for this story. U.S. apple industry experts believe the Japanese apple market could be worth an estimated $50 million annually to U.S. growers. Industry supporters concede that will do little to ease this country's near $50 billion trade imbalance with the Asian nation but trade problems with Japan faced by apple growers are typical of those faced by U.S. businesses across the country according to Sen. Gorton.

SEN. SLADE GORTON: Apples are not a huge commodity, not a huge item, as we look at the entire trade relationship between the United States and Japan. But neither is any other single item on which they have significant trade barriers. And so you really do have to work at them one at a time.

MR. HIRAKAWA: Washington State apple growers are hoping trade talks between the U.S. and Japan will resolve this controversy which has been going on for more than two decades. Japanese officials last week insisted they plan to open their borders to U.S. apples possibly by January.

MR. MacNeil: In his first full press conference last month, President Clinton cited the high trade deficit as evidence that Japan's borders are not open to American exporters.

PRESIDENT CLINTON: [March 23, 1993] The persistence of the surplus the Japanese enjoy with the United States, with the rest of the developed world, can only lead one to the conclusion that the possibility of obtaining real even access to the Japanese market is somewhat remote.

MR. MacNeil: Even the Japanese prime minister seemed to acknowledge Mr. Clinton's point. He told reporters this week that Japan needs what's called "gaiatsu," pressure from the outside. Referring to the trade imbalance, Mr. Miazawa said he believed Japan would accommodate a certain pressure, that we should do something to correct this. This week, Miazawa also unveiled a special economic stimulus package of $115 billion. That's meant to pull the Japanese economy out of its deep recession so that Japanese consumers will buy more exported goods from the U.S. Joining us now are Mickey Kantor, United States Trade Representative; Clyde Prestowitz, president of the Economic Strategy Institute in Washington, and trade negotiator for President Reagan; James Bovard is author of a book titled The Fair Trade Fraud, which examines United States trade laws; Yoshi Tsurumi is a professor of international business at Baruch College in New York. Mr. Kantor, our reporter quoted Japanese officials as saying they would start letting apples in in January. Can you shed any light on that?

MR. KANTOR: Well, I hope they do that, but I have to be somewhat skeptical. This has been going on for ten years. Two years ago, after eight years of negotiations, we thought we had reached agreement. The Japanese had scheduled to have their inspectors go to the state of Washington to verify our procedures, and they failed to show up. Now, ten years later, after those negotiations have begun, they've added new and different standards. And it seems to me that they're not responding. Just today, Sec. of Agriculture Mike Espey and I signed a letter to three Japanese ministers protesting this latest action. We mean to open up that market as we mean to work with our Japanese trading partners in a strategic way to try to open up other markets which are closed frankly.

MR. MacNeil: Well, look, suppose ideally all the barriers that Japan imposes to American products were dropped and you could, the United States could sell anything it wanted in whatever quantity it wanted to Japan. How much would that roughly $50 billion trade deficit go down?

MR. KANTOR: Well, let me give you some examples of what makes up that $50 billion trade deficit. 65 percent of it is in autos and auto parts and supercomputers and computers and semiconductors and electronic products, high value added hi-tech products which employ people in high wage, high skilled jobs. It's jobs who wish to grow. Frankly, there are studies being done now at Berkeley which showed if barriers had been dropped say in 1985, the study shows we would have added about 600,000 jobs to this economy alone just dropping those barriers in 1985, Robin. So it is quite significant and would be quite meaningful. Frankly, we need to add this. As we try to deal with our competitive problems and not all our problems, of course, are made in Japan, there are a lot made here in the United States, and the President is addressing those problems, as we hope that the Japanese will institute an important and effective stimulus program, we have got to open up markets not only in Japan but around the world. That's why we've called for such a large market access package in the Uruguay round.

MR. MacNeil: Mr. Tsurumi, from your point of view, how much would the deficit go down if all Japanese barriers were wiped out?

MR. TSURUMI: I computed that for number of years as best it may go down perhaps by $10 billion, including rice and a few others and apples.

MR. MacNeil: One-fifth.

MR. TSURUMI: One-fifth at best and it would take five or six years. And this, the apple problem points out one of the cause of problems that every country, including the United States, the United States is the worst offender. US didn't let the Asian oranges to come in for the same reason now Japanese appear to be using to keep out those apples that every country, many place this standard of products in order to keep out foreign companies and products. For example, even today, United States government and steel industry also are manipulating dumping definitions to harass Japanese products and companies inside the United States. So you would have to solve this problem. The best solution is not to demand Japan, set aside say 20 percent of this market for others but --

MR. MacNeil: Let me come back on that point and how we solve it. I'm just interested in the views of these other members we have here first.

MR. TSURUMI: Okay.

MR. MacNeil: Mr. Prestowitz, how much are Japanese barriers the source of this deficit? In other words, if the Japanese got rid of all the barriers, how much would this deficit go down?

MR. PRESTOWITZ: Robin, several leading U.S. economists have done studies which have indicated that if the Japanese market operated more or less in the same way as the U.S. or the Canadian or the German market, the Japanese imports would increase by on the order of $50 billion.

MR. MacNeil: $50 billion, which would wipe out the deficit where it was last year?

MR. PRESTOWITZ: If all of that were supplied by the U.S., it would wipe out the deficit. But let's assume that all of it would not be supplied by the U.S. Some of it would be supplied by Europe and Asian countries. But I think it's fair to say that --

MR. MacNeil: But Japan has, Japan has --

MR. PRESTOWITZ: -- 20/25 billion dollars.

MR. MacNeil: Japan has surpluses with them too.

MR. PRESTOWITZ: That's right.

MR. MacNeil: So about half the deficit you estimate.

MR. PRESTOWITZ: Half the deficit.

MR. MacNeil: Our deficit. Yeah. Mr. Bovard, do you agree with that?

MR. BOVARD: I think it's a little bit high. The Federal Reserve estimated that if the Japanese dropped all of their trade barriers that our exports would increase between 5 and 8 billion dollars, but there was also a study by the U.S. International Trade Commission that estimated that if both the U.S. and Japan dropped their barriers towards each other that our trade deficit might actually increase because we have a very large number of very strict trade barriers that we impose on Japanese imports.

MR. MacNeil: Give us an example.

MR. BOVARD: Well, we have over, we have a lot of import quotas on their textile products. We've basically arm twisted the Japanese government to impose voluntary export quotas on their autos, and we're, we're, we've almost stonewalled their steel exports with the current dumping cases.

MR. MacNeil: So, Mr. Kantor, how do you react to these various estimates of how much the deficit would improve if it was just a question of removing Japanese barriers?

MR. KANTOR: Well, first of all, we know it would improve substantially. No. 2, open markets and expanded trade are what all of our goals should be. No. 3, that would promote global growth, which is extremely necessary today in combination, trade growth in combination with macroeconomic policies which would also promote growth. But let me go back to something that was said. Frankly, the United States is the largest open market in the world, and although it's not completely open, as I would agree with Mr. Bovard, it is the largest open market in the world and has been since the Second World War and, in fact, that open market and our consumers have helped fuel one of the greatest growths in an economy in world history and that has been the Japanese economy. Now, that was important to us in terms of strategic strategies, as well as helping the European Community in terms of the East/West confrontation. The Cold War is over. Now what we need to do is have global growth. We need to have a strategic partnership. We need to work together, but we cannot have the kinds of barriers that have been thrown up by the Japanese which keep out such strategic products as I mentioned before.

MR. MacNeil: Mr. Bovard, I thought I saw you wanted to reply there.

MR. BOVARD: Yeah. It's nice that Mr. Kantor's very concerned about foreign trade barriers. It's too bad he doesn't have the same concern about U.S. trade barriers. For instance, in agriculture, we are very protective. We have import quotas. Our agriculture import quotas allow Americans to have, each American to have the equivalent of only two foreign peanuts per person per year, one teaspoon of foreign ice cream per person per year, and one pound of foreign cheese per person per year. And there was an interesting case. A lot of people are proposing to try and -- Mr. Kantor has said he's going to use a sledge hammer on some of our trading partners to try to get them to open their markets, but if we look at some of the trade cases that have been brought in the past, it's almost laughable. For instance, in 1988, Mr. Kantor's predecessor pressured Japan to end the import quotas on ice cream, cheese, and sugar, which the Japanese did. I'm happy that they did it, but I would have preferred that the U.S. government also drop our own import quotas on the same products.

MR. MacNeil: Mr. Kantor.

MR. KANTOR: Well, just if Mr. Bovard maybe can tell me a larger, more open trading market than the United States I'd be glad to retract my statement if he can cite one for me in the world.

MR. MacNeil: Let me --

MR. BOVARD: But I'd like to put this a little bit in perspective. It's true that the United States has some trade barriers, but the United States has run $100 billion plus trade deficits for the last 10 years. Japan has trade surpluses with all of the major trading areas in the world. The U.S. takes 60 percent, fully 60 percent of the manufactured goods, exports of the less, of the LDCs, the lesser or developing countries. Japan takes 10 percent. It's very difficult in that context to, to compare the U.S. as a protectionist or a closed market to Japan.

MR. MacNeil: Since we have disagreement on that, let me go on to something else. Mr. Prestowitz, what do you see as the real causes of the U.S. deficit with Japan, the trade deficit?

MR. PRESTOWITZ: Well, there are two causes. One of them is a macroeconomic cause. The Japanese have a high savings rate, and we have a low savings rate. But a very substantial part of the problem is the structural deficit which arises because of the practices of Japanese corporations in tending to procure parts and components and supplies from related companies, and part of it has to do with the fact that products like videotape recorders and so forth are simply not made in the United States anymore.

MR. MacNeil: What do you see, Mr. Tsurumi, as the causes of the deficit?

MR. TSURUMI: Prestowitz has been always wrong on these issues, but real cause is now twofold: One, the hollowing out of American non-defense manufacturing industry and Prestowitz is partially right on that one, and it's not due to the Japanese problem. So United States are not making manufactured goods which they can sell at home in the U.S. as well as to export. Second one is --

MR. MacNeil: That isn't true of auto parts and automobiles.

MR. TSURUMI: No, but again American consumers are not buying American cars. That's why American industries are in trouble. American auto industries are in trouble not because Japanese are not buying American cars but the American consumers are not buying, and I hope they will come back. Another important issue, Japan now imports, per capita basis, per capita imports more from the United States than the U.S. imports from Japan. Japan imports about $400 per head, per person. U.S. imports from Japan about 380, wash, it's imbalance. It's a population imbalance is one, it's a structural reason. Then the issue is all right, Japan has become manufacturing powerhouse, U.S. has been kind of denuding, hollowing out manufacturing industry. That is the key matter. It's nothing to do with, to do with really the closed market, unfair practices. Bureaucratsand the lobbyists love those, you know, scapegoating, but the real problems are with the United States.

MR. PRESTOWITZ: Robin.

MR. MacNeil: Yes.

MR. PRESTOWITZ: If you talk about the hollowing out question though, let's just take a good example. You mentioned that 2/3 of the trade deficit is in autos and auto parts. Now the Japanese auto companies actually assemble autos in the U.S. If they were, were procuring U.S. parts and materials at a high rate of content, the trade deficit could be cut by 15 to 20 billion dollars right there. And the interesting thing is that today the U.S. is the low cost location for auto production, which is why BMW and Mercedes are locating plants in the United States. Nevertheless, the Japanese auto companies continue to import a high percentage of their parts and materials from Japan. And this is the kind of structural issue that I think the President has to get out with Miazawa.

MR. MacNeil: Mr. Bovard, let's hear your description of what the real causes of the deficit are.

MR. BOVARD: Me?

MR. MacNeil: Yeah.

MR. BOVARD: Oh, I'm sorry. Yeah, I think there are a number of different reasons. As far as autos and auto parts, there has been a consistent quality gap between the Japanese products and the American products. The American companies have closed that gap partially but American consumer surveys have shown that going back to at least the early 1980s. Secondly, there is, it's important to realize that the U.S. government is doing more to sabotage the U.S. exports than any foreign government is doing. We have a lot of programs, a lot of barriers. For instance, the U.S. Agriculture Department effectively imposes export quotas on California almonds and raisins, almonds and raisins. This is something that decreases our exports. It makes no sense. It's the USDA trying to play the OPEC of raisins and almonds, but we have a lot of agriculture programs. We have a lot of export controls that are decreasing our exports. It would be so helpful if the U.S. government would just stop getting in the way of American exporters.

MR. MacNeil: Mr. Kantor, what do you say to these various reasons beyond the Japanese resistance to products that are at the heart of these deficits?

MR. KANTOR: Well, at the heart of the deficit, Robin, is a closed market in critical areas. And lets go back to what I've cited before. It's interesting to talk about agriculture but 65 percent of the 96 billion dollars that was exported from Japan to the United States was in the six areas that I cited. Let's take supercomputers. Although we have 85 percent of the supercomputer market in Europe, we only have 11 percent of the government supercomputer in Japan. Although we sell 40 percent of the mainframe computers in the market to private market in Japan, we only have 4/10, foreign, all foreign makers of mainframes only have 4/10 of 1 percent of the central government market in Japan. You don't have to go further than that to understand there are barriers being thrown up that are non-tariff barriers to entry. And those are high value added, high wage, high skilled jobs that we're losing here in this country because of those practices. We have that happening in many other areas as well. And the fact is we need to get to those things not in the sense of bashing anyone, but in the sense of working together for global group. And that's what we need to do. And the fact is that it's in the Japanese interest and in our interest. We are 40 percent of the world's economy together, the second largest economy in the world. It's time for both countries to take responsibility and to seize the opportunity that the President has stated.

MR. MacNeil: You're talking about not bashing. It was you who used the word "sledge hammer," wasn't it?

MR. KANTOR: Well, sledge hammer to break down barriers. I wasn't hitting anyone over the head. I was trying to break down trade barriers. And frankly, we will continue to do that because that is not in the interests of expanded trade which I assume all four of us will agree is in the best interest of global growth.

MR. MacNeil: Let's go around and ask the others what they think of the way, the best way is to open up the Japanese market starting with you, Mr. Prestowitz. What do you think is the best way to do it? For example, is the superconductor agreement under which Japan agreed to allow U.S. superconductors to sell 20 percent of its domestic market, is that kind of so-called "managed trade" the way to go to get the market open?

MR. PRESTOWITZ: I think you mean semiconductors, and I think that first of all --

MR. MacNeil: What did I say? Did I say super --

MR. PRESTOWITZ: You said superconductors. You meant semiconductors, yeah.

MR. MacNeil: I'm sorry. I meant semiconductors.

MR. PRESTOWITZ: In, in approaching the Japanese market I think it's important for U.S. negotiators to have some kind of a target or a goal, and as Amb. Kantor pointed out earlier, an easy way to set those targets is to look at the performance of U.S. industry in other marks. And if you have a situation in which U.S. industry is getting 50, 60, 70 percent market shares in Europe, in other markets, in Asia, and a very low share in Japan, then I think that it is reasonable to set some kind of a target that would indicate reasonable opening of the market in Japan. But I'd like to emphasize one other thing, and that is that it really would be much easier, it would be much easier to reduce the trade deficit by getting the Japanese who, who manufacture products in the United States to increase their usage of U.S. parts and materials. Again, let me come back to the automobile industry. The Japanese transplants in the U.S. are using only about 40 percent U.S. materials and parts. If they were to double that to 80 percent, that right off the bat would get us 15 to 20 billion dollars in deficit reduction.

MR. MacNeil: Is there any hope there, Mr. Kantor?

MR. KANTOR: Well, I think there is. You know, the Japanese pledged in 1992 that they would raise that use of local content as Clyde Prestowitz pointed out from, from the 35 or 40 percent level to 70 percent. They have not gotten there. They're not even close. They also agreed they'd buy $19 billion worth of auto parts by the end of fiscal year '94. They're at 12 billion, and they're not even close. If we could close those gaps and keep those pledges then, in fact, we'd take a significant dent out of this trade deficit.

MR. MacNeil: Mr. Bovard, what do you think is the way to, to improve the trade with Japan, how the Clinton administration should attack this?

MR. BOVARD: Well, first of all, I'm opposed to any type of agreement that would give politicians more control over what Americans are allowed to buy or sell. And that's the fundamental trouble we have with the semiconductor arrangement. When the politicians took control of the semiconductor prices, prices skyrocketed and that crucified the American computer industry.

MR. MacNeil: But that's being hailed here at least by the Clinton administration as a good deal because we did secure 20 percent of the Japanese market for semiconductors.

MR. BOVARD: Well, if one goes back to the early history, it's my guess the American companies would have increased their exports anyhow, but I think, I think it's fine to put verbal pressure on Japan, but I think some of the tone of the comments from some of the Clinton administration officials have sounded almost like a bunch of school kids out on a Saturday afternoon firing their pop guns in the air. And I think we have to be a little more restrained, a little more responsible. And Mr. Kantor commented in an interview with the Financial Times that trade is not very complicated, it's just like baseball. I think he needs to better understand the complexities of some of the unfairnesses of the American laws, especially the dumping law.

MR. MacNeil: Mr. Kantor.

MR. KANTOR: Well, maybe Mr. Bovard ought to understand some of the complexities of baseball. He might have some fun. The fact is that the semiconductor group was not a result of American businesses doing better. They have done better. In fact, it's a real model for many industries both in this country and outside this country. But the result of these agreements, Mr. Bovard knows, came as a result of a Section 301 action, a trade action taken by the United States which then the Japanese agreed to open up the semiconductor market, which has meant $2.4 billion more in sales of semiconductors in Japan. But the fact is that 20 percent is not very impressive, although our industry has done very well. We have 53 percent of the semiconductor market outside of Japan, so therefore I go back to what Clyde Prestowitz said. we ought to try to match those figures in order to see that a market is really opened.

MR. MacNeil: Mr. Tsurumi, is the semiconductor agreement a good model for opening up trade with Japan?

MR. TSURUMI: That has been a total flop. For example, the talk about the $3 billion, look at the numbers. Those numbers include those semiconductors made by say American companies inside Japan, same with IBM. So when they say just the Japanese market was opened up, would have been opened up anyway --

MR. MacNeil: But why is it a flop?

MR. TSURUMI: Flop. Well, as Bovard pointed out, it increased the prices of Japanese microchips as in the United States which cut American semiconductors and it didn't open up any, not too much U.S. export market from the United States. That was intended benefits, but actually that agreement counts.

MR. MacNeil: So it didn't have -- you're saying it did not have an impact on U.S. jobs because these were people employed in Japan.

MR. TSURUMI: And they got the impacts even --

MR. MacNeil: Mr. Kantor.

MR. KANTOR: Well, it did have an impact no jobs, and that what this is all about, growing the economy, growing jobs, and then trying to serve American workers who have been battered in the '80s. The fact is if we can get this trade deficit down, if we can grow our economy, if we can increase our exports. By the way, export jobs, Robin, on the average pay 17 percent more than any other jobs in our economy. That's what we are about, and if we can grow the global economy starting with Japanese stimulating their economy, the Germans lowering interest rates, the President has already put an important economic package on the table in the Congress which will fund infrastructure development, increase development, educate our people, do something about the structural deficit. We need to get health care costs under control, which we're working on very hard, and we need to get energy costs under control. If we can do that, we become more competitive and then we open markets in Japan and other areas of the world, then we'll see real global growth.

MR. MacNeil: Mr. Bovard, what do you think of the Clinton administration's approach to Japan so far?

MR. BOVARD: Well, I think it's been a lot of hot air and since it's primarily hot air, it hasn't done much harm. But I'm concerned about giving -- I'd be concerned if Mr. Kantor or others try to seize power over either what Americans can sell to them or the Japanese can sell to American citizens because politicians should not have unlimited power over what American citizens can buy, but that's, that's what could happen from the type of trade policy that we're drifting towards.

MR. MacNeil: I don't understand that. How do politicians get more power from that kind of trade policy?

MR. BOVARD: Okay. Well, for instance, looking at the 1986 semiconductor arrangement, what happened was the U.S. Commerce Department basically took the power to set the price, so-called "fair price" for Japanese semiconductors here in the U.S. And what the Commerce Department did was in the first time it set the prices, it raised the prices by about 250 percent. That had a devastating impact on American computer industries, on electronics industries here, and as far as Mr. Kantor is saying it should have an impact on jobs, it did. There was a study by the Center for the Study for American Business at Washington University in St. Louis that estimated the semiconductor arrangement destroyed 11,000 jobs in American industries that used semiconductors.

MR. MacNeil: Mr. Prestowitz, you were around at the time. What do you say to that?

MR. PRESTOWITZ: Well, I think the semiconductor agreement essentially saved the U.S. semiconductor industry. Prior to the agreement, there was massive dumping of Japanese chips in the U.S. market that was illegal under both U.S. and international trade law. All the U.S. semiconductor industry -- companies were hemorrhaging red ink. Many of them pulled out of the business, and had it gone on much longer, we would not have had a semiconductor industry. It would have gone the way of the video tape recorder industry and the television industry. So I think we saved a very important industry, which is the bedrock of our computer and other electronics industries.

MR. MacNeil: Mr. Tsurumi, what do you think of the Clinton administration approach to Japan so far?

MR. TSURUMI: Well, it has been very terrible. The Clinton administration should be focusing itself on the real issues. They want to clean up American economic mess, not the Japanese political mess, that is, work on building the manufacturing activities inside the United States. So the best thing that Mr. Clinton and others can do to help the United States trade deficit is to stop harassing Japanese manufacturing companies and products inside the United States by manipulating dumping rules and other silly regulations.

MR. MacNeil: Mr. Kantor, you've been accused of harassing and also that your policy is hot air.

MR. KANTOR: Well, I'm -- at least they haven't said I'm a bureaucratic thug yet. What we're trying to do is, is make an impact in the Japanese market which would only be characteristic of the kind of impact that American businesses and American workers are making in other markets and some key sectors that I've talked about before. That's critical to do if we're going to do something about this deficit. The deficit has two parts: One is quantitative, which we talked about, a $48 billion, almost $50 billion deficit, Robin. The other is, of course, the content of it. And the content of it is critical because it has some industries that have high wage, high skilled jobs. The bottom line here is: What are we going to do about growing jobs in the American economy? How do we serve American workers? How do we lead global growth? And our trading partners must come along with us. And if they do so, it will serve us all well.

MR. MacNeil: Well, Mr. Kantor, thank you for joining us. Mr. Prestowitz, Mr. Bovard, and Mr. Tsurumi, thank you. FOCUS - APRIL 15, 1993 - THE TAXMAN COMETH

MR. LEHRER: This is April 15th, tax day, as good a day as any to ask people how they feel about paying taxes to support their government. That's what Correspondent Spencer Michels did in his hometown in California.

MR. MICHELS: The going is rough on the deteriorating streets of San Anselmo, a well-to-do suburban town of 12,000 in Marin County across the Golden Gate bridge from San Francisco. This is a community that voted nearly 70 percent for Bill Clinton last fall. Yet, residents and officials of San Anselmo are suffering anxiety over raising taxes, despite the obvious need to repair the infrastructure.

WALTER ANDERSON: On my way to breakfast I ran across this pot hole. The pot hole was so deep and so wide until it jarred the CD, which I have a CD player in the car, and it skipped. And I hit, banged it, broke the CV joint, broke the band on the alternator.

MR. MICHELS: That pot hole cost actor Walter Anderson $480 to fix his car.

MR. MICHELS: Would you be willing to pay more taxes to take care of those pot holes?

WALTER ANDERSON: Yes, because the streets are very bad and a few dollars would be a great asset. That would be better than $480.

MAYOR PAUL CHIGNELL, San Anselmo, California: The drainage problem with the run-off from town-owned property --

MR. MICHELS: The mayor of San Anselmo, who is also a San Francisco police officer, says such problems are getting worse, but he is reluctant to go to the voters for a tax cut.

MAYOR PAUL CHIGNELL: We need to raise taxes, quite frankly. I know that's not always the politically correct thing to say for an elected official, but I support a tax increase if that money is earmarked to fix our streets and fix our drainage problems because the longer we let this go, the cost is going to be geometrically higher in the years to come. The problem is in California you need 2/3 vote to pass these tax increases. And it's very difficult to get a 2/3 vote when you have a vocal minority who won't vote for any tax increase at all.

MR. MICHELS: The late Howard Jarvis wrote the 2/3 requirement for most local tax increases into California's Proposition 13. The tax cutting measure was passed by voters in 1978, the opening shot in a nationwide tax revolt. Because the economy was healthy, some of its effects were delayed. Prop 13 even won here in Democratic San Anselmo. Today many politicians blame the measure for a whole litany of civic problems that fester because of lack of money. The crisis is heightened by the recession and by the gloomy outlook for state government, which is taking money away from cities and counties to pay its own bills. In San Anselmo, officials worry they will have to cut back fire protection, laying off firemen or closing a fire station, because of a $300,000 short fall. They say police services may be threatened as well, though critics claim that is a scare tactic. San Anselmo's maintenance yard needs repairs. And the vehicles stored there are getting old and broken, all of this in tough economic times when state and federal politicians are also saying it's time to raise taxes.

JEAN BONANDER, Town Administrator: Our loss is likely to be $452,733.

MR. MICHELS: San Anselmo's administrator, Jean Bonander, told town officials that competition for tax dollars is intense.

JEAN BONANDER: We elected as a nation a new president in November, and he has come out with a budget proposal for the nation that includes both tax increases and service level cuts and many of which appear that they're going to have a tremendous impact on the Bay area.

MR. MICHELS: With Chester, the town cat, oblivious, Bonander outlined unpleasant options, including salary and benefit cuts for city workers, a reduction of services, even new taxes.

JEAN BONANDER: We may have to ask our citizens to pay more in taxes, and the two most common taxes that get talked about at this level of government are utility users taxes and general parcel taxes.

MR. MICHELS: Asking residents of San Anselmo like me to support new taxes is touchy. Sometimes it's hard to see the need, and the city seems to be functioning pretty well. My tax bill, which I just paid, keeps going up. And already it includes special assessments for San Anselmo pension, mosquito abatement, a sewer charge, two school districts and paramedics. Just recently, the voters here approved another school tax, so it may be a difficult time to go for new taxes. The success of the school tax measure provides clues on how to get a tax passed, but the fact that it did win could hurt the chances of increasing taxes for other purposes.

COMMERCIAL SPOKESMAN: Next week, Marin voters are going to the polls again. And some say the outcome will be a lot more important than anything that went on last November.

MR. MICHELS: Campaigning using cable TV's community access channel, parents in favor of the school tax in the San Anselmo area this winter mounted an all out effort. Two previous attempts had failed. Attorney and parent John Wright led the campaign that got a 75 percent "yes" vote.

JOHN WRIGHT, School Tax Chairman: I think a lot of people like myself with young children are seeing the decline in public services, the decline in our schools, the decline in our highways, the decline in our health care, and I think frankly from our standpoint we are willing to make sacrifices because we have something at stake.

MR. MICHELS: Wright believes that to support a tax, local or national, voters must see specific benefits.

JOHN WRIGHT: Again, with the school tax, it's a fairly specialized thing. It's a very local issue, and people can really see the benefit from it. At the national level you just have to give people a sense that they are empowered to participate in the process and have town meetings, have the phone lines. I think if people feel that the decisions are being made by a group of, of cronies back in Washington that are subject to lobbyist pressures, they're just not going to be involved in the process.

MR. MICHELS: While school activist Wright supports President Clinton's call for federal taxes, some others here don't. Gary Venden, pastor of the San Anselmo Seventh Day Adventist Church, calls himself a conservative and originally opposed the school tax increase. But after attending school board meetings, he changed his mind.

GARY VENDEN, Pastor: Here they're running a tight ship. So as a result, I switched to believing that we needed a tax increase here, and it's small and local. I can live with that. I can work with it.

MR. MICHELS: For Pastor Venden that does not translate into support for President Clinton's proposed tax increases.

GARY VENDEN: I am cynical on the government's rhetoric. And I see every politician coming in, saying, we're going to spend less and they end up spending more.

MR. MICHELS: What would it take to get you to actually go along with Bill Clinton's proposals on taxes?

GARY VENDEN: I guess I'm looking for something in Congress that they vote themselves some limits, and I think constitutionally we should be forced to live within our means. If Congress would put that kind of a straight jacket on themselves, I'd open my wallet to help them solve the current dilemma.

MERVIN FIELD, Poll Director: If local governments say we want more money and state says we want more money, there's just so much money in any person's pot.

MR. MICHELS: Marin County resident Mervin Field operates the California Poll. He's been testing taxpayer attitudes toward local and federal taxes.

MERVIN FIELD: The public has to see that they have less police protection and they want more police protection, or whether fire protection or whether a sewer is backing up. They have got to see a demonstrated need. This is the first time in a long time that the national administration, either Democratic or Republican, has had to come to the public and say, yes, we do need more revenue for this program and that program and that program, but we also need more revenue to reduce the deficit. And that's just making it a much taller order.

LARRY LOCOCO, CPA: [talking to client] These are the new rates here.

MR. MICHELS: This tax season San Anselmo CPA Larry Lococo has been hearing from many of his clients, mostly business people. He says they're nervous about tax increases. They don't think new taxes will be spent on reducing the deficit.

LARRY LOCOCO: People, I think they've kind of had enough. Now it's time to, you know, to get business going again and, you know, to generate tax revenues by having increased business rather than necessarily raising taxes. I don't, I really still don't see how you can stimulate an economy by raising taxes. I don't know if that's ever been done.

MERVIN FIELD: If President Clinton could have gone to the American public the day after the election and said, this is what I want, I need this kind of program, I need more taxes, I think there would have been a large majority supporting him.

MR. MICHELS: Pollster Field believes that the political squabbling over the President's plans has eroded public support.

MERVIN FIELD: I think the window of opportunity for the Clinton administration to get more taxes, to cure the deficit, and have an economic stimulus program is, is waning each day.

MR. MICHELS: Locally, San Anselmo officials want to find out how much support is out there for a tax increase to solve city problems. They'll pay for a survey before putting a tax measure on the ballot. Congress will be watching national polls before voting on the President's plan. New taxes will never be popular. But timing may well determine whether they'll be enacted. ESSAY - CALIFORNIA DREAMING

MR. LEHRER: Finally tonight, another Californian, essayist Anne Taylor Fleming, has some thoughts about her native state.

MS. FLEMING: Every day there's another piece in one of the local or national newspapers or on one of the local national news shows trumpeting the demise of my home state of California. The economy is in the worst slump since World War II. The schools don't work. County and local governments are an overlapping, bureaucratic nightmare. The freeways are jammed. The gangs are out of control. Graffiti is everywhere. The ocean is periodically full of sewage, and everybody but everybody seems to be armed. The old frontier turned into the even more lethal new frontier. The California dream all these writers and commentators are saying is over, my dream, my state, my home. Indeed, things are tough out here at the edge of the continent, very tough. The Golden State is dysfunctional, in need of its own 12-step program. At every party I go to this is what people talk about now. Here in Los Angeles, part of which was torched in the wake of the Rodney King verdict, some 24 people have signed on to run for mayor in an amusing free for all. Everybody apparently knows that we need fixing. So how do we start? How do we start over? Can we rewind the reel? Can I? Can we go back to a time and a place and a beach where as a girl my friends and I would hang out past midnight without fear, and where I probably wouldn't walk alone now on a winter afternoon? This beach. I grew up here, a Coppertone baby turned greased up adolescent. I am a Californian through and through, always rising to the defense of my native land when strangers derided it as a mecca for the dreamers and schemers and unhinged, the vain and the desperate. I always love the spill of their energy, all the surfers and skateboarders, the hippies and gurus, the producers and starlets, the ranchers and entrepreneurs, all citizens of my irreverent, energetic paradise. Now, according to all reports, it's over. To live in California, I've come to realize is to live in a metaphor. We've gone from paradise gained to paradise lost. The truth is we're probably in danger of under celebrating ourselves, for once we over celebrated. After all, my childhood paradise was certainly not everyone's. There was always a laboring immigrant group on whose backs the California dream was leveraged, the underpaid Mexicans helping to build early Los Angeles, the Chinese up North slaving to build the railroads, and in the middle always the migrant farm workers bent over in the fields. Underneath the dream was the reality, just today underneath the reality is still the dream. People continue to pour into California, nearly 3/4 million last year, many from other states, but also huge numbers from Asia and Latin America. Oh, there are predictable, anti-immigrant rumblings now, as the state gropes to redefine itself, refind itself economically, psychically, and yes, spiritually, to use a little California jargon. It won't be easy. Jobs have been lost, aerospace and military industry jobs that won't come back. Manufacturing plants are moving out of state even as thousands of illegal aliens continue to come in. Truth be told, this entire state has a Zoe Baird problem, one among many to address as we try to sort ourselves out. In that sorting, nostalgia like mine, I've come to realize, has very little heart. It is at its face profoundly un-Californian. The real cannot be rewound. There are days when I feel bereft because things that once felt safe no longer feel that way, like this beach, days of rage when I rail at all the guns and guns and graffiti and the impossibility of fixing it, any of it. But then I walk down a street and feel all the hopeful immigrant energy and see all the kicky kids with their imaginative clothes, and my own California optimism kicks back in. That's the way many of us live here now, our optimism and our sense of loss co-existing side by side as we try to reckon with what is happening to the land we love. [song about California in background] I'm Anne Taylor Fleming. RECAP

MR. LEHRER: Again, the major stories of this Thursday, a hostage prison guard was found dead on the fifth day of the prison uprising in Lucasville, Ohio. Officials would not say how he died. President Clinton said he was willing to accept a smaller economic stimulus plan than the one being filibustered by Republicans in the Senate, and the seven major industrial nations agreed to give Russia more than $28 billion in grants and loans. We close tonight with a million and one shot, literally. The basketball shot came last night in Chicago Stadium, where as part of a promotion, 23-year- old Donald Calhoun of Bloomington, Illinois, was given one chance to win one million dollars. All he had to do was make a basket from the far foul line, 75 feet away. Watch this. [Calhoun making basket] That basket was worth $50,000 a year for 20 years. Calhoun says he will keep his part-time job as an office supply salesman and finish his college studies. Good night, Robin.

MR. MacNeil: Good night, Jim. Our trade discussion ran over so we couldn't bring you Charlayne's latest report from Somalia. We will try and reschedule it as soon as possible. I'm Robert MacNeil. Good night.