The NewsHour with Jim Lehrer

GWEN IFILL: Good evening. I'm Gwen Ifill. Jim Lehrer is on vacation. On the NewsHour tonight, our summary of the news, then: What's behind the latest deadlock over a new constitution for Iraq; who are the people of Gaza, the ones leaving, the ones staying; American cities join forces to reduce greenhouse gas emissions; and a book conversation with Asia watcher Clyde Prestowitz about the economic tidal wave that's moving East.

NEWS SUMMARY

GWEN IFILL: Iraq's parliament decided today to delay by a week a vote on a new constitution. That decision came just 20 minutes before the midnight deadline arrived. Negotiators managed only a tentative deal putting off decisions on the most contentious issues including federalism, women's rights and the role of Islam. We'll have more on the story right after the News Summary. There was more violence in Iraq today, as insurgent attacks across the country claimed the lives of at least seven Iraqis. Yesterday, police discovered 30 bodies in a grave south of Baghdad. And five more U.S. soldiers were killed over the weekend. They died in three separate roadside bomb attacks in and around Baghdad.

The Israeli pullout from Gaza began today amid protest. Israeli soldiers went door to door handing out eviction notices to the first of 8,500 Jewish settlers living there. In some areas, defiant settlers formed human chains and vowed peaceful resistance. The final evacuation deadline is Wednesday. After that, settlers will be forcibly evicted. We'll have more on this story later in the program.

Some passengers on a CypriotAirline that slammed into a Greek mountainside over the weekend may have already been dead before the crash. The coroners said today at least six were alive at impact. One hundred twenty-one people were aboard the Helios Airways jet when the plane crashed Sunday just north of Athens. Investigators are trying to determine whether a sudden high-altitude decompression and loss of oxygen, caused the crew to pass out before impact. Today, police in Cyprus also raided the airline's offices, but no arrests were made.

The Indonesian government and rebels in Aceh Province, signed a peace treaty today in Helsinki. The hostilities on the northern tip of Sumatra have killed 15,000 people in the past 30 years. We have a report by Ian Williams of Independent Television News.

IAN WILLIAMS: It is being seen as the best hope yet of ending a 30-year conflict that's claimed thousands of lives. The peace deal between the Indonesian government and the Free Aceh Movement, GAM, was signed in Helsinki and brokered by former Finnish President Martti Ahtisaari. It was carried live on Indonesian TV, watched anxiously by big crowds outside the main mosque in Banda Aceh, and applauded by the Indonesian president in his Jakarta palace.

PRESIDENT SUSILO BAMBANG YUDHOYONO, Indonesia: It is a good beginning. It is a new beginning. And we will be doing our best in succeeding this peace process.

MALIK MAHMUD, Free Aceh Movement: It is a leap of faith GAM has taken to allow Aceh to repeat after the devastating tsunami which killed so many of our brothers and sisters.

IAN WILLIAMS: It was the devastation of the tsunami that did most to bring the two sides together-- a recognition that rebuilding could never succeed while the conflict continued. Politically, there does seem a genuine commitment by both sides to make it work, though there are obstacles ahead. In recent weeks the conflict has rumbled on. These pictures of GAM rebels active in North Aceh were shot last month -- this group warily monitoring passing Indonesian soldiers. The last attempt at a peace deal collapsed three years ago, and there are fears that rogue elements, particularly in the Indonesian army, may try and sabotage the latest accord. Under the deal, the rebels have given up their claim for outright independence and the government has given ground on autonomy. GAM has committed to disarming, alongside a phased withdrawal of Indonesian troops. It will be monitored by 200 unarmed observers, mostly from the EU.

GWEN IFILL: The peace deal also calls for a human rights court, and a truth and reconciliation commission, to be established in Aceh.

Back in this country, documents released today show that U.S. Supreme Court Nominee John Roberts urged the Reagan Administration to support congressional efforts to allow school prayer. In a 1985 memo, he argued that a Supreme Court ruling striking down the practice "seems indefensible." Roberts was working in the White House Counsel's Office at the time. The material was part of more than 5,000 pages of records released by the National Archives.

New budget forecasts released today show a drop in the federal deficit for the current fiscal year. The nonpartisan Congressional Budget Office estimated the shortfall would be $331 billion. That's down from last year's record high of $412 billion; the revised numbers reflect higher revenues and a growing economy. Gas prices have moved sharply higher over the past three weeks. The Lundberg Survey reported Sunday prices have gone up nearly 20 cents in that time. The national average price is now more than $2.50 a gallon. But today, the price of crude oil fell slightly. In New York, futures were down 59 cents to settle at $66.27 a barrel. On Wall Street today the Dow Jones industrial average gained 34 points to close at 10,634. The NASDAQ rose ten points to close at 2,167. The White House has a new first chef. Cristeta Comerford is the first woman to fill the role. Comerford, a native of the Philippines, has been an assistant chef at the White House for the past ten years. First Lady Laura Bush made her choice after a six-month search. That's it for the News Summary tonight. Now it's on to: The deadlock in Iraq; the people of Gaza; reducing greenhouse gases; and three billion new capitalists.

FOCUS - CONSTITUTION CRUNCH

GWEN IFILL: The last-minute wrangling over a new Iraqi constitution, Sunnis, Shia and Kurds, stayed at the table late into the night hammering out the final details. Shortly after the midnight Baghdad-time deadline passed, I spoke with Edward Wong of the New York Times.

GWEN IFILL: Ed Wong, thank you for joining us again. A seven-day extension in this constitutional deadline, what does that mean?

EDWARD WONG: That basically binds the leaders of the various political parties here more time to try to negotiate further demands. It's been a bit of a roller coaster ride here the last several weeks. We have seen lots of different drafts of the constitution come out. We've seen the leaders make various pronouncements, some very extreme pronouncements; some are more in the ways of compromise. And what we're seeing now is this crunch time and the leaders haven't been able to reach any sort of major concessions or compromises, as the deadline has approached. So what they decided to do-- what the Kurdish leaders decided to do was they went forward to the parliament and asked the parliament to grant the seven-day extension which the parliament can do under a three-quarters vote. And apparently that requirement was met so they will be going forward and trying to continue negotiations over the next week.

GWEN IFILL: The deadline was literally at midnight Baghdad time and they came very close to almost breaking that deadline. What were the sticking points in the end?

EDWARD WONG: Talking to various members of the constitution committee and to different party leaders, there seems to have been an entire host of sticking points. A lot of people say it came down to two or three points but my guess is that there is still at least a half dozen questions that remain unanswered and these aren't minor questions, they're very existential questions that reach to the very core of what Iraq is. The questions like: how much power will the different provinces have to go out and form their own region, similar to the Kurdish region in the North; and once those regions are formed what kind of powers will those regions have? How much power will be split between Baghdad and these regions? How will the oil revenues be split between, say the Shiite South and the central government in Baghdad, as well as the oil fields in the north and the central government; and also questions of what kind of role will Islam play in the new constitution, will it be the sole source of the legislation or will it be one among several sources of legislation? And lately we also heard that the Kurds have once again put on the table a demand that many of the Arabs find very inflammatory, which is the Kurds are asking for the right to secede to be enshrined in the constitution.

GWEN IFILL: So you are talking about sectarian conflict, political conflict, economic conflict, even religious and some gender conflicts involved in this, and they had reached no agreement on any of these areas?

EDWARD WONG: That's right. In the last several days, there have been times they said an agreement has been reached, and then the next day we'll see them backtrack and say that that compromise basically fell apart. I think what we're seeing right now is we're seeing a lot of the political parties basically scrambling to protect their own interests and to protect the interests of the constituency or what they believe is their constituency. And it's hard to discern what kind-- whether they have the greater interest at heart, the greater interest of Iraq. What it looks like at this point, at this point tonight is that these are leaders who are trying to carve up various parts of Iraq for their own self interests, rather than banding together to create a country for the greater good of the people here.

GWEN IFILL: Was there any common ground that was agreed upon among all these different groups along the way, during this process, or did they all - have they all agreed to disagree on everything?

EDWARD WONG: No. There have been some basic issues in which they have been able to agree, for example, a little while ago I looked at a draft of section two of the constitution which talks about things like the rights of people. And there is a lot of language in there which the various groups have agreed on. There is also some language which is still very much in conflict right now. And that includes things like family law, personal law, whether it will be based on individual interpretations of Islam or whether it will go to civil courts, for example. And that goes to the very heart of what kind of rights or protections will women have in the society that we're going to see emerge from this. So there are some-- there are some points on which they've agreed. Another point on which they've agreed is the make-up of the new government. For example, they know that there will be parliament, they know that there will be prime minister and that there will be a president. And right now they believe that the parliament will probably be a bicameral house similar to what we have in the U.S. So in some basic issues they have reached agreement. But as we talked about before on the very most fundamental issues, the existential issues, they are still far apart right now.

GWEN IFILL: You mentioned earlier the discussion about the impact of Islam in the drafting of its final constitution. Was there any sense or any vital disagreement that that was going to have too much of a role?

EDWARD WONG: There is sense among some people that Islam might play too much of a role in legislation going ahead. There are several parties that are opposed to that. One is the Kurds who are generally more secular than some of the Shiite religious parties that have their strongest support in the South. The Kurds are insisting that Islam not be mandated as the single source of legislation or the main source of legislation or the main source of legislation. The Kurds rather have more lenient language saying that Islam is a source of legislation, for example. Various secular groups in Iraq are also supporting that. Women's groups are in general supporting that and we're also seeing the U.S. Embassy, the ambassador putting down his foot on that issue trying to flex their muscles in saying that they would rather have Islam play a lesser role than what the Shiite religious parties would like.

GWEN IFILL: And speaking of U.S. Embassy and the U.S. in general flexing its muscles, the president has made clear, the secretary of defense has made the clear, the U.S. Ambassador has made clear that they believe that this deadline today Aug. 15 was an important one. The United States, is it prepared to do anything to force this seven-day deadline in the same way that it tried to urge the one for today?

EDWARD WONG: I'm sure the U.S. will be putting a lot of pressure on the various parties in the next week. I mean, essentially what happened today was that the parties missed their deadline. They never asked for a formal extension by Aug. 1 like they were supposed to. So what they had to do was meet the deadline today. They missed it and basically at the last minute they fudged it and they tried to use bylaw in the interim constitution that would permit them to get around this deadline. But I don't think that we should be under any illusion that the seven-day extension is a formal extension, it's something that they basically came up with at the last minute and the U.S. Ambassador, I assume is not very happy about that. I don't think the White House will be happy about that. And I think they will be putting a lot of pressure on it in days to come.

GWEN IFILL: Ed Wong of the New York Times, thanks again.

EDWARD WONG: Thanks a lot, Gwen.

GWEN IFILL: This evening Secretary of State Rice told reporters we are witnessing democracy at work in Iraq. She said negotiators have achieved much and will yet produce a document to bring all Iraqis together.

FOCUS - UNSETTLING GAZA

GWEN IFILL: Israel's political decision to withdraw from Gaza, in an operation which began today, will affect those who go, and those who stay. Who are they? Terence Smith has the story.

TERENCE SMITH: At midnight, the gates came down and the Gaza settlements were officially off limits to Israeli citizens. In Jerusalem large crowds gathered in front of Prime Minister Ariel Sharon's office to protest the planned pullout.

MAN: All my family died in the Holocaust and dreamed for this land; now we are giving it away for terrorists.

TERENCE SMITH: This densely settled 139 square mile stretch of land at the edge of the Mediterranean Sea has been disputed for decades; 1.3 million Palestinians call it home. But 35 percent of them live in refugee camps, with unemployment rates soaring to 60 percent. Only about 4,000 Palestinians in Gaza have jobs in Israel, in part because of the tight restrictions at the border. Until today, 8,500 Israeli settlers have lived among the Palestinians, but they and the troops who protect them must now leave, in a move announced two years ago by Israeli Prime Minister Sharon. The main cluster of 15 settlements is at Gush Katif, with other settlements to the north at Kfar Darom, Netzarim, and Nisanit. Clearing all of them out is expected to take up to three weeks. Under the terms of the withdrawal, Israel will maintain control of Gaza's borders, coastline and airspace.

It was during the six-day war in 1967 that Israel captured the Gaza strip from Egypt. Today's pullout marks the first time since then that Jewish settlers have ceded land in Gaza to the Palestinians. Palestinians want the land for their own independent state. And after Israelis leave, they are free to move into the evacuated zones.

SPOKESMAN (Translated): Life is going to change. We will be able to live well. We will live in freedom. There will be no settlers, no army, no one to forbid us to move around as we wish.

SPOKESPERSON (Translated): With God's will, after the disengagement we will be happy because the roads will be open and they will remove the checkpoints and we can move freely. With God's will we will have work and we will live normally like it was before.

TERENCE SMITH: Many of the Israeli settlers being relocated are angry, and have stripped their homes of anything of value.

SPOKESMAN (Translated): We are dismantling everything. Here is the kitchen I dismantled. In fact, you can't leave anything to them. Those people who did nothing but terror, and did not do anything good, they do not deserve to live here and get these houses like in a vacation deal. I would have left it for them if they were human beings but they are not human beings. Me, I wouldn't even leave them even one.

TERENCE SMITH: For some this isn't the first time they've been pushed out of their homes. Avi Farhan was among the last Israelis to leave the Sinai settlements in Egypt when Israel withdrew in 1977 as part of the peace agreement. His family then relocated to Gaza.

AVI FARHAN (Translated): Today for the second time I will be an exile in my own country. Experts say that a tree can be transplanted to a temporary place, maybe for two years, and still have a chance to grow, but if you uproot it and transplant it another time, it will wither.

TERENCE SMITH: Other settlers, about half, have refused to budge, with some even sneaking into Gaza from Israel and West Bank settlements, camping out in tents and forming human chains on the edges of settlements.

TERENCE SMITH: We get two perspectives now of the people of Gaza-- the settlers and their Palestinian neighbors. Steve Cohen is a national scholar at the Israel Policy Forum, a non-profit organization that supports the peace process. And Omar Dajani is a former senior legal advisor to the Palestinian Authority. He's now an assistant professor of law the University of the Pacific. Welcome to you both.

Steven Cohen, generally speaking, who are the Israeli settlers in Gaza, when did they move there and what was their motivation in the first place?

STEVE COHEN: The first group of settlers came to Gaza in the same way that other settlements were created in the period right after the 1967 War and these were paramilitary settlements. Then in -- about ten years later when there was an important election in Israel and for the first time the Likud came to power they began to move into the idea of civilian settlements and then many more people moved in. Now it is true that there were a small number of people who lived in settlements in Gaza in the '40s and had to move out once the war began in 1948. But most of these people have come in these last years and there was a big influx of people who came in the last few weeks, including, for example, the fact that three religious seminaries transplanted themselves from the West Bank to come to Gaza during this time in order to strengthen their will to oppose the government decision.

Many of the people in Gaza had in fact agreed that they would start to negotiate with the government to move and in order to pack themselves on time. But then when the social pressures began to become intense from settlers in the West Bank who came and who had a much more radical view of the situation, they convinced many of the Gaza people to draw back from the agreements with their government and to go into a situation where they would not agree to leave until the very last minute or even after the last minute.

TERENCE SMITH: Omar Dajani, let me ask you essentially the same question. Who are the Palestinians of Gaza, when did they move there and why?

OMAR DAJANI: Until 1948 there were about 80,000 Palestinians living in Gaza, most were farmers, lived an agricultural life. With the War of 1948 and Israel's establishment 200,000 Palestinians came down from, fleeing from what's now Israel and settled in the Gaza Strip, most in crowded camps. That proportion, about three-quarter refugee, one quarter indigenous has continued up until this day, so that what you've got now is a population of just under a million refugees in the Gaza Strip, a portion of whom live in eight extremely crowded camps, and the remaining being sort of the original Palestinian families from Gaza.

For many of these people the two sort of deepest continuities of the last 50 years since 1948 have been, number one, poverty -- the World Bank estimates that 65 percent of Gazans are living under the poverty line which it sets at $2 a day. And a considerable number of Gazans are unemployed. The other sort of deep continuity has been an inability to move. Since 1948, during the years of Egypt's administration of the Gaza Strip and particularly since Israel took over in 1967 when it established its military occupation there, Gazans have not only been barred from moving to other parts of the country, to the West Bank and to what's now Israel but also have been barred from leaving Gaza and moving around inside Gaza. And I think that those two things together combined with the experience of having been refugees, are what define Gazan identity to a greater extent than anything else.

TERENCE SMITH: Steve Cohen, the land that the Israeli settlers developed in Gaza, did they buy it? Was it expropriated, how did that happen?

STEVE COHEN: Most of the land was land that was taken as defense land and then developed by the settlers as a result of being expropriated by the military. I think that a number of the Israelis who came were part of a movement that was created as a result of the situation in the '60s in Israel where there was a big decline in the Israeli economy and a large number of new immigrants that had come to Israel. And so there was a big downturn, recession in Israel at the end of the '60s. And the new land that was available in the West Bank and Gaza became very attractive to people who had very little, not good housing, not good jobs and certainly no opportunity for farming or anything of that kind. So that's one kind of thing that happened.

It's also important to note that religious settlers who are important to what was developed in the West Bank are also important to what was developed in Gaza because they believed that this was land that should remain as part of the Holy Land and should become part of the land of Israel, the greater land of Israel. And so that was also an important source of settlers. And they, too, were able to take advantage of the fact that certain areas in Gaza were cut off from the Palestinians and became part of areas that were seized by the military and handed over to the Israeli settlers.

TERENCE SMITH: I suppose, Omar Dajani, that the Palestinians see it differently, the land, the encroachments especially as Steve Cohen has suggested as it expanded with greater security perimeters around the settlements.

OMAR DAJANI: Absolutely. Although only 5 to 10 percent of the land on which the settlements were built was originally owned by private Palestinian owners, much of the rest of the land was previously farmed sometimes in sort of a cooperative fashion. And the key thing is that for Palestinians I think that they have experienced the settlers' presence in a few specific ways.

Number one as you alluded to, over the course of time as Israeli concerns about security have grown and as settlers' plans for expansion have also grown, what you've seen is that a lot of Palestinian homes have been confiscated, occupied by Israeli troops; in some circumstances entire farm areas were razed, if, for instance there was attack on a settlement in the North in Tagit, for instance, Palestinian greenhouses and fields were razed by bulldozers. That kind of experience I think prejudiced Palestinians even further against the Israeli settlers.

In addition to that I think the presence of the settlers and location of the settlements which were placed in between Palestinian populations centers meant that for Palestinians to travel from Raffa in the South up to Gaza City in the center of the country it was necessary for them to go through an Israeli checkpoint and very frequently when there was Israeli settler movement between the settlements and Israel, Palestinians would stand in line for hours, sometimes, and this seems like exaggeration but it's true, sometimes even days.

TERENCE SMITH: Let's look ahead now. Steve Cohen, do you have any sense of what percentage of these eight or nine thousand settlers are going to dig in and refuse to go willingly and what percentage may obey the government's orders and go freely?

STEVE COHEN: Well, the expectations now are that almost 80 percent of them will leave peacefully and those that will not leave peacefully are not intending to engage in violence against the police and the military but rather to engage in active resistance; that is they will try to hold off as long as they can but it's unlikely that they will use violence and they have had their guns collected during these last few days, so that we're not dealing with a situation of heavily armed settlers the way it had to be dealt with in the past by the Palestinians.

The one thing that I think needs to be said and I am sure that you would also agree on this, is that the Palestinians in Gaza because of their very difficult socioeconomic status and their status as refugees were very susceptible to developing extreme ideas about the future of their relationship to Israel. And for a long time they were a special place for recruitment for extremist groups among the Palestinian movements.

TERENCE SMITH: Well, let me interrupt you there and ask Omar Dajani to tell us whether he agrees with that and also what you believe the prospects are that some of these groups will stand by and let this process go ahead and be completed more or less peacefully.

OMAR DAJANI: I think Dr. Cohen is right. Many of the Palestinians and the refugee camps have been fertile -- a perfect audience for militant Islam for a few different reasons. The first is the poverty and sort of social deprivation that they have been dealing with.

Secondly a lot of these people were refugees from a very sort of traditional farming life within Palestine pre-1948. They come from a traditional society and many of them, stripped of their land, found themselves in an urban setting in the Gaza Strip and sought some way of rendering coherent their existence there. And I think some of the militant organizations were very opportunistic in taking advantage that have dynamic. So, yes, I think that that is true.

As far as looking forward I think that the Palestinian Authority has made it very clear that it regards the Palestinian - the Israeli disengagement from the Gaza Strip as a critical opportunity to turn the peace process around. And I think that it will do everything possible to try to maintain order, but it's not going to be an easy task.

TERENCE SMITH: All right. We'll have to -- I'm afraid that we'll have to leave there, but I want to thank you both. And obviously we're going to watch this process over the next 48 hours and in the weeks ahead. Thank you both very much.

GWEN IFILL: Still to come on the NewsHour tonight, clearing the air in American cities, and a book conversation.

FOCUS - CLEARING THE AIR

GWEN IFILL: Now, a report on how several of the nation's municipalities are banding together, city by city, to curb greenhouse gases. Lee Hochberg of Oregon Public Television has the story.

LEE HOCHBERG: On a misty July morning in Seattle, the cruise ship "Diamond Princess" steamed into port. It belched exhaust from its huge diesel engine. Under an agreement with the city of Seattle, the engine was shutdown when the ship docked. As it loaded and unloaded passengers all day, it instead received power from an electrical connection recently installed on shore. The setup will keep almost 200 tons of sulfur oxide emissions from entering Seattle air over the summer, equal to taking 1100 cars off the road.

MAYOR GREG NICKELS, Seattle: In most ports they would keep their diesel plant running. When they come into Seattle, they turn that diesel plant off, and so they have no emissions while they're in our port.

LEE HOCHBERG: It's part of Seattle Mayor Greg Nickels' plan for Seattle to meet the terms of the Kyoto agreement, which called for the U.S. to reduce greenhouse gas emissions 7 percent from 1990 levels by the year 2012. President Bush pulled the U.S. as a nation out of that treaty in 2001, saying the science about global warming was unclear.

PRESIDENT GEORGE W. BUSH: The Kyoto protocol was fatally flawed in fundamental ways. No one can say with any certainty what constitutes a dangerous level of warming, and therefore what level must be avoided.

LEE HOCHBERG: But Nickels disagrees that global warming isn't a proven problem.

MAYOR GREG NICKELS: This doesn't appear to be a hoax, it doesn't appear to be a trivial. It appears to be real and very serious.

LEE HOCHBERG: Nickels had grown alarmed about global warming after last winter's unusually warm Pacific Northwest conditions. They left snow pack in the nearby Cascade Mountains at a fraction of normal. The warm weather closed ski resorts and threatened the city's water reservoirs.

MAYOR GREG NICKELS: Our dry winter, Florida's hurricane season, southern California's rain and mudslides, none of those necessarily is the effect of global warming. But taken together-- the heat wave that Europe had that killed literally hundreds of people-- the trend is clear. And it is also clear the kind of action we have to take in order to keep that from becoming an everyday occurrence.

LEE HOCHBERG: Fighting global warming fits the liberal eco- politics of Seattle.

SPOKESMAN: Resolutions will be considered...

LEE HOCHBERG: But mayors from a number of other cities in both blue and red states agreed with Nickels. They supported a climate protection agreement he put forth in at a U.S. Conference of Mayors meeting in June.

SPOKESMAN: Resolution 51 endorsing the U.S. Mayors climate protection agreement...

LEE HOCHBERG: His initiative would reduce dependence on fossil fuels by promoting wind and solar energy, also more efficient motor vehicles and biofuels. It received unanimous support.

SPOKESPERSON: Those in favor say aye.

GROUP: Aye.

SPOKESPERSON: Opposed? Thank you very much.

LEE HOCHBERG: One hundred sixty-eight mayors in thirty-seven states committed their cities to meet the Kyoto treaty. The cities are a varied lot-- conservative and liberal from Vermont to California. Alexandria, Virginia, fears global warming will cause flooding of the Potomac. The mayor of Laredo, Texas, signed on; car and truck emissions at the Mexican border crossing are an issue there. New Orleans' mayor says an increase in the Earth's temperature could raise the water level on Lake Ponchartraine a foot over 30 years, submerging his low-lying city.

MAYOR GREG NICKELS: Another foot of water in the ocean and New Orleans is gone. So in his case it's their survival, it's the future of his city.

LEE HOCHBERG: In the Pacific Northwest, National Park Service geologist Jon Riedel says global warming could create a water shortage. Seattle gets much of its drinking water and hydroelectricity from this city- owned 90,000-acre watershed in the Cascade Mountains. It's fed by melting glaciers.

JON RIEDEL, National Park Service: I've been working on this lake and on this mountain for 25 years and I've never seen a snow pack this low.

LEE HOCHBERG: Riedel says the level of carbon dioxide in the atmosphere is higher than at any time in recorded history. With that, the average temperature in the Northwest has risen almost two degrees in the last century.

JON RIEDEL: We see very rapid retreat of glaciers. We've lost about 40 percent of our ice cover in the last 150 years. You know, I've never seen Jack Mountain look like that this early in the summer. It's going to be the worst year we've seen on glaciers since we've started monitoring them. Global warming shouldn't be debated; it's happening.

LEE HOCHBERG: Lower water could put Seattle in violation of its license with the federal government to operate its huge hydroelectric project. The city's also required to ensure there's enough water in the system for both threatened salmon runs and recreation. Already, docks built for recreational boaters are landlocked ashore and being used only for sunbathing. To try to solve the global warming problem, Seattle is offering developers incentives to build energy-efficient green buildings. At its new city hall, a lush planted rooftop insulates the building from cold and catches rainwater for use in flushing toilets -- that saves a million gallons of water a year.

The city has converted much of its fleet of city vehicles to biodiesel fuel. By the end of this year, Seattle City Light will be the only utility in the country with no net emissions of greenhouse gases.

But President Bush has maintained throughout his presidency that actions to reduce greenhouse gases are unacceptably costly.

PRESIDENT GEORGE W. BUSH: I will not commit our nation to an unsound international treaty that will throw millions of our citizens out of work.

LEE HOCHBERG: Recently he told Danish reporters that abiding by the Kyoto treaty would have wrecked the U.S. economy. The White House says Kyoto would cost the U.S. five million jobs. Senior White House advisor James Connaughton.

JAMES CONNAUGHTON: We have a growing population and a growing economy. Our goal is to first slow the growth of greenhouse gasses. Then as the science justifies, stop the growth and reverse it. That's a sensible course of action. It's similar to what has happened with air pollution in the United States over the last 100 years.

LEE HOCHBERG: The mayors argue there are business opportunities in reducing greenhouse emissions. In Seattle, self-proclaimed "bioneer" John Plaza recently founded this plant to manufacture biodiesel fuel. It's made from soybean oil. His eight employees process it to mix with diesel to create a low-polluting fuel. The City of Seattle committed its fleet to biodiesel and encouraged the state ferries to use it.

JOHN PLAZA, Seattle Biofuels: Our total revenue of sales will be between $8 million and $10 million and we can look at a 15 percent profit margin on that. So we're doing it not because we want to change the energy policy of the United States only, we're doing it because there is an economic benefit for us absolutely.

LEE HOCHBERG: Yet even if there are profits to be found in the new technology, the cost of conversion may be a problem for some businesses. Princess Cruise Lines says its cost to outfit its cruise ships for shore power was $1.5 million. And even mayors who support curbing emissions worry whether a city by city approach will really work. Portland, Oregon, was the nation's first city to adopt a plan to global warming. Since 1993, it has increased light rail ridership significantly; it's purchased a significant amount of renewable energy and constructed almost 40 green buildings. On a per capita basis, greenhouse emissions have fallen 13 percent and the city's economy has remained robust.

But with population growth, the region's total emissions have only barely dropped below 1990 levels-- far short of the city's target of a 10 percent reduction by 2010. And though Seattle's city government says it's been able to reduce its own emissions 60 percent since 1990, greenhouse gases from all sources in the Puget Sound area are expected to increase 20 percent above the 1990 level within a few years-- half of that is due to auto emissions. Nickels acknowledges there are limits to what cities can do by themselves.

MAYOR GREG NICKELS: Ultimately we will make it impossible for the federal government to say no. They will both see that it can be done without huge economic disruption and they will see that there's support throughout the country to do this. It may be this administration, it may be the next administration. But the fact that it takes 15 years means that we better get started.

LEE HOCHBERG: The administration is advocating instead that industry voluntarily take steps to reduce emissions.

CONVERSATION

GWEN IFILL: Finally tonight, a conversation about the emerging power of China and India in the world's market. Our economic correspondent Paul Solman of Boston's WGBH has that.

PAUL SOLMAN: If you want to see where the world economy is heading, go east, young man and young woman, too. At least that's the message of "Three Billion New Capitalists: The Great Shift of Wealth and Power to the East." The author is Clyde Prestowitz, a veteran Asia watcher who began his career as a trade negotiator in the Reagan Administration. Prestowitz thinks all those factory workers in China and outsourcing jobs in India you keep seeing on the news are just the beginning of an economic tidal wave that Americans had better learn to live with, better learn to contend with. We sat down with Prestowitz recently to discuss the book.

PAUL SOLMAN: What's the basic thesis of "Three Billion New Capitalists"?

CLYDE PRESTOWITZ: We're in the middle of a two- part revolution. Three billion new people, billion and a half Chinese, billion Indians, half a billion people from former Soviet bloc, have suddenly come into the global economy all at one time. Within these three billion people is a population as big as the United States, bigger than anybody in Europe or Japan, who are every bit as skilled and can do anything that could be done in the U.S. or Japan or any of the developed countries for ten cents on the dollar.

PAUL SOLMAN: When you say "every bit as skilled," you don't mean as skilled as our top doctors, our top scientists...

CLYDE PRESTOWITZ: No, I do. I mean, as good as us or better. They've got their PhD's from Harvard and MIT, they've worked at the Centers for Disease Control in Atlanta; they've been top professors at top U.S. universities. They've started companies in Silicon Valley with Silicon Valley venture capital. They are every bit as skilled and they can do this for 10 percent maybe 25 or 30 percent on the dollar.

PAUL SOLMAN: So why do they go back to their home countries?

CLYDE PRESTOWITZ: Because they got great opportunities. People who have that kind of a background in the U.S., going back to India today or going back to China today have just wonderful opportunities to start companies, to do things, to build things in their own country that are going to push those countries to be the winners of the 21st Century.

PAUL SOLMAN: So then in your view, the outsourcing we've been hearing so much about is just the tip of the iceberg?

CLYDE PRESTOWITZ: Just the beginning, yeah. And that's the second revolution. Not only have you had three billion people come in, but the Internet and FedEx have canceled time and distance. So anything that you do on the Internet, it's two seconds from any other place in the world; two seconds from Boston to Bangalore. And even if you're working in atoms, even if you're producing and actually have to deliver something, FedEx can deliver anything anywhere in the world in 36 hours. So effectively, all these people are right across the table.

PAUL SOLMAN: So what do we do? Are you just going to tell me we have to knuckle down, study harder, go to school longer, retrain our workforce?

CLYDE PRESTOWITZ: We have to do that. Our educational system is an embarrassment, and we definitely have to do that but that in and of itself is not enough. We need to have a new approach to international economics. And one of the things that needs to be addressed is something like the following: U.S. semiconductor manufacturers, despite the fact that the U.S. is the best place to make these kinds of products, are increasingly looking at putting plants elsewhere. In fact, two-thirds of the semiconductor plants being built today are being built in Asia. And you ask yourself, "Well, if the U.S. is the best place to make these things, why are they putting the plants in Asia?" And the answer is because the economic development boards of Singapore and Malaysia and China and many of these countries are visiting regularly the executives of these companies and saying, you know, "What would it take to get you to my country? How about a tax holiday; how about a capital grant?" And you know you're talking $3 billion investment, so if a government is willing to put up $1 billion or $2 billion, that's a lot. So in effect, they bribe these plants to come there and this, of course, has nothing to do with market forces. It has nothing to do with Adam Smith and all the free trade theory that we talk about. And yet, the U.S., both Democrat and Republican administrations, has never responded to this.

PAUL SOLMAN: You know, this reminds me of what you were saying fifteen or twenty years ago. The United States had to come up with a national, competitive industrial policy or else-- it was Japan back then-- was going to eat our lunch. But the U.S. economy has been doing pretty well almost ever since.

CLYDE PRESTOWITZ: But the point is this: In response to the challenge that Japan posed in the '80s, the United States Government actually did a lot of things. We established, for example, Sematech, a joint industry and U.S. Government-funded research and development organization to promote development of the U.S. semiconductor equipment industry. We negotiated agreements with Japan which stopped Japanese dumping of chips in the U.S. market and which opened the Japanese market to substantially more foreign penetration than had taken place before. People forget that because the success of the U.S. In the '90s is always attributed to the wonderful qualities of U.S. entrepreneurial capitalism, and certainly it had something to do with that, but it's wrong to dismiss the impact of the response of U.S. Government policies through the challenges posed by Japan in the '80s. And what we're seeing now is kind of a rerun of the whole Japan story in the '80s, except that the numbers are bigger, there are more players, and one of these players is a very different kind of player than Japan, a much tougher player than Japan: China.

PAUL SOLMAN: But economically, America is growing, isn't it, faster than Europe, faster than Japan?

CLYDE PRESTOWITZ: Right. But this growth of ours is fueled by debt. The U.S. has swung from being the world's biggest net creditor to being the world's biggest net debtor to the tune of $3 trillion, growing at $700 billion a year. We're now soaking up as a country, 80 percent of available global savings. Well when you hit 100 percent, the music stops. Paul Volcker has said publicly 75 percent chance of a major financial crisis in the next five years. Warren Buffett has bet something like $20 billion of Berkshire Hathaway Funds investing in foreign currencies. George Soros has made a bet against the dollar. They're all looking at these numbers and they're saying, this doesn't compute.

PAUL SOLMAN: But given the trends you're citing, what real hope is there, even if we come up with a national economic strategy, work harder, study harder and so on?

CLYDE PRESTOWITZ: Let me give you hope, let me give you hope. They face huge challenges, too. We have -- if you think of this as a game of bridge, and ask yourself whose hand would you like to play-- China's hand, India's hand, U.S. hand -- I'll take the U.S. hand any day. We've got more trumps and aces than anybody else. We've got stable institutions. We've got the best graduate schools. We have got the best infrastructure. We've got an entrepreneurial culture. We reduce risk in this society to encourage people to fail and try again. We have challenges on the pollution side and global warming, energy and so forth, but if you look at China and India, enormous challenges in pollution, trying to find clean water, just trying to find enough water in northern China and much of India, huge task. Energy, they're just beginning to become big energy users. They don't have much at home. So they're going to have to go out and become much more dependent on the Middle East, for example, than we are; AIDS, health issues. In China, aging -- China in ten, fifteen years is going to age very rapidly and the population's going to begin to shrink. The "one child" policy means that you got two parents and one child. How do the pension and healthcare issues get taken care of? That's an area where India actually has a great advantage. India's demographics are good. Less -- half the population is under the age of 25 in India, which is why I'm betting on India as the winner of the 21st Century. But they face enormous challenges. And the good thing is this: We want them to succeed. The worst thing in the world would be a failed China and India. That would be a threat to us as well as to them. So we want them to succeed and create a complementary economic relationship that lets them win and lets us win. But the key here again is that we have to get our minds around the fact that we need to think about winning and we need to think about competing, and we need to think about having a strategy that enables us to do the things that are necessary to meet that challenge.

PAUL SOLMAN: Clyde Prestowitz, thanks very much.

CLYDE PRESTOWITZ: My pleasure.

RECAP

GWEN IFILL: Again, the major developments of the day: Iraq's parliament agreed on an extra week of negotiations to complete a draft constitution. The Israeli pullout from Gaza began amid protest. And new budget forecasts showed a drop in the federal deficit for the current fiscal year.

GWEN IFILL: And, again, to our honor roll of American service personnel killed in Iraq. We add them as their deaths are made official and photographs become available. Here, in silence, are 23 more.

GWEN IFILL: We'll see you online, and again here tomorrow evening. I'm Gwen Ifill. Thank you and good night.