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LOU DOBBS TONIGHT

Second Round of Attacks Hit London; New York Police Begin Random Bag Searches; Pentagon Admits Iraqi Troops Aren't Ready; Memo Raises New Questions in Leak Investigation; Bonner Suggests Official Sanction of Minutemen-style Volunteers; Canada-US Tunnel Destroyed; US-China Trade Examined

Aired July 21, 2005 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


LOU DOBBS, HOST: Thank you, Wolf. And good evening, everybody.
Tonight major American cities stepping up security, after a new wave of radical Islamist bomb attacks in London. My guest tonight, the chairwoman of the Senate Homeland Security Committee.

Also tonight, unfit to fight. The Pentagon acknowledges in a new report that nearly all Iraq's army and police battalions cannot successfully fight insurgents without the help of American troops. We'll have that special report.

And the Bush administration wins one in the economic relationship with China. But is it too little or the beginning of something big? I'll be talking with Treasury Secretary John Snow here tonight.

Our top story, a new wave of radical Islamist bomb attacks against London exactly two weeks after terrorist bombings killed more than 50 people. Police have arrested two men. It is not clear whether those arrested have anything to do with today's bombings, however.

The targets in today's attacks were the same as two weeks ago: three subway trains and a bus. But on this occasion, the terrorists did not kill anyone. Only one person was wounded.

Today's attacks took place at Shepherd's Bush, Warren Street and Oval subway stations, and on a bus in Hackney Road.

ITN's Bill Neely reports from London.

(BEGIN VIDEOTAPE)

BILL NEELY, ITN CORRESPONDENT (voice-over): Suddenly and for the second time in two weeks, chaos on and below London's streets.

UNIDENTIFIED MALE: Would you please move?

NEELY: Tens of thousands evacuated, reports of explosions, smoke, rucksacks. News first of one bomb, then two, then more. And scattered around London streets, so many who thought they were about to die.

UNIDENTIFIED MALE: We were told not to panic, but everybody was panicking. NEELY: Just before 1 p.m., West London, near Shepherd's Bush station, something has just exploded on a train. Minutes later, in South London, police respond to calls about a bomb on a train and about much more than that. Passengers are chasing a man who dumped a rucksack in a carriage, screaming, "Stop him!"

UNIDENTIFIED MALE: Suddenly I saw a guy running from the stairs. And then people chasing him.

NEELY: Police, too, gave chase, but the suspect, described as a young dark-skinned British man with a beard, escaped.

London's Northern tube line, almost exactly the same time, and underground passengers smell that something is very wrong.

UNIDENTIFIED MALE: All I saw is people running for their lives, and there was no room for me to get away to the next carriage. There was no way I could get away from it. All I did was say a prayer and wait for it to happen.

NEELY: So far, only one man is injured, but it's not over. After west, north and south London comes under attack in the east. In a carbon copy of a fortnight ago a device exploding on the upper deck of a bus. Windows on the bus are broken, but again, no one is injured.

Two hours after the first incident, and the police confirm four bombs.

SIR IAN BLAIR, METROPOLITAN POLICE COMMISSIONER: The bombs appear to be smaller than on the last occasion. But we don't know the implications of all this yet, and we're going to have to examine the scene very carefully.

NEELY: But London is still jittery. Armed police are sent to deal with an incident at a hospital, where many of the dead and injured from a fortnight ago were taken.

The police announce that four detonators but not explosives went off in the four locations, which are now being checked for traces of chemical weapons.

Then, opposite Downing Street, armed police arrest a man they became suspicious of. They made him open his shirt to check for weapons or bombs. But there is nothing to connect him to the explosions.

Just 100 yards away, the prime minister makes his first comment.

TONY BLAIR, BRITISH PRIME MINISTER: We know why these things are done. They're done to scare people and to frighten them, to make them anxious and worried. And fortunately, in this instance there appear to have been no casualties.

NEELY (on camera): Now in all of this, the police have a huge lead. The devices, the bombs are still largely intact. And one of them is just over there. (voice-over) The police have confirmed there is no question the detonators were meant to set off explosions.

Police have now recovered forensic material from the sites. Another four crime scenes for them to pore over, thousands more statements to take, and thousands of hours of CCTV footage to examine.

The four bombers may still be free tonight to strike again, but luckily, and for some unknown reason, their bombs failed. And dozens of people at least are alive tonight who might be dead.

Bill Neely, ITV News.

(END VIDEOTAPE)

DOBBS: A short time after those attacks in London, police in New York announced that they will begin random searches of bags and backpacks in the city's mass transit system. The searches begin tomorrow in New York. And other cities have been on heightened alert for possible terrorist attacks since the original London bombings two weeks ago.

Joining me now for more on these bombings in London and the radical Islamist terrorist threat to this country, former acting CIA Director John McLaughlin, CNN's national security adviser; and former FBI Assistant Director Pat D'Amuro, who played a leading role in the investigation into the September 11 attacks. And he is also the CEO of Giuliani Security.

We thank you for being here, gentlemen. Let's start, if I may, Pat, with you.

This -- and I'm going to ask you as well, John. Your best reasoning, gentlemen, no one apparently seriously injured in this. Four attacks, three subways and a bus. Is this al Qaeda? Is this a follow-on to the attacks two weeks ago?

PAT D'AMURO, CNN SECURITY ANALYST: Well, it could be. We don't know that yet. I think what we have to wait and look for is what we call a fingerprint on the type of device that was used. Law enforcement officials there are going to have to take a look at the recovery of the devices and determine if they can link it to the groups two weeks ago.

DOBBS: John, no one being seriously injured apparently at this hour, this does not sound like al Qaeda. It has been remarkably successful in its terrorism.

JOHN MCLAUGHLIN, CNN NATIONAL SECURITY ADVISER: That's the one aspect of this attack, Lou, that doesn't sound like al Qaeda. The bombs didn't go off.

A number of explanations are possible for that. One is that they're using an explosive here that was homemade, and it may have deteriorated because of improper storage. But the important thing here, as Pat just pointed out, and as the ITN reporter indicated, is they will have much more forensic data here than they did in the case of the July 7 attacks, where everything was destroyed in the attacks themselves. And I would think the London police and intelligence services are going to learn a lot from what they've been able to apprehend here.

DOBBS: Is it your sense, Pat, that this is -- was it a failed suicide bomb attack? Divine what you can from this, based on what we know.

D'AMURO: Well, it could be a failure. It could be something that went awry. But it's not like al Qaeda to fail this way, as John said. One thing al Qaeda wants to do when they conduct an attack is be successful.

When we look back at the bombings two weeks ago, those individuals didn't really fit the profile of what we know suicide bombers to be. So we're seeing some changes in some of the tactics and individuals that they will use to carry out these attacks.

DOBBS: Fortunately, John, these attacks, whatever they were, inspired by whomever, failed to inflict serious damage. But the fact that they were carried out at all, two weeks after the tragic terrorism of two weeks ago in London, this really demonstrates how tough it is to provide security in mass transit, not only in London, but the United States, and frankly, everywhere in the world, doesn't it?

MCLAUGHLIN: It does, Lou. And there's -- Pat referred to some changes in method here. There are many similarities to what we've seen in the past. But one thing that strikes me is the incredible stealth with which these bombers and the earlier ones were able to move through what is a high alert situation.

If you recall from 7 July, the people who knew those folks -- their parents, their friends, their schoolteachers, their employers -- none of them had any suspicion of their activities prior to the bombings. So the group that is responsible for this in London has adopted a very low profile, and burrowed deeply into that society.

DOBBS: I want to ask you both, because we have up on the screen right beneath you, and now me, John, and soon Pat, will be "war on terror." The cutline here. The administration's statement. This is radical Islamist terror. We know who the enemy is. We have seen cutlines and statements by the administration and others talking about London terrorized, terror in London.

This is an assault by a radical element, radical Islamist, fundamentalist terrorists. Why are we not identifying who these people are and dealing with them? When I say we, not only the United States, but every civilized country in the world.

D'AMURO: Well, you know, a lot of work has been done. And I think John will agree with me that going back to the bombings in East Africa in 1998...

DOBBS: Right. D'AMURO: ... it was the CIA and the FBI working together that actually disclosed the extent of al Qaeda throughout Europe. It was the both of us working together that showed al Qaeda was in Germany, in Italy, in the U.K. And we started working very closely with the special branch and Scotland Yard in working and trying to identify these people.

DOBBS: John, your thoughts?

MCLAUGHLIN: Well, certainly the record is clear since 9/11, and Pat indicated before, that intelligence, law enforcement, FBI, CIA, our partners have been very successful against a large number of leaders in al Qaeda. The president often cites the figure of three- quarters or two-thirds of the original al Qaeda leadership and so forth.

DOBBS: Right.

MCLAUGHLIN: But the important thing here is these folks are burrowed very deep into society, and I think to identify the bombers here, and to root out all of those who potentially are bombers, requires a couple of things.

First, the penetration of those groups deep inside society.

And second, it requires the hardening of our country, Britain, our allies, hardening of the vulnerabilities, because no matter how good your intelligence, no matter how tight your network and your web, someone is going to get through at some point.

D'AMURO: And Lou, if I could, this is no different than what we saw in Lackawanna, the Lackawanna six outside of buffalo, New York.

DOBBS: Right.

D'AMURO: They were second generation United States citizens that were entrenched and actually went back to Afghanistan to train with bin Laden and his element there.

MCLAUGHLIN: And if you think about it, there's a very large recruiting pool here. We certainly can't say this about all of the Pakistani Britons who are there, and many of whom are dramatically loyal to the government and so forth, but there are about 500,000 Pakistani-Britons in the U.K. And potentially, then, if that is the quarter from which these folks are coming, there's a large recruiting pool there.

DOBBS: John McLaughlin, Pat D'Amuro, we thank you both for being here.

And with the arrests, the early arrests by London authorities, perhaps the perpetrators here, whatever their origin, will be discovered quickly. Thank you very much.

MCLAUGHLIN: Thanks, Lou. DOBBS: Still ahead, the Pentagon says nearly all Iraq's military and police units are simply unfit for successful battle without U.S. assistance. We'll have that special report for you next.

And how vulnerable is this country to a new radical Islamist terrorist attack? I'll be talking with the chairwoman of the Senate Homeland Security Committee, Senator Susan Collins. We'll be talking about that and of course, the nomination of Judge Roberts to the Supreme Court.

And new developments tonight in the investigation into the White House leak of a CIA agent's identity. We'll have that report for you and the fight over Supreme Court nominee Judge Roberts. I'll be talking with distinguished trial attorney David Boies. Remember 2000? He'll be here to give us his assessment of Judge Roberts' career and his prospects to sit on the highest court in the land, next.

(COMMERCIAL BREAK)

DOBBS: In Iraq, insurgents and terrorists today killed eight Iraqis in a series of attacks in the Baghdad area. Five Iraqi soldiers were among those killed when a suicide bomber attacked their checkpoint 25 miles south of Baghdad.

Also today, insurgents kidnapped two Algerian diplomats, this the latest in a series of insurgent attacks against Arab diplomats in Iraq.

The Pentagon today acknowledged that nearly all Iraqi military and police units are simply unfit for battle against insurgents without U.S. help. The admission raises new disturbing questions about how soon our troops can come home.

Jamie McIntyre reports from the Pentagon.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN CORRESPONDENT (voice-over): The report concedes what congressional critics have complained about for weeks, that while the Pentagon touts that 171,000 Iraqi security forces are now trained and equipped, only a small fraction, roughly 2,500, are capable of mounting counterinsurgency operations on their own without help from the U.S. military. And that makes it hard to see how they will replace U.S. forces anytime soon.

SEN. CARL LEVIN (D-MI), ARMED SERVICES COMMITTEE: We have got to transfer greater responsibility to the Iraqis. We've got to do it faster. We can't make an unlimited commitment to have our forces in Iraq.

MCINTYRE: CNN has learned the classified annex to the report shows of 84 Iraqi army battalions, only three can operate independently. And none of the Iraqi Special Forces battalions are yet 100 percent battle ready. Still, Pentagon officials insist it's not misleading to use the 170,000 number. LT. GEN. WALTER L. SHARP, JOINT DIRECTOR, PLANS AND POLICY: Every one of the soldiers in those battalions are in the fight. We may be helping them with planning. We may be embedding them with our units out there that really try to be able to get at the insurgents. We may be mentoring them. But again, it doesn't mean they're off to the sideline.

MCINTYRE: And Pentagon officials say with 84 percent of attacks limited to just four provinces, including Baghdad and the so-called Sunni Triangle, other areas of Iraq may be put under Iraqi control by sometime next year.

PETER W. RODMAN, ASSISTANT SECRETARY OF DEFENSE: I expect you'll see a gradual process. As they become more capable they'll take over more responsibility. It's not going to be a dramatic shift from one day, you know, we're there, and the next day we're gone.

(END VIDEOTAPE)

MCINTYRE: One thing the report doesn't have is any timetable or projection for substantial withdrawals of U.S. forces. Pentagon officials say that will depend as much on political progress as it will on the ability of Iraqi forces to take over the fight against insurgents -- Lou.

DOBBS: Jamie, thank you very much for that admittedly disturbing report. Thank you very much from the Pentagon, Jamie McIntyre.

Also in Washington tonight, more details on a two-year-old State Department memo, a memo that is now at the center of the investigation into the leak of a CIA agent's identity.

New questions are being raised about who knew Valerie Plame's identity and when? Who was the source of the leak? And what will be done about it after a two-year investigation -- an investigation that has now taken longer than that into Watergate?

Dana Bash reports.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CORRESPONDENT (voice-over): An "S" for secret, in a classified State Department memo, federal investigators hope leads them to who leaked her identity.

Two government sources who have seen the June 10, 2003, memo confirmed to CNN Plame was referred to by her married name, Valerie Wilson, without indication she was undercover or her identity was protected. Nevertheless, a former national security staffer, not privy to this memo, says the rules are clear.

RICHARD FALKENRATH, FORMER NSC STAFFER: And revealing it to someone without proper security clearance or without a need to know is not authorized and is a violation.

BASH: The memo, which discussed allegations Iraq tried to buy uranium from Africa, notes Valerie Plame Wilson was in a meeting about sending her husband, Ambassador Joe Wilson, to look into the claims, according to the officials.

Other sources familiar with the leak investigation say federal prosecutors asked several senior administration officials testifying before the grand jury if they had seen this memo.

A senior U.S. official believes Secretary of State Colin Powell took it with him aboard Air Force One July 7, 2003, when he accompanied the president to Africa. Investigators want to know if any senior Bush officials had access to the memo then, and as CNN previously reported, subpoenaed the manifest of Air Force One.

The timing of that trip, as it relates to the Wilsons, could be crucial. Just days before, Joe Wilson accused the White House of twisting intelligence on Iraq's weapons program to make a case for war.

As Mr. Bush and his team were flying to Africa, back in Washington, a stunning admission at the White House. The president went too far in his State of the Union address about Iraq's attempts to get uranium from the country of Niger.

Throughout his trip, the president was dogged by questions.

QUESTION: Can you explain how an erroneous piece of intelligence on the Iraq-Niger identity got into your State of the Union speech?

BASH: Wilson insists senior officials leaked his wife's identity as payback.

(END VIDEOTAPE)

BASH: And prosecutors want to know if the classified memo naming Valerie Wilson is the source of the leak of her identity, and if so, under what circumstances. Now, a source familiar with, yet sympathetic to Karl Rove's testimony, says there is -- quote -- "no indication he saw this memo" -- Lou.

DOBBS: Dana, thank you very much.

Up next, I'll be talking with the chairwoman of the Senate Homeland Security Committee, Senator Susan Collins, about the radical Islamist terrorist threat to this country.

And China says it will finally revalue its currency. Coming up, I'll be talking with Treasury Secretary John Snow about whether this is too little or something really important in the high cost of free trade.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: The Pentagon today reported nearly all Iraqi's military and police units incapable of fighting insurgents successfully without American support. Military sources tell us that only three of the Iraqi army's 84 operational battalions are fully capable of independent operation in counterinsurgency.

Iraqi police units are even less capable. None of the 28 Iraqi police battalions can carry out operations on their own.

Joining me now, General David Grange.

General, we have talked over the course of the past better than now two years about the importance of bringing the Iraqis into this fight. This is taking far longer than anyone certainly dreamed. What is -- why aren't we getting those troops and those police ready?

GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, I think, Lou, what you have is a very slow start after the fall of Saddam Hussein, when they had to reassemble all of the recruits that were in the military, or police forces, bring them together. And then a training process. Truly, those take a long time.

Now one thing that we have to be careful about, I believe, is that conducting independent operations on our own, that really refers to offensive operations, not security duty or guarding a checkpoint, et cetera.

DOBBS: Right.

GRANGE: So, yes, I think they're behind. But I think that they still can conduct some operations.

DOBBS: Counterinsurgency specifically, with 170,000, that is the number that has been used. There have been great political arguments, as you know, over the course of particularly the last eight months about what that means.

The fact is, General Petraeus has been in charge. Great optimism that he would have troops up and ready to go much quicker than predecessors had. This just is a very long process. Is it necessarily so?

GRANGE: Well, you know, you have -- you have certain levels of units that have good leaders. And all this depends really -- the bottom line is good small unit leadership. And that's what takes so long to develop.

If you go back to Vietnam, it took years to establish units that had tough, reliable, loyal leaders. You had had certain units that were very good from almost the start, like Airborne paratrooper units.

DOBBS: Right.

GRANGE: And then you had some units that just took forever, and even when we left Vietnam, really weren't up to a level of truly independent operations.

DOBBS: Is it your judgment -- and you are a leader of great experience and talent -- is it your judgment that there can be a significant training to the point that Iraqi units, police and military, can be operationally independent in counterinsurgency within the next five years?

GRANGE: Yes, I believe that. In fact, just like in Vietnam, they were effective against the insurgents. What got the South Vietnamese military in Vietnam was the North Vietnamese regulars who fought conventionally, big armies, an army of troops. But it's going to take a while and they're going to have to put good units in tough places and weaker units in more benign places to be successful.

DOBBS: General David Grange, thank you as always.

Up next, I'll be talking about the vulnerability of this country to radical Islamist terrorism with the chairwoman of the Senate Homeland Security Committee. And I'll also be talking about the nomination of Judge Roberts to the U.S. Supreme Court. Senator Collins also a member of the so-called Gang of 14.

And China's unfair trade. Will China's meager reevaluation of its currency do anything to level the playing field, as they say, or will we continue to experience the very high cost of so-called free trade? Treasury Secretary John Snow, my guest next.

And a first, along our border with Canada, federal agents discovered a 360-foot long tunnel complete with concrete, lights and ventilation. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Joining me now to discuss the threat of radical Islamist terrorism to this country, Senator Susan Collins of Maine. She is the chairwoman of the Homeland Security Committee.

Senator, good to have you with us.

SEN. SUSAN COLLINS (R-ME), CHAIR, HOMELAND SECURITY COMMITTEE: Good evening.

DOBBS: These attacks, as we reported with two -- the foremost experts on radical Islamist terrorism at the beginning of this broadcast, the threats are real. They're continuing. This country, its borders, its ports remain extraordinarily vulnerable, don't they?

COLLINS: We still have a lot of work to do. We need to strengthen security at our borders, at our seaports, with mass transit. The vulnerabilities are almost endless.

But we have made a lot of progress. We're far more prepared than we were prior to the attacks on our country on 9/11. But there's an awful lot more to do.

DOBBS: Is it your sense that we are moving fast enough at this point?

COLLINS: I do think we're making progress. There are two areas, however, of particular concern to me in addition to mass transit. One is the lack of security and standards for our chemical plants and facilities.

DOBBS: Right.

COLLINS: And second is our seaports. Senator Joe Lieberman and I will shortly announce that we're going to undertake an investigation on whether we're doing enough work to secure mass transit. We have made some progress in the wake of the Madrid bombings, but I think there's a lot more that can be done there, as well.

DOBBS: And of course, Senator Collins has introduced legislation to help in that area, as well.

Senator, as you're aware, Robert Bonner, the head of Customs and Border Protection, yesterday said his department was considering using volunteers who might otherwise be involved with the border -- the California Minutemen or the Minutemen Civil Defense Organization. And it sounded to many people and I will certainly say, to myself, as a very smart idea.

Homeland Security, quickly this morning, put out a note saying -- knocking that down, saying under no circumstances would they do that. What's going on over there at Homeland Security?

COLLINS: Well, I think it's an issue of whether volunteers would have the training necessary to be effective and that's an issue that we have to be careful about. But I think each and every one of us as citizens has an increased obligation to be more alert, to assist authorities wherever possible. There may be some middle ground that can be reached, but I think there are issues of liability and training that come into play.

DOBBS: Right. Well, that liability and training, Senator, as you know, those are issues that come up with police auxiliaries, sheriff's auxiliaries all over the country every day. Tens-of- thousands of Americans volunteering for that sort of duty. Certainly that's every bit as dangerous as joining a Border Patrol auxiliary.

I just think that Commissioner Bonner deserves such great credit for being open-minded and considering this. And then suddenly, you know, the Border Patrol Union and the Department of Homeland Security, with all of its admitted bureaucratic issues to confront, comes down on that idea. Is that something you really want to see, that kind of ossified thinking in a bureaucratic organization like Homeland Security?

COLLINS: Well, what I want to see is for us to explore every idea that's been put forth. We need new ideas. We need new concepts. So, I don't rule any approach in or out. I think we need to explore all the possible ways that we can make our country safer.

DOBBS: I bet you that Commissioner Bonner is glad to hear you say that. I know that most Americans certainly would be.

Senator, let me turn -- as a member of the so-called Gang of 14, the seven senators from each party who have been successful in being a moderate influence, if you will, on the filibuster issue. Is your judgment that this nomination of Judge Roberts to the Supreme Court is going to move ahead without a threat of a filibuster by the Democrats?

COLLINS: I think so. The so-called Gang of 14 met today. We had breakfast together and we talked about this issue and there was a consensus that it's premature for the Democrats to be making a final judgment -- or for any of us to be making a final judgment, until Judge Roberts' hearings are finished. We do have a process. I want to honor that process, but I see absolutely no grounds for a filibuster at this point. I think the president's made a really good choice.

DOBBS: And you're hearing it from a card-carrying member, as the expression goes, of G-14, Senator Susan Collins. Thanks for being here.

COLLINS: Thank you, Lou.

DOBBS: China's foreign minister today trying to mitigate rising anger in this country over a Chinese general's threat to launch nuclear strikes against the United States.

Last week that general said China might destroy hundreds of American cities in any U.S. interference over Taiwan. Today China's foreign minister declared that China will not use nuclear weapons first - quote -- "at any time and under any condition" -- end quote. The Chinese foreign minister did not criticize the Chinese general who made the threat.

Later here, I'll be talking with Treasury Secretary John Snow about China's decision to remove the peg to the dollar.

We'd like to know your thoughts on the massive trade imbalance between the United States and China. Do you believe the Bush administration is doing enough to significantly reduce our trade deficit with China? Yes or no. Cast your vote at LOUDOBBS.com.

And a deadly heat wave turning now to the rest of the country. Enduring record temperatures throughout the Southwest in particular, forecasters say it is not nearly over. Temperatures above 100 degrees in several states, including Arizona, California, Colorado.

In addition, a drought throughout the Midwest.

Officials and volunteers today handed out water in Phoenix, Arizona, where at least 18 people have died in the sweltering heat there since Saturday. Temperatures in Phoenix remain near 113 degrees. There will be no break in those temperatures until, at the earliest, this weekend.

Kids, however, found a way to beat the heat in Denver. Temperatures there just over 100 degrees as well. Denver, Pueblo and Colorado Springs all experiencing record-high temperatures. The highest temperature in the country: 129 degrees today in Death Valley, California.

But that's not the highest temperature residents there have ever experienced. The record in Death Valley is 134 degrees.

And with record temperatures being set all over the country, with the drought in the Midwest and the Southwest in the grip of a, what many fear is a 500-year drought cycle, we can ask, global warming anyone?

Coming up next here, our nation's top border official causing controversy in Washington tonight. As I said, his idea for a U.S. citizens' Border Patrol auxiliary under fire. We'll have a special report.

And a first-ever sight on our nation's border with Canada -- our broken borders we call them and that's because they're plural -- an underground tunnel for drug smugglers between Canada and the United States.

And judging John Roberts for the Supreme Court. I'll be joined by noted trial attorney David Bois next. We'll be talking about his experience with nominees and his judgment of Judge Roberts.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight a discovery beneath the U.S. border with Canada. Officials have secured and shut down a 360-foot-long underground tunnel used to smuggle illegal drugs into the United States. Did I just say underground tunnels? Tunnels tend to be, don't they? That tunnel runs from Langley, Canada, to Lynden, Washington. Officials have never found a tunnel like this before on our northern border.

Katherine Barrett has the story.

(BEGIN VIDEOTAPE)

KATHERINE BARRETT, CNN CORRESPONDENT (voice-over): The cross- border tunnel started under this Quonset hut along Zero Avenue (ph) on the Canadian side of the border. It's the first one found on the United States' northern boundary.

Three Canadian suspects are said to have spent eight months digging the 360-foot conduit coming up under the living room floor of this house just across Boundary Road on the United States side. All this, less than 200 yards from an official border-crossing post. The tunnel was reinforced with concrete, rebar and lumber. It also had power and ventilation.

ROB BENSON, DEA SPECIAL AGENT-IN-CHARGE: It was well built; probably one of the more sophisticated tunnels that we've ever seen in the United States. And it was a significant drug-trafficking organization that was responsible for the construction of it.

BARRETT: U.S. and Canadian authorities had monitored the tunnel's construction for months. In early July, they installed cameras, watching suspects make repeated trips, carting hockey and garbage bags. Local authorities followed the loads and seized about 200 pounds of super potent "B.C. Bud" marijuana.

It was drugs this time, but authorities say it could have been worse.

LEIGH WINCHELL, ICE SPECIAL AGENT-IN-CHARGE: This tunnel was constructed for the purpose of smuggling narcotics, but the security implications for both Canada and the United States are immense. That tunnel could be used to smuggle aliens into the U.S. It could be used to smuggle equipment into the U.S. for those who could do harm to the United States.

(END VIDEOTAPE)

BARRETT: Lou, this is just the latest twist in what the U.S. Drug Enforcement Administration calls a billion-dollar business, smuggling Canadian marijuana over the northern border.

Now, investigators on both sides say their investigation is ongoing. The three suspects are under arrest. But they say charges could be expanded in coming weeks -- Lou.

DOBBS: Katharine Barrett, thank you very much.

A stunning development today. Our nation's top border official coming up with an innovative idea, suggesting a Border Patrol auxiliary.

Customs and Border Protection Commissioner Robert Bonner saying that he thinks it might be a good idea that citizens voluntarily patrol our broken borders, and it's an idea worth exploring. Bonner's superiors, however, dismissing the idea outright.

Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): During a visit to the Port of Los Angeles to unveil new radiation detection devices, Customs and Border Protection Commissioner Robert Bonner quietly signaled what appears to be a major shift in the Bush administration's position on the Minuteman civilian volunteers now patrolling sections of the southern border.

Bonner told reporters he's considering what he calls a Border Patrol auxiliary, made up of trained, organized civilian volunteers. This from the same administration that just weeks ago derisively referred to the Minutemen as vigilantes. It's welcome news for this U.S. congressman, who stood side by side with Arizona's Minutemen in April.

REP. TOM TANCREDO (R), COLORADO: Another indication that they're finally getting the message. The Border Patrol has, up to this point in time has never been enthusiastic about this idea. In fact, they've been quite opposed to any such plan. So something has changed. And I have a feeling that it is a reflection of more changes that are on the way. WIAN: Customs and Border Protection did not respond to requests to speak with Bonner about the citizens' border patrol proposal. The Associated Press reports that questions about whether volunteers would be armed or have the power to make arrests must still be answered. Meanwhile, the Department of Homeland Security, which includes Customs and Border Protection, issued an apparent statement of nonsupport for Bonner's idea, saying there are currently no plans by the Department of Homeland Security to use civilian volunteers to patrol the border.

Chris Simcox has led civilian patrols on the Arizona border for years and is a leader of the Minuteman Project.

CHRIS SIMCOX, FOUNDER, MINUTEMAN PROJECT: Oh, it's the same passing the buck again. I'm sure that word of this plan reached the White House, and perhaps President Bush put the kabosh on it, you know, knowing that then he would have to eat his words about calling American citizens vigilantes.

WIAN: DHS added it believes the job should be done by the Border Patrol and other law enforcement agencies.

Civilian volunteers say they're not doing the job well enough, mainly because of a lack of manpower.

(END VIDEOTAPE)

WIAN: Government support or not, the Minuteman Project appears to be gaining momentum. Volunteers are patrolling the border from California to Texas, and soon will be on the Canadian border as well. And affiliated groups are also videotaping employers suspected of hiring illegal aliens and protesting government-sponsored day laborer sites -- Lou.

DOBBS: And it's important again to emphasize, we're talking about volunteers taking responsibility for our borders, and for the security of those borders. I think we have to give Commissioner Bonner great credit for having the courage, as well as the innovative instinct, to suggest channeling that volunteer spirit and that great concern about border security into an idea about an auxiliary. It just seems like a solid, sound idea.

WIAN: It will be interesting to see if his superiors will let this idea go any further, Lou.

DOBBS: Yeah, it looks like Secretary Michael Chertoff remembered who appointed him very quickly. We'll see what happens. Thank you very much, Casey Wian.

A volunteer U.S. Border Patrol would follow a proud U.S. tradition of citizens helping protect our country, and our interests, by the way. The U.S. Coast Guard auxiliary program has 30,000 volunteers. They participate in coastal security patrols all around the country. And the U.S. Air Force auxiliary has 60,000 volunteers. They participate in security patrols and search and rescue missions as well.

At the top of the hour here on CNN, ANDERSON COOPER 360. Heidi Collins tells us all about it -- Heidi.

HEIDI COLLINS, GUEST HOST, "ANDERSON COOPER 360": Thank you, Lou. Coming up next on 360, London under attack again, but this time police get a significant break when bombs fail to detonate.

Also, the New York City Police Department as an intelligence gathering operation? We'll explain that. Ahead on 360 -- Lou.

DOBBS: Look forward to that, Heidi, thank you.

When we come back here, China making a modest move -- perhaps a larger move in time -- to float its currency. What does it mean? Treasury Secretary John Snow will be here to tell us about that and more.

And renowned trial attorney David Boies on Supreme Court justice nominee Judge John Roberts. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The Bush administration can claim its first victory in the trade relationship with China. It is a modest victory, some say only a crumb. Nonetheless, it is progress. China today unpegged its currency from the yuan -- from the dollar.

I asked U.S. Treasury Secretary John Snow if boosting the yuan by a modest 2 percent amounts to much at all.

(BEGIN VIDEOTAPE)

JOHN SNOW, TREASURY SECRETARY: I think this move by the Chinese has enormous potential in it. It, over time, if you change your exchange rate on a daily basis by .3 percent, you're talking about potentially very large changes. You know that there are a number of economists who think the yuan is out of alignment by, oh, 10 percent, 20 percent, some say 30 or 40 percent. This mechanism over time would allow a movement to test those hypotheses.

DOBBS: We now have a trade deficit that is 6 percent of GDP. Is there, in your judgment, reasonable expectation that the dollar is going to lose value here in the months ahead in response to that massive deficit?

SNOW: Well, Lou, I never comment, as you know, on -- that's a clever way to get me to do it, but I never comment on the relative exchange rate of the dollar. What I will say is, that we are working hard to make sure that there's a global adjustment process in place to reduce the current account deficit. Partly, that's our savings rates; partly, it's trading partners growing faster; and partly, it's this greater flexibility that China has now begun to introduce into their currency arrangements.

DOBBS: What will be the specific exports that will benefit most from any significant decline in the value of the dollar versus the yuan? SNOW: Well, we'll have to wait and see how this plays out. I wouldn't expect to see any major changes in the short term. But over time, particularly as the Pacific Rim countries adjust in accordance with what happens to the yuan...

DOBBS: Is the administration prepared to offer any guidance to the Chinese about what is acceptable and what is not?

SNOW: Well, we're trying to do that. We're disappointed, of course, that China's markets aren't more open to us, that they haven't broadened the ability of -- liberalized the ability of U.S. firms to get into their markets, financial markets, other markets, own larger shares in their enterprises.

Trade's got to be a two-way street. That's one of the messages we continue to repeat. Trade has to be based on rules. There has to be respect for intellectual property rights. Counterfeiting of products is theft. It shouldn't be allowed.

So Lou, we're engaged. The new ambassador overseeing the U.S. trade office, Rob Portman, is very forceful, very effective. So is Carlos Gutierrez, the new Commerce secretary. I put my voice in there. The president does. I think they know we're disappointed at the pace of progress. We want trade to be based on rules, and trade's got to be a two-way street.

DOBBS: Have you given them any sense of a deadline?

SNOW: Well, I'm not sure the Chinese react to deadlines. They know where we're coming from. The action today, I think, is positive on the currency. We're going to continue to press for the sorts of behaviors that we need to see in order for trade to be mutually advantageous and for American enterprises to have the opportunities in China that China's enterprises have in the United States. That's only fair. And we're going to press for it.

DOBBS: Treasury Secretary John Snow, thank you.

SNOW: Thank you.

DOBBS: Reminder to vote in our poll tonight. Do you believe the Bush administration is doing enough to significantly reduce our trade deficit with China? Yes or no. Cast your vote at LOUDOBBS.com. We'll have the results here in just a few minutes.

Coming up next, judging Judge Roberts. I'll be talking with one of the country's most renowned trial attorneys. He'll be here to share his thoughts on the president's choice for the Supreme Court. David Boies joins me next. Stay with us.

(COMMERCIAL BREAK)

DOBBS: My guest tonight says Supreme Court nominee John Roberts is a brilliant attorney and judge. David Boies is a renowned trial attorney. He, of course, represented Vice President Al Gore in the 2000 recount and argued the case before the Supreme Court. He joins us here tonight.

Good to have you with us, David.

DAVID BOIES, ATTORNEY: Good to be here.

DOBBS: From a brilliant attorney calling another attorney brilliant, that's high praise indeed, particularly one who is in the case of Judge Roberts, considered to be a conservative, and you obviously a liberal.

BOIES: He's clearly more conservative than I am. And I'm sure there are a great many issues that will come before the court that he and I would disagree on. But I think that one thing that everybody who knows him, or at least everybody who I know who knows him, believes is that he is a very careful judge. He's a very fair-minded judge. He has a lot of integrity. And he is very smart.

DOBBS: He is very smart. As you look at his resume, distinguished public service. You worked with him. You've been on the same side. Tell us what the experience was like.

BOIES: Well, he represented the states, 19 states who were suing Microsoft at the same time I was representing the United States Department of Justice suing Microsoft. And he represented the states on appeal, and did an excellent job at that.

DOBBS: And as we hear rumblings -- and I will tell you, I'm hearing this not only in my capacity as a journalist, but my friends who are liberals, many of them are simply gnashing their teeth because there's nothing to get a hold of here. And they're scared to death of this guy because they really believe he is the archconservative that they've always feared would step forward.

What are your thoughts?

BOIES: I think he is conservative. And he is going to move the court to the right, there's no doubt about that. Replacing Sandra Day O'Connor with Judge Roberts is going to move the court to the right. But I don't think he is somebody who is doctrinaire. He is not an ideologue. He's not going in to reverse settled law, I don't believe. I believe he's got enormous respect for the integrity and role of the Supreme Court.

DOBBS: My conservative friends are just as fearful that he is another David Souter, which sounds like almost the worst thing a conservative can say about a Supreme Court justice, or maybe I can say Ginsberg, I don't know.

BOIES: I think it's a compliment.

DOBBS: Well, I understand. But these conservatives are concerned that he is going to be pragmatic. At his confirmation hearing in 2003, to move to the appellate court, he said he sees Roe v. Wade as settled law and that he accepts that.

Does that -- would you interpret that to mean that he would not be one who would move against Roe v. Wade, or do you think otherwise?

BOIES: I would be very surprised if he were to try to undo settled constitutional law like Roe v. Wade. On the other hand, obviously the devil is in the details.

DOBBS: Right.

BOIES: And I would expect that he would be more conservative than Justice O'Connor has been in some of the issues that come up in how to apply Roe v. Wade -- what kind of exceptions are appropriate.

DOBBS: One of the other complaints is that Judge Roberts -- from liberals in particular -- is that Judge Roberts was helpful to Governor Jeb Bush in the recount of 2000. Do you think that is a fair strike for liberals to hold against him?

BOIES: No. He was a lawyer. He is a long-time Republican lawyer. He is a member of the, I think it's the Republican Lawyers Association. I've been a member of the comparable group for Democrats under the auspices of the Democratic National Committee. You're representing your client. Now, you believe in your client. The reason he's on the Republican side is he believes in the Republican side. But that shouldn't disqualify you from holding a position in the judiciary.

DOBBS: Not knowing whether you would have any ambitions in this direction, I wouldn't be astonished that any Democratic president would not reach out to David Boies to move to the Supreme Court. And irrespective of your politics, you know, it seems like the first thing should be your character and your talent.

BOIES: I think it's your character and your qualifications. And I think ideology plays a part. I think if you get somebody who's way off in the extreme, I think ideology plays a part. But I don't believe that Judge Roberts is off on the extreme.

DOBBS: David Boies, we thank you for being here. It's always good to talk to you, to have your insights into any issue, or any person, as in this case this evening. Good to see you.

BOIES: Thank you.

DOBBS: The results of our poll, 98 percent of you responding say you do not believe the Bush administration is doing enough to significantly reduce our trade deficit with China. We will pass that along to the White House tomorrow morning first thing.

And finally tonight, Judith Miller, the Pulitzer prize-winning "New York Times" reporter, she has now been in jail for 15 days for failing to disclose her confidential sources in the White House CIA leak case.

And that is our broadcast for this evening. We thank you for being with us tonight. Please join us here tomorrow. Our special report "Red Storm", a critical hearing on China's exploding economic and military. What exactly are this communist nation's global ambitions? Be with us.

And then "Heroes." We focus on one Marine who won the Bronze Star trying to save his wounded comrade in the Battle of Fallujah. We'll have his story, a great deal more, please be with us.

Good night from New York. ANDERSON COOPER 360 starts right now with Heidi Collins. Heidi.

END

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