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 the threat of trade war with Europe with Trade Rep. Carla Hills and European Community spokesman Peter Doyle. Then business correspondent Paul Solman looks at infrastructure investment, and whether it would help the economy. We update Boris Yeltsin's political problems in Russia, and Charlayne Hunter-Gault talks to Audrey Hepburn about the suffering in Somalia. NEWS SUMMARY

MR. LEHRER: The United States will impose punitive tariffs on some $300 million worth of European imports. U.S. Trade Rep. Carla Hills made that announcement today. White wine will be the chief product affected. It will subject to a 200 percent duty, tripling the price of a bottle. Amb. Hills, speaking to reporters in Washington, explained why the action became necessary.

AMB. CARLA HILLS, U.S. Trade Representative: Europe has taken away tariff concessions. That means the letting in of our product at zero tariff. They've impaired that, and we have sought to negotiate how we could write the balance sheet. So today we have indicated there are a list of items, primarily white wine, rapeseed oil, and wheat gluten, on which we will increase our tariffs. These will not go into effect for 30 days. That will do two things: It will enable the products that are on the seas to reach port, and it will give us time in which to reach a solution which we earnestly want to reach with Europe on this issue.

MR. LEHRER: The European Community's chief trade negotiator has vowed to retaliate against any such U.S. action, but Britain's trade secretary warned today that Europe should think carefully about its response to avoid what he said would be a spiral of retaliation. We'll have more on this story right after the News Summary. Robin.

MR. MacNeil: President-elect Clinton said he would not comment on the U.S. trade decision. He said, "We've got one President. He has to make those decisions." But Mr. Clinton's spokesman said the President-elect generally believed the U.S. must get tough with countries that close their markets to U.S. products. Mr. Clinton remained in Arkansas today, dealing with a combination of state business and his transition to the presidency. He spent much of the day at the State House in Little Rock, where he was greeted by old friends and colleagues. He talked with reporters about the calls he'd received from foreign leaders.

PRESIDENT-ELECT CLINTON: -- you know, brief, look forward to working with you conversations, and I talked to Mr. Yeltsin, President Salinas, President Maloney, Prime Minister Major, Mr. Romano of Italy -- Benham in Argentina.

REPORTER: Could you tell us about what Yeltsin said to you and what you said to Yeltsin?

PRESIDENT-ELECT CLINTON: And I talked to Mr. Mandela.

REPORTER: Can you tell us about the conversation you had with Yeltsin?

PRESIDENT-ELECT CLINTON: No. We just talked about what he was doing. I said I supported democracy and free market economics in Russia, and I looked forward --

REPORTER: Did he talk about his own difficulty?

PRESIDENT-ELECT CLINTON: No. We had no substantive conversations. They were all just, you know, welcoming me, and saying that we'd work together.

MR. MacNeil: A spokesman for President Yeltsin said the Russian leader had invited Mr. Clinton to visit Moscow after the inauguration. He also suggested further cuts in nuclear weapons. President Bush today held his first cabinet meeting since the election. Spokesmen said he asked cabinet members to cooperate fully with the incoming Clinton staff. Later, he and Mrs. Bush left the White House for a long weekend at Camp David, the presidential retreat in the Maryland Mountains.

MR. LEHRER: In economic news today, the Labor Department reported new claims for jobless benefits fell to their lowest level in more than two years. They were down 16,000 to 360,000 in the week ended October 24th. The more closely watched four-week average of claims also hit a two-year low. The Department also reported worker productivity rose at an annual rate of 2.6 percent in the July to September quarter. That compares to an annual rate of 5 percent for 1991.

MR. MacNeil: The Environmental Protection Agency today issued stricter rules for auto emissions testing. The new regulations will affect 181 urban areas designated as having the worst air pollution problems. Most are in the Northeast and California. EPA officials said the new test will probably require one in five cars to undergo repairs. They said smog-causing emissions would be cut by 28 to 31 percent. EPA chief William Reilly spoke at a Washington news conference.

WILLIAM REILLY, EPA: Today's action represents the single most significant action I know of on behalf of clean air. If you maintain your car and you get it serviced, you're doing a great service to your neighbor, to your family, and to the environment. What we're doing today will require states to implement programs which go a long way toward fulfilling the promise of the Clean Air Act. The cities with poor air quality will realize large emissions reductions in the near-term and in a very cost effective way.

MR. MacNeil: A landmark anti-smoking lawsuit that got all the way to the Supreme Court has been dropped in a victory for the tobacco industry. A New Jersey woman, Rose Chippalone, filed suit in 1983 against the makers of cigarettes she had smoked for 42 years. She died a year later. But the family took the case to the Supreme Court, which in June refused a tobacco industry request to throw it out. The Supreme Court ruled that health warnings on cigarette packages do not protect companies from personal injury claims. The case was about to be retried in Newark but was withdrawn by the Chippalone family with no explanation.

MR. LEHRER: Russian troops were sent to stop ethnic fighting in several villages today. Dozens of people were reported killed in a week of fighting between Muslim and Christian populations in the area called Northern Osalia. A cease-fire was agreed to yesterday, but fighting was reported throughout the night. The troops have been ordered to disarm both sides and to enforce a state of emergency.

MR. MacNeil: Russian President Boris Yeltsin is planning a trip to England next week as part of ongoing effort to get Western help for Russia's ailing economy and to bolster his position at home. We have an update report from Ian Williams of Independent Television News.

IAN WILLIAMS: Just days ahead of his visit to Britain, President Yeltsin tried to calm fears provoked by a week of rumors of a conservative backlash against his reformist government. He defended his prime minister, Yegor Gaidar, but suggested some ministers will be sacked, though not on the scale his opponents are demanding.

PRESIDENT YELTSIN: [speaking through interpreter] As far as a government reshuffle is concerned, they have suggested several people who should be sacked, but I've told them they're demanding too much. We're not prepared to meet all of their requests.

MR. WILLIAMS: And he defended the general direction of reform and the support for it among the Russian people.

PRESIDENT YELTSIN: [speaking through interpreter] Despite the difficulties we're all facing, most of the people I meet tell me they support the reform program, and they urge me to hold on and to resist the pressure from conservative forces.

MR. WILLIAMS: In suggesting there will be some government changes though, Yeltsin was responding to the ultimatum from Arkadi Volsky. The leader of Russia's industrialists wants ministers sacked and reforms curbed as a price for the support of his party, the Civic Union, at the forthcoming Congress of People's Deputies. This came as Russian soldiers continued to try and control unrest in the Caucus region of Southern Russia, the first serious ethnic conflict in Russia, itself. Dozens of people have been killed, and Moscow has declared a state of emergency, sending in more than 3,000 troops. This morning, President Yeltsin sacked his adviser on ethnic affairs, Galena Staravoitva, a longstanding confidante and one of his most liberal advisers. Hours earlier, she had told Channel 4 News Yeltsin was being pushed to bypass parliament and rule Russia by decree. So Moscow is bracing itself tonight for a government reshuffle in which several liberal ministers may lose their jobs. Quite what that means for reform will no doubt be high on the agenda when British ministers meet the Russian president in London next week.

MR. MacNeil: That's our summary of the news. Now it's on to the trade dispute with Europe, investing in infrastructure, and Audrey Hepburn on Somalia. FOCUS - TRADE TANGLE

MR. LEHRER: The white wine and cooking oil trade fight with Europe is first tonight. The U.S. government announced stiff tariffs on select European goods today, those goods being mostly imported white wine. U.S. Trade Rep. Carla Hills said the action was in response to the European Community's refusal to stop subsidizing several farm products, those products being mostly oil seeds, soybean, sunflower seeds, and rapeseeds, which are used in cooking oil, among other things. We'll hear from Amb. Hills and European Community official Peter Doyle right after this backgrounder by Nik Gowing of Independent Television News.

MR. GOWING: It was the EC farm commissioner's announcement of deadlock, the failure of negotiations in Chicago on Tuesday, which led to tonight's announcement of U.S. retaliation.

RICHARD BOUCHER, State Department Spokesman: The United States is withdrawing trade concessions by imposing increased duties on imports of white wine, rapeseed oil and wheat gluten from the EC. We regret that we were forced to take this action.

MR. GOWING: The main U.S. resentment is this: the EC's heavily subsidized production of oil seed rape, which the U.S. claims is losing their farmers 600 million pounds. Compromise after compromise has been offered. The outstanding differences are small, but the intensity of political intensity from French farmers in particular and a defiant stand made unapologetically by the French government has meant that EC negotiators could go no further, buttressed by Irish concern about beef, Danish concern about milk products, Germany on cereals, and Spanish political support, national objections blocking a multilateral agreement a reality no political pressure can apparently overcome.

MICHAEL HESELTINE MP, President of the Board of Trade: Every conceivable way open to us we have sought to make progress in these negotiations, but in the end, one is dealing with the sovereign states and the self-interest of those sovereign states, and there are no powers that are available to us to compel people to do what they don't want to do.

MR. GOWING: It was the French stand through the EC negotiator which precipitated tonight's U.S. decision. It will be French wine which pointedly will have prohibitive tariff charges imposed for imports into the U.S. Tonight, the U.S. has threatened retaliation on a further $1.7 billion worth of EC exports to America, perfume, food additives, car tires, paper, ceramics, glassware, pipe work, recorded material and furniture.

STEPHEN WOOLCOCK, Royal Institute of International Affairs: The danger if the oil seeds dispute is not resolved is that there could be a major tit for tat retaliation between the United States and the Community which could have knock-on effect on trade.

MR. GOWING: The U.S. first wanted the EC to reduce oil seed production from 11.4 million tons to 7 million. The EC would only cut to 9.5 million tons. The U.S. tried to compromise at a ceiling of 9 million tons. An outstanding 1/2 million ton difference remains, leaving $200 billion worth of EC U.S. trade now at risk, and from an exhausted post-election President Bush talk that a trade war can and must be avoided.

PRESIDENT BUSH: We're not engaged in a trade war just because we have some tough fighters over here on our side, but no trade war. Just looking after the interest of world trade.

MR. LEHRER: Now, the opposite official views on this conflict, first of Peter Doyle, spokesman for the European Commission delegation in Washington. Is the U.S. action today justified?

MR. DOYLE: I don't think so either in terms of timing or in terms of the amount of retaliation that, that has been talked about. It's not just 300 million. It is -- there's also talk of 1.7 billion. And we disagree with those figures. We also disagree with the timing.

MR. LEHRER: What's the timing problem?

MR. DOYLE: Well, we're in negotiations on this issue within the GATT, and we consider it ourselves to be still in the, in the negotiations on --

MR. LEHRER: That's within the General Trade Agreement?

MR. DOYLE: Yes, correct. On trying to reach agreement on a figure for impairment on the damage to the United States and also on how we could compensate, so we feel that --

MR. LEHRER: You mean the United States jumped the gun? This was done in the middle of negotiations, before negotiations were concluded. You think that if the U.S. had hung in there a little bit, there could have been a resolution short of firing this round?

MR. DOYLE: Well, I would have hoped so, certainly and negotiate in good faith, not just with the U.S., but with some other oil seed producers as well.

MR. LEHRER: Do you agree with Nik Gowing's piece that the real problem is just that the French are unwilling to give on this, on the oil issue?

MR. DOYLE: I think as Mr. Heseltine said, all our member states have different preoccupations, and the French certainly have a very large farming constituency, and you've only got to look at the result of the French, the difficulty in getting ratification of the Maastricht Agreement, the contribution of the French farmers to the, to the "No" vote to indicate just what a big problem that is. And you have to bear in mind that the Community has carried out a very major reform of the common agricultural policy which has involved major sacrifices for farmers and in all countries, and it's very difficult for us to go further.

MR. LEHRER: As a practical matter, what happens now? If the French are the problem from the European point of view, is it now, are the rest of the European countries now going to get the French off on a road and say, hey, friends, if we don't get together on this, there may be, as you just said, and as Nik Gowing said in his piece, even more than $300 million, it could involve all kinds of things, is that the next step, or is it -- are you going to try to get the United States to back off of this?

MR. DOYLE: Well, I haven't said the French is the main problem.

MR. LEHRER: Right.

MR. DOYLE: You're saying that.

MR. LEHRER: Right, exactly. I said if the French were the main problem.

MR. DOYLE: What will happen next is that the Commission will, will study in detail the announcement that was made today. They've been looking at that all day. There is an informal meeting of trade ministers over the weekend in the UK. There will be a foreign ministers council next Monday, and probably the Commission will bring forward some recommendations to that Council. But I can't anticipate what the result will be.

MR. LEHRER: Sure. I realize that, and I know this is a difficult situation, as was said in the tape. You're speaking -- the European Community is more than one country. The United States was only one. So I realize the difficulty here, but based on your experience in dealing with this kind of situation, do you anticipate a retaliatory, a retaliation from Europe, and say, okay, you've done this, United States, we're going to do something, and if so, what do you think that might be?

MR. DOYLE: Well, it would be very difficult I think for the European Community to take retaliation lying down. I mean, we have, we have our rights as well, but Amb. Hills has said that there will be a 30-day stay on the implementation, so that does give us a window where we may be able to avoid having to take any action, but it is difficult for us to negotiate with this thing hanging over our heads.

MR. LEHRER: But isn't it -- would you not agree that having that hanging over your head precipitates more focused negotiations too? I mean --

MR. DOYLE: Well, that could be an American point of view, if not necessarily a European one.

MR. LEHRER: Well, let me tell you what, based on your experience, do you think this thing is going to get resolved, or do you think in 30 days we're going to have some war here, some trade war between the United States and Europe?

MR. DOYLE: Well, I'd hate to talk about trade wars. I think we both want to avoid that. But really it wouldn't be possible for me to say how it's going to be resolved. The Commission will make some recommendations on Monday. The -- the action taken by the Council can be agreed by a qualified majority. It doesn't have to be unanimous.

MR. LEHRER: How do you interpret the fact -- and I'll ask Amb. Hills -- she's sitting right here, and I'm going to ask her in a moment -- but how do you interpret the fact that when all of the things the United States could have done, they chose French wine - - I mean, all of the white wine that comes into the United States from Europe, 90 percent of it comes from France -- is -- is that good strategy, or how do you interpret that? Is it only the French farm -- wine makers are the ones that get hurt on this?

MR. DOYLE: I don't understand why it would be white wine rather than red wine, because the French sell probably as much red wine in this country as they do white. It's probably very good strategy from Amb. Hills' point of view.

MR. LEHRER: Because it only -- it isolates the damage, you mean, I mean it goes only after one country?

MR. DOYLE: The list that I saw included a lot of Italian wine as well, plus some German.

MR. LEHRER: Yeah. Yeah. All right. Mr. Doyle, thank you very much. All right, now the other side is that of the United States, and it comes from the official who has been leading the negotiations with the European Community, U.S. Trade Rep. Carla Hills. What do you -- why did you choose white wine, just to begin with?

AMB. HILLS: We put out a list for public comment here in the United States, and we selected those items which we thought first would help us achieve a solution so we wouldn't have to, in fact, go forward, and, secondly, that would cause our home market the least amount of damage.

MR. LEHRER: Now the only Americans who get hurt by this are people who, who are hung up only on French wine. I mean, now white wine is still going to be available; it's only that that's made in Europe, and 90 percent of that comes from France, is that right?

AMB. HILLS: That's about it.

MR. LEHRER: And did you do that intentionally just so, so -- in other words to ease the hurt here in the United States? What was the strategy that you employed in choosing this particular way to go?

AMB. HILLS: When we're forced to retaliate, we always put out a list and publish it in the Federal Register so that our industry can comment, and we try to tailor that list so it will cause the least amount of harm possible, because any time we close trade, there is harm created. But this is a very different case than the usual case. This is a case that's been ongoing for five years. We have won two GATT panel cases. In effect, the court has told us, you're right and Europe is wrong. And we have negotiated during this entire period, and the negotiating period or the consultation period expired in August. We have been patient beyond any measure, and our industry is getting hurt $1 billion a year. We simply --

MR. LEHRER: What industry is getting hurt?

AMB. HILLS: The oil seeds industry.

MR. LEHRER: How is it getting hurt?

AMB. HILLS: Because its trade is foreclosed to Europe by reason of these subsidies, and we had to take action. We are here negotiating, trying to get better trade rules.

MR. LEHRER: Excuse me. Just to make sure we understand, the reason -- they can sell here, it's just that the price is out of whack. In other words, is that -- the markets aren't closed to U.S. oil makers, it's just that the price for all practical purposes shuts them out, is that right?

AMB. HILLS: Well, which means that they don't sell, because as a practical matter when you subsidize one party's product and you don't subsidize the other, you have closed the market to the other, and that's what has occurred. And that violates the GATT rules, not because we said so, but because a GATT panel said so. And when we went back for a second GATT panel, they said, yes. The system in Europe does violate the GATT rules. So it's important if we are going to have the GATT rules be credible that we abide by them. And we've been patient for five years. We, in effect, have simply garnished Europe's trade to recover on our judgment. And we took a very moderate step. The 300 million is less than 1/3 of the damage we suffer each year. We postponed the implementation of that so it won't go into effect for 30 days. I've very hopeful that we'll get a solution.

MR. LEHRER: Now, what, what is being done to get a solution? What happens in this next 30 days?

AMB. HILLS: Well, we will talk to Europe. We had our negotiators together in Chicago, as was in the press. And --

MR. LEHRER: Secretary -- our Secretary of Agriculture and the Agriculture Secretary for the EC, right, they couldn't make it, right?

AMB. HILLS: Well, I'm not sure they couldn't have made it. The Agriculture Minister, Mr. McSherry, was called home by his team, and told not to proceed with the negotiations. He now has, I am told, said that he will not continue to negotiate and has given up his, his negotiating authority for this dispute because he felt that he was undercut. So we have some difficulty in knowing with whom to negotiate, but the important thing is we want to get a solution. It's going to be better for both sides of the Atlantic, if we do, and -- but we're serious that our GATT rights must be recognized.

MR. LEHRER: Is it correct to interpret this as a, a real problem between the United States and France more than anything else?

AMB. HILLS: Well, under the Treaty of Rome the European Commission represents all 12 member states. It isn't for us to pick out one state or another, nor can we negotiate with one state or another. We are required to negotiate with the European Commission, and I think they must come up with a means of satisfying the judgment that was rendered against them by the international court, that is, the GATT.

MR. LEHRER: But the -- the weapon that the United States chose to use today was essentially a shot at France.

AMB. HILLS: Well, it -- as Mr. Doyle pointed out -- affects Germany and Italy, but it does affect France, which has been particularly resistant to paying on this judgment that we have achieved so long ago, and the harm continues at a billion dollars a year, so that we want to achieve a solution. We will do everything we can to negotiate a solution, but we can't let our domestic interests be hurt to this extent. We just can't.

MR. LEHRER: All right. Let's go -- let's take the scenario a step beyond the next 30 days. Let's say for whatever reason that there is no solution, these tariffs go into effect. Then what happens? Are we going to escalate it beyond that? Do you expect the Europeans to retaliate? If they do, what happens?

AMB. HILLS: I would think that the Europeans would not retaliate because there's no legal basis for them to do so. I would hope that we would get a solution in the first 30 days, and I really am not prepared to speculate that the strategy that we have put in place is not one that is best equipped to have us achieve a good solution, and that's to settle this dispute and get our oil seeds industry the remuneration that they're entitled to.

MR. LEHRER: Well, what about Mr. Doyle's point that having a gun to its head is not necessarily the way to get a friend to, to cooperate, which is essentially what the U.S. has done to the European Community today?

AMB. HILLS: I would not analogize it to a gun. I would analogize it to a garnishment. If I get a judgment against you and we talk and talk and talk for five years, and you don't pay your judgment, the Court will let me garnish your wages. And that isn't because I'm being mean, holding a gun to your head. It means that I'm entitled a payment on my judgment, and that's what we've done here. We have gone through all the process. We have used every GATT rule, and we are not angry. We're frustrated. We have gone through the negotiation. Now what the GATT rules contemplate is that we would adjust our tariffs by cooperation, but since Europe hasn't come up with a mechanism to pay us for the harm, we simply have gone the route of garnishment. We have said, on these three areas we will raise the tariffs ourselves.

MR. LEHRER: So the rules of GATT, which to remind everybody is the General Trade Agreement that governs all world trade, the European Community could reimburse the United States for this, this loss on these oils?

AMB. HILLS: Absolutely, but we would have to agree on it. And it would have to be a meaningful reimbursement, that is, close to the amount of damage done, and we have insisted that the reimbursement be to the industry that has suffered. And I think we can -- I think we were very, very close to a solution in mid October when I was in Europe, and so I believe that we can, if we exercise good will, achieve a solution. I am very positive that we should be able to settle this, this problem.

MR. LEHRER: Well, Nik Gowing, in fact, said in his piece, he quoted some folks who were involved in the negotiations, that the differences really were very small. Is that -- do you agree? Are you saying the same thing?

AMB. HILLS: They're larger than were suggested on the program, and I'm not permitted to go into the figures, but suffice it to say, I see a path for solution.

MR. LEHRER: Does it have to do with money, or does it have to do with the philosophy or the basic concept of subsidization? I mean, can this whole thing be resolved if the European Community comes up with some money, or is the United States going to insist on, on the subsidies being dropped on these oils in Europe in order to open the market to the Americans?

AMB. HILLS: We would prefer that their system be fixed so that we don't have a repetition of harm. Compensation is one way to go about it, but it has to be a compensation that is agreed to between the two parties under the GATT rules. And I think we can find a solution if we can sit down and work together without having different commissioners have differing points of view.

MR. LEHRER: Without getting into the specifics, et cetera, you've been at this for some time now, what does your head and your gut tell you about whether or not this thing is going to be resolved, or are going to have maybe not a trade war but some skirmishes over this over the next several months, maybe even years?

AMB. HILLS: No, I think we can solve it. I truly do. I think that there are offers that have been made by the United States that have been contemplated positively by some of the representatives in Europe, and I think we should go forward and come to a solution.

MR. LEHRER: All right. Amb. Hills, thank you very much.

AMB. HILLS: Thank you.

MR. MacNeil: Still ahead on the NewsHour, getting the economy back on track, and Audrey Hepburn on Somalia. FOCUS - ROAD TO RECOVERY

MR. MacNeil: Recharging the economy is President-elect Bill Clinton's No. 1 priority and the keystone of his economic plan is infrastructure investment. Sorting out just what that means for us is business correspondent Paul Solman of public station WGBH, Boston.speaking through interpreter]

PRESIDENT-ELECT CLINTON: My plan would dedicate $20 billion a year in each of the next four years for investments in new transportation, communication, environmental clean-up, and new technologies for the 21st century.

MR. SOLMAN: Throughout the campaign, the President-elect talked about getting the economy back on track by investing in a catch- all economic category known as infrastructure. Now there's not much debate about infrastructure spending in general. There be no such thing as a national economy without it. Just consider the difference between the U.S. with its roads, railways, and telephone cables holding together one single market and regions of the third world that have no such infrastructure and, therefore, no real market economy. In principle, there's not much debate about infrastructure spending in particular. We can, each of us, I suspect point to a bridge that could use a little work. But which projects do you invest in to maximize economic growth? And how much do they cost? We're going to show you one way to look at infrastructure spending. This is the home of my friend and PBS colleague Tom Friedman and his family. They're devotees of a kind of infrastructure computer game known as SIM, for Simulated City.

TOM FRIEDMAN: [Playing SimCity] I'm building another road there. Think that'll help?

DAUGHTER: Doesn't look like it helps. There we go.

TOM FRIEDMAN: No. There it is. That's loosening it up.

MR. SOLMAN: For some years now in game time Tom and daughter Corey have been building a city. On the menu that just popped in they're about to raise taxes. The point of the game is to raise taxes just enough to pay for the infrastructure investments you need to make to keep your city growing, your citizens satisfied. On the city map they're clearing ground to lay some new train tracks. The idea is to continue the economic progress they've made thus far, that tall commercial office building on the left, for example, all those tiny white cars jiggling along the road.

MR. SOLMAN: So how are you doing?

TOM FRIEDMAN: We're doing fine. We're growing by leaps and bounds, but the people have just called for a seaport. This town now requires a seaport.

MR. SOLMAN: This is a river here?

TONY FRIEDMAN: Yes. That's a river. It says, industry requires a seaport. So we're going to have to build them one. It's very expensive, but it's clear that if we want to grow, we need one. So why don't we just put it right in there?

MR. SOLMAN: If investing in infrastructure makes sense in SimCity, according to economist Robert Heilbroner, it makes even more sense in America 1992, even though it will increase the deficit.

ROBERT HEILBRONER, New School for Social Research: Now is a wonderful time for this country to mount something for which there is an unquestionable need and a great growth possibility is in infrastructure. Why shouldn't we get the motors going by putting, borrowing money and spending money for these many purposes called infrastructure whose purpose is, of course, to make the country grow?

MR. SOLMAN: According to proponents like Heilbroner, infrastructure investing delivers a double bang for the buck since it's especially labor intensive. In the short run, it injects money into a stalled economy by putting people back to work. They then are earning money they'll spend throughout the economy. In the 1930s, this was the so-called "pump priming" response of the Roosevelt administration to the Great Depression, spending government money on public works to create jobs, and immediately prime the pump of the economy. But the second bang for the infrastructure buck is long-term. It supposedly builds the economy for future growth. Take for example investing in highways and what the economy might be like if we didn't.

ROBERT HEILBRONER: Imagine having no road. I mean, the economy would come to a shrieking halt. Imagine having bad roads. It doesn't come to a halt, but it limps. You have traffic jams and you have accidents. Good roads, then you have the marvelous sense of the economy gliding along in high.

MR. SOLMAN: And, in fact, back at our growing computer city, Tom and Corey have put in roads, this light rail transit system, and the new seaport.

MR. SOLMAN: So you guys put in a seaport. Has it benefited the city at all?

TOM FRIEDMAN: It's helped, but I think now we need an airport. These people desperately need an airport. I think I'm going to put it right in there.

MR. SOLMAN: This is also right by the water.

TOM FRIEDMAN: But you also see that it's sort of undeveloped. You have -- these are commercial centers, but there are no buildings there. See residential areas, but there are only a few houses, and those are single family houses. It needs a boost.

MR. SOLMAN: The airport, they reason, will attract more commerce to the area, and even though it'll cost a pretty penny, it should give the economy another lift and pay for itself with further growth.

MR. SOLMAN: This airport has really attracted industry. Oh, there, there, something popped right in just then.

TOM FRIEDMAN: Absolutely.

MR. SOLMAN: So infrastructure investing often computes, at least short-term. On the other hand, in the long run, investing in infrastructure tends to be more of a mixed bag. Law School Professor Charles Haar learned that working for President Lyndon Johnson in the 1960s.

CHARLES HAAR, Harvard School of Law: I was an undersecretary of Housing & Urban Development in the Johnson administration, and I remember that I used to give grants and loans for infrastructure. That means -- that's a fancy word for sewers, for water, for hospitals, for roads, and that we did all sorts of investments, some of which were good, but some of which were bad. And I don't think the very fact that you're investing means that automatically good will come from it.

MR. SOLMAN: Consider, for instance, the suburban extension of greater Boston's transit system in the early 1980s. It meant jobs for Massachusetts construction workers, a project for Speaker of the House Tip O'Neill's congressional district, but, wonders Prof. Haar --

CHARLES HAAR: Was that a wise investment in infrastructure? I don't think the construction workers would challenge it, some of the landowners out there, but I do know transportation economists were very concerned about it, thought it was a very poor investment.

MR. SOLMAN: While there was plenty of fanfare when they finished the project, there were precious few new passengers, not enough, it seems, even to cover the added costs of running the trains, nor enough social or economic benefits to justify the 900 million dollar investment. So not every investment pays off, not in real life, and not in Tom and Corey's simulated computer economy.

COREY FRIEDMAN: [little girl] When we put the airport and seaport in, it grew dramatically, but now it's starting to shrink again because of the traffic.

MR. SOLMAN: People are leaving town?

COREY: Yup.

TOM FRIEDMAN: People are crying for more roads. "More roads," they cry. What can I say? There's another traffic jam. Excuse me, I have to build some more here. We'll find the money to pay for it later.

MR. SOLMAN: Looks like budget balancing is on the back burner as Tom and Corey have caught the highway bug, and they're going to sink more money into road construction, just as George Bush did last year when he signed the $150 billion transportation bill.

PRESIDENT BUSH: [Dec. 18, 1991] And the point I want to make is this wasn't a Republican effort, a Democrat effort, a liberal or conservative, it was bipartisan, and it was all American, and I think it's going to be a great thing for, for this country.

MR. SOLMAN: For all its popularity, however, the bill, nicknamed "Ice-T," contained some rather questionable expenditures, at least according to Prof. John Meyer, one of the country's foremost transportation economists.

JOHN MEYER, Kennedy School: Well, the kind of thing that really makes you pause in Ice-T is the amount of money that's appropriated for certain kinds of special projects like 700 million for MagLev experimental rail transportation.

MR. SOLMAN: That's magnetically levitated trains, and I thought that was one of the great hopes for the future.

JOHN MEYER: There's still a lot of unproven aspects of it. I'm not sure we're really ready to go ahead with a 700 million demonstration project.

MR. SOLMAN: Now experts might disagree about investing in MagLev or another feature of the new bill, for that matter, light rail transit, but on one form of infrastructure investment, there seems to be near consensus these days, investing in America's human capital by educating our work force for the high skills jobs of the future, jobs that other countries will get if our population can't manage them. Prof. Heilbroner.

ROBERT HEILBRONER: In some ways, the most important infrastructure expenditure of all is education. And the amount of knowledge that's invested in people becomes part of the real working, working capacity of the country. When somebody knows something that he or she didn't know before, that person moves up in terms of productivity, contributory possibilities for the country.

TEACHER: [adult class] And if multiplying decimals, you're just going to multiply like you do any other multiplication problem and worry about the decimals later.

MR. SOLMAN: In fact, investing in education can have such a high pay-off that a private company like Motorola here spends as much as $150 million a year educating its employees to make up for the failures of the public education system. Presumably, it's not charity, but an investment, not in the traditional form of machines, but in people, and how even the simplest skills will add value to the job. But we can't rely on companies to do all our educating for us.

ROBERT HEILBRONER: That's largely a public function, not entirely, but largely, so money you pump in there also shows off in the end in a more educated and more productive labor force.

DEMONSTRATION [Sept. 7, 1992]

MR. SOLMAN: But if education is such a high pay-off investment, why do teachers, such as those in Los Angeles, have to threaten to protest cuts in education, as much as 12 percent in teachers' pay in LA this year alone? In rejecting tax increases for education, voters across the country are presumably saying education is a bad investment, at least as it's currently constituted. Yet, when you ask them, people say, we have to become more educated. The apparent contradiction may stem in part from the fact that we have very imperfect ways of measuring public pay-offs.

ROBERT HEILBRONER: In the private sector there's something very lucky. You know, it costs you a certain amount to put out some new thing, and you presume that the benefits are the money you get back when you sell it, so you have an indicator called profit and loss, and that's a great guide in the private enterprise system. And it has its misdirections. Believe me, you can make money out of things that kill people, and you make losses out of things that really do a lot of good for people, but on the whole, it's a reasonable indicator. In the government you don't have such an indicator. You turn out a product called education. You turn out a product called transportation, and you don't get any money back unless you want toll roads every place -- no, thank you -- or unless you want to charge people, then it's along republics -- so you turn out public goods and you don't get any public income. There's no way of seeing -- there's no test of the market place.

MR. SOLMAN: In listening to all the campaign rhetoric about infrastructure, some of those in favor of public works, like Prof. Haar, were sympathetic, but suspicious of the terminology.

CHARLES HAAR: And so it seemed to me that investment is really another term for spending, but it's more mollifying to the ear of the taxpayer, and we ought to analyze it and call it for what it is, which is spending. And if that then makes more difficult the question of whether you're going to be able to cut taxes or somehow rectify the deficit situation, well, you'd have to face up to it and not bury yourself behind Webster's Dictionary, and simply call it an investment and, therefore, it's all right, rather than spending.

ROBERT HEILBRONER: Charles has a very good point, and I would, on balance, sort of agree with it. The one sort of hopeful thing that I would carry out of this whole discussion is that changing the wording from spending to investment may actually have some beneficial effects by putting more pressure on those proposing these kinds of expenditures to justify them in terms of benefits. In order for them to be investments that pay for themselves, they have to have some productivity gain, serve some real purposes, generate some real revenues or some real economic benefits. And so the, the pressure, the burden of proof may be subtly changed by changing this wording from spending to investment.

MR. SOLMAN: So after all the toing and froing, how much do we spend on infrastructure and where and when do we spend it? Well, like most of our experts, John Meyer thinks that it is an analyzable process. It's just that it takes a long time to analyze responsibly. And so he thinks that we may not want to get too much of our new infrastructure spending up and running too soon. As for the long-term effects, it'll be a very long time, Meyer feels, before we see the real economic payoffs from infrastructure.

JOHN MEYER: Ah, they're very difficult to compute, very difficult, indeed, because economists can't even predict the next year or two with any kind of accuracy, and trying to predict what things will be 50 years from now, or even twenty, thirty years from now in this economy with its evolving technologies and demography and so on is very difficult indeed.

MR. SOLMAN: Finally, we return to the Friedmans and their city, which keeps running into traffic jams. And that reminds Corey of how hard it is to invest effectively in infrastructure, as she learned playing this game some months ago.

COREY FRIEDMAN: Well, there were so many traffic jams that so many people moved out I was left with a very, very small population, and I had to quit the game.

MR. SOLMAN: Really? You had to abandon it because everybody abandoned your city?

COREY FRIEDMAN: Yeah.

MR. SOLMAN: Well in real life, Americans likely to exercise that option, so instead, we'll wind up balancing what we need in the way of infrastructure, how much it'll cost us, and what its payoffs are likely to be. And, as we've seen, it's not likely to be that easy. CONVERSATION

MR. LEHRER: Finally tonight, a conversation with actress Audrey Hepburn. Last week, just before she went into the hospital for colon surgery, Miss Hepburn sat down with Charlayne Hunter-Gault to talk about her recent trip to Somalia, a nation devastated by civil war and where it is estimated 1.5 million people are at risk of starvation. Miss Hepburn, who grew up in Holland during World War II, is familiar with the deprivations and brutalities of war. She went to Somalia in her capacity as UNICEF's good will ambassador.

MS. HUNTER-GAULT: Miss Hepburn, thank you for joining us.

AUDREY HEPBURN, UNICEF Envoy to Somalia: Thank you, Charlayne.

MS. HUNTER-GAULT: You wrote an article in Newsweek in which you said you were unprepared for what you saw in Somalia, and yet, you've been to other areas of devastation like Ethiopia, the Sudan. What was different about Somalia?

AUDREY HEPBURN: I thought I was prepared, therefore, the shock was even greater, because I think somehow however marvelous the documentaries are on television, however well done they are, or photographs you see or you read about it, it's still an abstraction until you're faced with the reality. And it's unbearable. It just is so totally unacceptable to see small children just die in front of your eyes, obviously because they're starving but also because they are so frail they really finally die of disease, and that in this day and we're nearly the year 2000 that can still be happening, and you somehow on one hand feel impotent that you can't do enough, you're not in time to save at least those little lives, and on the other hand, it's -- it's comforting to be there and see how much is being done and see how much progress is being made.

MS. HUNTER-GAULT: In terms of what assaulted you, what were the things that struck you the most? Tell us a little bit about it as we look at your footage.

AUDREY HEPBURN: Starting with the first camps we went to in Kismayu, that's where I noticed after wandering around for some 20 minutes this very strange absence of small children. And I asked about it. I thought perhaps they were in a different, in a hospital or something. No, they're gone.

MS. HUNTER-GAULT: You described a young man having an asthmatic attack. Tell me about his.

AUDREY HEPBURN: Yes. This was in Bidoa in a feeding center where the children worst off were being therapeutically fed because they sort of can't eat or drink, sort of every few minutes giving them something. And this boy was sitting with just a bit of cloth around him, rail thin, I mean, really just bones and eyes and absolutely struggling for breath. He obviously had a respiratory infection, and I was suffering so for him because I did have asthma as a child and anemia and edema and all the things that come with first degrees of malnourishment that I remember, remember so this crisis of not being able to breathe and struggling to -- and I just felt I wish I could breathe for him but he literally sort of just lay down while I was there and was gone.

MS. HUNTER-GAULT: Died?

AUDREY HEPBURN: Mm hmm.

MS. HUNTER-GAULT: In front of you?

AUDREY HEPBURN: Yes.

MS. HUNTER-GAULT: Is it possible to describe witnessing something like this?

AUDREY HEPBURN: No. That's why I say it's been perfectly described by the media, thank God, because for so many months the media couldn't go into Somalia and show what was happening because it was war. And at the same time there's this curious, what can I call it, embarrassment, timidity that comes over one when you do walk into a feeding center like that of I feel I shouldn't be there, I feel I should leave. It's like walking into somebody's room who is dying and the family should be there, only the nurses, you know what I mean, of sort of intruding in some way. At the same time, longing to pick up one of these children and give it some kind of warmth, and on the other hand, they're so frail that you're afraid you're going to break them or hurt them, because you know people say I guess people are starving to death, but I wonder if people think of the pain of starving to death, what happens to your body. And it's a very slow process. And it's not something that just sort of you waft through and then die. And as I said earlier, they nearly always die of a disease.

MS. HUNTER-GAULT: Is there a lot of crying, or just silent suffering?

AUDREY HEPBURN: Coughing a great deal, because they do, mostly children do have respiratory problems, diseases, you know, very silent, very silent. And this also, also in the camps with the adults.

MS. HUNTER-GAULT: We hear so much about looting, anarchy in Somalia, and you, yourself, wrote that it's the relief workers that are keeping a whole nation afloat. Tell me about that, that lack of government, and the role of the relief workers.

AUDREY HEPBURN: You enter Somalia, No. 1, without a visa, because there is no government, so you just land, and there are no roads to speak of. There's no government, no electricity, no postal service, no telephones. It's like the moon from that point of view, and yes, there is anarchy, which is the least you can expect when a government is deposed, fortunately because it was a very repressive one, then four years of civil war. Fortunately, the U.N. was able to negotiate a cease-fire in Mogadishu. That's all they have. There were two sort of major clans, the two generals, if you like, who share Mogadishu. There's a green line which you don't see, but I mean that is a sort of separation. But the rest of the people are livid unto themselves. And, of course, there's looting, No. 1, certainly in the beginning because everybody's hungry. So are the looters. But looting is always a result of upheaval and anarchy.

MS. HUNTER-GAULT: How much aid is getting through, and what is the impact?

AUDREY HEPBURN: Considering the mind boggling logistics of this country that I just told, the non-existing infrastructure, I would say that the aid that we are providing and Red Cross and CARE is a miracle, because it is getting there. Yes, part of it is being looted, but that happened all along. That's happening in Sudan too. But you cannot give up at least trying and many, many people are being saved, and in the camps are already beginning to look better, but there are places inland where we still haven't reached, where we haven't been. There was still a great deal of unrest. I mean, God knows what we're going to find there.

MS. HUNTER-GAULT: Does there have to be outside intervention like the United States or the OAU before peace can be permanent?

AUDREY HEPBURN: I think only in, in a supportive sense, not in an aggressive sense. First of all, we can't go into Somalia, invade it and occupy it. That is not our right, nor does the U.N. have that kind of a mandate. The U.N. guards are still not functioning properly. They don't -- are not able to function properly, those that are there, because their mandate is not to fight it out; it's to guard the provisions that are coming in. But the war won't let them do exactly, you know, what we would like to do, and all of that needs negotiating. So it's all very long.

MS. HUNTER-GAULT: Miss Hepburn, we're approaching the year 2000. Did you ever think that there would be this kind of tragedy repeating itself?

AUDREY HEPBURN: Let's look on the bright side, Charlayne. I think there is one in the sense that, believe it or not, there are fewer conflicts in the world today than 10 years ago. There are already so many, but it was double. We do have better and more access now because of the Cold War beingover. And the world has woken up. I know it's too late very often and we are slow, but we do have a sort of enormous mechanism now. And though the U.N. has been very criticized, they're not to be sneezed at because what other organization has the planes, the people? You know, it has to be done. These are wonderful, the CARE, Red Cross. I don't know if during the first great famines in Bangladesh, during the great famine in the thirties in Russia, during the Irish famine, how much did we do about that? Now we're at least trying, and doing it rather well. But we're impatient, because now we see the children dying right in front of us, for most of us on television. I've seen it happen, and I'm filled with a rage at ourselves. I don't believe in, in connective guilt, but I do believe in collective responsibility. Somalia is our responsibility. It's certainly the British responsibility, the Italians' responsibility, because they colonize that country. And they should be doing more, I think. They have an obligation to those people from whom they benefitted for so many years. But it is the international community, and that is the beauty of humanitarian, of relief workers, of humanitarian aid, that regardless of what's going on, of the danger, of the diseases they're getting themselves, they do it, and they don't give up. And that's why I want to not only speak for children but for these extraordinary people who live among the living dead and sleep among moaning bodies in Bidoa, where there is no light after 6 o'clock, and you can't read or even think because there's so much misery around you, and get up in the morning and wash these people and these children, and try and feed them month after month. They're the ones that have to be supported with more help.

MS. HUNTER-GAULT: Well, Audrey Hepburn, thank you.

AUDREY HEPBURN: Thank you, Charlayne. Thank you very much. RECAP

MR. MacNeil: Again the main stories of this Thursday, the U.S. ordered steep tariffs on $300 million worth of European imports, mainly white wine. It did so to punish Europe for refusing to cut subsidies on some farm products. European trade officials warned that it could spark a trade war. President-elect Clinton said he would not comment on the trade decision, but a spokesman said the President-elect believed the U.S. must get tough with countries that close their markets to U.S. products. The Labor Department reported that new claims for jobless benefits fell to a two-year low in the week ended October 24th. The Department also reported worker productivity grew at an annual rate of 2.6 percent in the third quarter of the year. That compares to an annual rate of 1/2 percent in 1991. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you tomorrow night with Gergen and Shields, and with a look at the question: What now for the Republican Party? I'm Jim Lehrer. Thank you and good night.