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LOU DOBBS TONIGHT

Escalating Political Confrontation Over Patriot Act; Capitol Hill Showdown; War on Middle Class; Transit Strike Frustrates New York City Commuters; Mexico Urges Defeat Of Border Fence Proposition; China's Economy And Influence Grows As It Buys Oil From Syria; U.S. Cutting Troops In Afghanistan; Cuba Has Harsh Words For U.S. Diplomat There

Aired December 21, 2005 - 18:00   ET

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


KITTY PILGRIM, CNN ANCHOR: Good evening, everybody.
Tonight, President Bush raises the stakes in the battle over the Patriot Act. It's a confrontation over civil liberties and national security.

Vice President Dick Cheney forces massive spending cuts through the Senate. We'll have a special report on the impact on the middle class.

Plus, Mexico's President Vicente Fox interferes in U.S. efforts to secure our southern borders.

And United Nations Secretary-General Kofi Annan loses his cool as he tries to deflect criticism in the oil-for-food scandal.

We begin tonight with the escalating political confrontation in Washington over the Patriot Act. President Bush today accused Senate Democrats of jeopardizing national security by blocking the renewal of the act. The president's opponents insist they are prepared to extend the act but only for three months. Sixteen key provisions are due to expire in 10 days.

Suzanne Malveaux reports from the White House -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Kitty, of course there is already somewhat of a deal or a compromise that is in the works. Behind the scenes, Senator Arlen Specter and others, of course, hoping to push forward the Patriot Act.

This is really a critical piece of legislation for the president. He has invested a great deal of political capital in convincing Americans that he is strong on national security. And all of this, of course, comes at a difficult time for this administration as members of Congress prepare for hearings to determine whether or not President Bush overstepped his bounds in pushing forward a domestic spy program.

(BEGIN VIDEOTAPE)

MALVEAUX (voice-over): Countdown to the holidays and President Bush isn't close to getting a break.

SEN. PATRICK LEAHY (D), VERMONT: Our goal is to mend it or extend it, not end it.

MALVEAUX: Wednesday, the president and Democrats were fully engaged in a high-stakes political game of chicken. At issue, the renewal of the administration's broad anti-terrorism law, the Patriot Act.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: In order to protect America, the United States Senate must reauthorize the Patriot Act.

MALVEAUX: While many Democrats and some Republicans are blocking a vote on the measure because they believe it violates civil liberties, Mr. Bush insists it's essential to national security. Eight Republican senators joined Democrats in urging the president to extend the act for another three months to allow for more debate, but Mr. Bush made it a point to stop before cameras to insist Congress renew the law in entirety, before it expires by the end of this year.

BUSH: The expiration of this vital law will endanger America and will leave us in a weaker position in the fight against brutal killers.

MALVEAUX: And he sent his surrogates out to reassure Americans the act would not violate their civil liberties.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: The Patriot Act gives us the ability to do that in a way that respects the Constitution, respects civil liberties, but gets the job done.

ALBERTO GONZALES, ATTORNEY GENERAL: The Patriot Act includes many protections for civil liberties.

MALVEAUX: But that message continues to be overshadowed by the controversy over a secret domestic spy program. More political fallout came Wednesday after a federal judge who sits on the court that reviews that spy program abruptly resigned. A colleague tells CNN that he believes Judge James Robertson quit to protest that program. Robertson has declined interview requests.

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: Yes, I don't know the reason why the judge resigned from the FISA court.

MALVEAUX: Going into the holidays, the president tried to keep the focus on the progress in Iraq with a trip to the Naval Medical Center in suburban Washington, where he visited wounded Marines and awarded Purple Hearts.

BUSH: Thanks for being an important part of this march for freedom.

(END VIDEOTAPE)

MALVEAUX: Republican insiders say, of course, the danger is whether or not this domestic spy program and the investigation next year, if it overshadows some of the other domestic items, of course, legislative agenda that the president is trying to push forward, but they say that the president is going to go ahead with this strategy of explaining and defining what it is that this program is, at the same time, perhaps even experimenting about trying to explain in more detail without necessarily compromising that program.

But Kitty, the big worry here, the danger here, they know this story is not going to go away. They certainly don't want it to overshadow some of the successes that this administration has had -- Kitty.

PILGRIM: Thanks very much. Suzanne Malveaux.

Well, a showdown on Capitol Hill over other critical issues as well. Vice President Dick Cheney played a decisive role in a Senate vote on spending cuts, and also the battle whether to drill for oil in the Alaska Wildlife Reserve reached a climax.

Ed Henry reports.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): Signs of high drama everywhere. Vice President Cheney arriving early to cast tie-breaking votes. Senator Ted Stevens sporting his lucky Incredible Hulk necktie, hoping it would help him muscle through a big bill. And Senator Chris Dodd hobbling in after surgery because Democrats were desperate for votes.

SEN. CHRISTOPHER DODD (D), CONNECTICUT: I had a full knee replacement two weeks ago.

HENRY: Cheney cast the deciding vote to help Republicans eke out a budget deal with $40 billion in spending cuts.

RICHARD CHENEY, VICE PRESIDENT OF THE UNITED STATES: The vice president votes in the affirmative.

HENRY: But Stevens was dealt a stinging defeat when the Senate blocked his attempt to open the Arctic National Wildlife Refuge to oil drilling. With the help of Dodd, Democrats beat Stevens by arguing the provisions should not be included in a defense spending bill.

SEN. HARRY REID (D-NV), MINORITY LEADER: Our military is being held hostage by this issue, arctic drilling.

HENRY: But Stevens is vowing to get his way, even if it keeps the Senate around for the holidays.

SEN. TED STEVENS (R), ALASKA: I can't go home for Christmas. I've already canceled. I've already canceled my trip.

I spent my time before in the chair on New Year's Eve. I don't look forward to it, but I want you to know we're going to be here until then, until we settle this problem.

(END VIDEOTAPE) HENRY: The Senate majority leader, Bill Frist, just a few moments ago, said he hopes to get out as soon as possible, not stick around through the holidays. One big issue they still have to deal with, of course, that renewal of the Patriot Act.

I can tell you there's been a flurry of activity on the Senate floor, senators trying to horse trade, trying to work out a deal. Still no deal yet, though -- Kitty.

PILGRIM: Ed, who has the political advantage in Congress right now? Republicans or Democrats?

HENRY: You know, that's the big question of the moment. Democrats think that they do because this has not just been a Democratic filibuster. You had four Republicans joining that filibuster.

But the problem for Democrats is that their leader, Harry Reid, last week boasted about "killing the Patriot Act." So this whole idea where they're now saying, "Let's extend it, not end it," that makes it a little more difficult because last week they were boasting about killing it altogether.

I think right now there's a sense that both sides are getting tired of all the countercharges. They realize this may backfire on both of them. And there's a saying around here that once they start smelling the jet fumes, they want to get home.

I think they're starting to smell those jet fumes. They want to get home for the holidays, too. There might be a deal -- Kitty.

PILGRIM: One would suspect. OK. Thanks very much. Ed Henry.

Well, as Ed just reported, the Senate narrowly approved billions of dollars of federal spending cuts, and critics say those cuts are nothing less than a war on the middle class.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Vice President Dick Cheney cast the deciding vote. The bill cuts $40 billion out of the budget. Republicans declared themselves good fiscal stewards.

SEN. BILL FRIST (R-TN), MAJORITY LEADER: We need to tighten our belts and learn how to do more with less. And that's exactly what the American people have told us, and today we have delivered.

SYLVESTER: But Democrats charge the budget acts falls disproportionately on the poor and middle class. College students will have to pay higher interest rates. Low-income families' Medicaid co-payments will rise. There are tighter restrictions for the elderly seeking long-term care, and less money devoted to child support enforcement.

The savings gained will go to offset tax cuts on dividends and capital gains that favor the wealthy.

SEN. KENT CONRAD (D), NORTH DAKOTA: I don't know of any religion practicing in America today that preaches from the pulpit that what one should do is take from the least among us to give to those who have the most.

SYLVESTER: The conference bill was voted on in the House Monday in the predawn hours. Lawmakers had only four hours to pore through 770 pages. When the ink dried, cuts in subsidies to pharmaceutical companies and other special interest groups were removed. But cuts that would impact middle class Americans remained.

BOB GREENSTEIN, CTR. ON BUDGET & POLICY PRIORITIES: It's as though we were turning Charles Dickens' "Christmas Carol" upside down, rewarding Scrooge with even bigger tax cuts and taking Tiny Tim's crutch away.

SYLVESTER: What's more, critics charge the budget reconciliation bill will end up not saving money but adding to the deficit when the $40 billion in budget cuts is erased by $70 billion in promised tax cuts.

(END VIDEOTAPE)

SYLVESTER: Now, there were changes made to the conference bill in the Senate. So the new version now has to go back to the full House. That's expected to happen sometime in January.

So this fight is not over yet, even though the Republican leadership was hoping to have this all wrapped up before the holiday weekend -- Kitty.

PILGRIM: The fight's not over but the direction so far is clear. Thanks very much. Lisa Sylvester.

Well, still to come, Defense Secretary Donald Rumsfeld says Osama bin Laden may not be in control of al Qaeda.

Plus, is President Bush's so-called strategy for victory in Iraq convincing the American people? We'll have a special report.

And Mexico's President Vicente Fox is trying to dictate U.S. border policy again. One of the top U.S. advisers is my guest.

(COMMERCIAL BREAK)

PILGRIM: A legal setback today for the Bush administration in the war on terror. A federal appeals court today ruled the government cannot transfer terrorism suspect Joseph Padilla to civilian custody.

Now, Padilla been held in a Navy brig in Charleston, South Carolina, since 2002. Today, the appeals court said the government's actions have left the impression that Padilla may have been held by mistake.

A senior State Department official says a radical Islamist terrorist wanted for murder in this country has been set free in Lebanon. Last week, the terrorist, Mohammed Hamadi, was released on parole by Germany after 19 years in jail. He was convicted by a German court of murdering U.S. Navy diver Robert Stethem during the hijacking of a TWA jet in 1985.

(BEGIN VIDEO CLIP)

SEAN MCCORMACK, STATE DEPT. SPOKESMAN: What I can assure anybody who's listening is, including Mr. Hamadi, is that we will track him down, we will find him, and we will bring him -- bring him to justice in the United States for what he's done. And we will make every effort working with the Lebanese authorities or whomever else to see that he faces -- faces trial for the murder of Mr. Stethem.

(END VIDEO CLIP)

PILGRIM: Robert Stethem was one of 39 hostages held -- Americans held hostage when terrorists attacked the TWA jet on a flight from Athens to Rome.

Defense Secretary Donald Rumsfeld declared that Osama bin Laden may no longer be running al Qaeda. Now, Rumsfeld made his comments while traveling to Pakistan.

And Barbara Starr reports from the Pentagon.

(BEGIN VIDEOTAPE)

OSAMA BIN LADEN (through translator): Your security is not in the hands of Kerry or Bush or al Qaeda.

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): The last time the world heard from Osama bin Laden was just before the U.S. presidential election, proof he stayed in one place along enough to tape a message.

The CIA noted with interest several details: a backdrop, lighting, a camera. Other people were there and saw bin Laden.

Defense Secretary Donald Rumsfeld now offering the conventional assessment that if bin Laden is alive, he is probably spending most of his time trying to avoid being caught.

DONALD RUMSFELD, SECRETARY OF DEFENSE: I have trouble believing that he's able to operate sufficiently to be a -- in a position of major command over a worldwide al Qaeda operation. But I could be wrong. We just don't know.

STARR: No one is sure why bin Laden hasn't made a new tape. His top deputy has made several tapes recently.

RUMSFELD: We know he has a fondness for talking on tapes and videotapes, and he seems not to be terribly fond of it for the last period of months.

STARR: The U.S. government believes bin Laden survived the recent earthquake in Pakistan and uses couriers now to communicate. But the U.S. hopes the circle around bin Laden is shrinking.

CNN's Dana Bash spoke to Vice President Dick Cheney.

CHENEY: He had a lot of damage to his organization, captured and killing key operatives in the al Qaeda organization.

STARR: Four of bin Laden's most senior operations and planning experts now in U.S. custody at undisclosed locations.

Two operatives killed in Pakistan in separate attacks this year by CIA drones firing missiles, U.S. sources say. Although, the deaths were never officially confirmed.

(END VIDEOTAPE)

STARR: And Kitty, U.S. military commanders, when asked the question, is it still important to get Osama bin Laden, to capture or kill him? They say, yes, of course, they know it's very important to the American people, but that the war on terrorism now with the worldwide terrorist network is really far beyond just one man, far beyond just Osama bin Laden -- Kitty.

PILGRIM: Thanks very much. Barbara Starr.

Well, President Bush's defense of his strategy in Iraq appears to have helped his overall approval ratings. However, some of the new polls suggest the American people still have serious concerns about the future of Iraq.

And Bill Schneider reports.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): On Sunday night, President Bush acclaimed the election in Iraq as a milestone.

BUSH: A landmark day in the history of liberty.

SCHNEIDER: Americans seem to agree. Sixty-five percent see the U.S. making significant progress toward establishing democratic government. But the public seems to have a problem when President Bush talks about victory, as he's been doing recently.

BUSH: We're releasing a document called the "National Strategy for Victory in Iraq."

SCHNEIDER: Most Americans do not believe President Bush has a plan that will achieve victory, as he defines it.

BUSH: Victory will come when the terrorists and Saddamists can no longer threaten Iraq's democracy, when the Iraqi security forces can provide for the safety of their own citizens, and when Iraq is not a safe haven for terrorists to plot new attacks on our nation.

SCHNEIDER: Do Americans think it's likely that in the next few years Iraq will have a government that will not be overthrown? They're not sure, 50-50.

Is it likely that Iraq's military and police will be able to ensure security without help from the U.S.? Sixty-two percent say no.

Is it likely that Iraq will be able to prevent terrorists from using their country as a base for planning attacks against the United States? Sixty-three percent say no.

The U.S. public is confident about what Americans can do, but not about what Iraqis can do.

The president sees a process in Iraq.

BUSH: We will see the Iraqi military gaining strength and confidence and the democratic process moving forward.

SCHNEIDER: Americans don't want to see a process, they want to see a leader, someone who embodies the hopes and aspirations of the Iraqi people, like Lech Walesa in Poland or Nelson Mandela in South Africa, or, to use President Bush's example, George Washington in the early United States.

Americans believe in leaders. So far they don't appear to be seeing one emerging in Iraq.

(END VIDEOTAPE)

SCHNEIDER: The early election returns in Iraq do not look encouraging. They seem to confirm Iraq's religious and ethnic divisions. Iraqis do not appear to be uniting behind a popular new leader -- Kitty.

PILGRIM: All right. Thanks very much. Bill Schneider.

Well, just ahead tonight, Kofi Annan closes the year with a bang. Why the U.N. secretary-general loses his cool at his yearend news conference. We'll have that next.

And then, New Yorkers brave the cold for a second day of a crippling transit strike. How one judge is threatening to take action against union leaders. We'll have that next.

Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Astonishing scenes at a news conference by United Nations Secretary-General Kofi Annan today. The secretary-general lost his temper with a reporter who asked repeated questions about Annan's role in the U.N.'s oil-for-food scandal.

Richard Roth reports.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Ladies and gentlemen, the secretary-general of the United Nations.

RICHARD ROTH, CNN SR. U.N. CORRESPONDENT (voice-over): It was billed as an end-of-the-year news conference by the secretary-general. But any holiday cheer was soon shattered. At the start, Kofi Annan offered advice to his eventual successor.

KOFI ANNAN, U.N. SECRETARY-GENERAL: They need thick skin. Thick skin. They need a sense of humor.

ROTH: Up until now, the Nobel Peace Prize winner had in public kept his cool, but he lost it when asked by a British reporter about a Mercedes bought by his son and then shipped with a diplomatic discount to Africa, a slice of the overall oil-for-food scandal.

JAMES BONE, REPORTER: The Volcker report says the Mercedes was bought in your name. So as the owner of the car, can you tell us what happened to it and where it is now?

Now, my question is, it's true that we missed a lot of stories in the oil-for-food scandal, and the U.N. hasn't made it easy. And even your answer today on the Mercedes so far hasn't made it easy. Some of your own stories, your own version of events don't really make sense.

I would like to ask you particularly...

ANNAN: I think you're being very cheeky here.

BONE: Well, let me...

ANNAN: And I have to tell you -- no, hold on, hold on.

BONE: May I ask my question?

ANNAN: Listen, James Bone, you've been behaving like an overgrown school boy in this room for many, many months and years. You're an embarrassment to your colleagues and to your profession. Please stop misbehaving and please let's move on to a more serious...

BONE: My question...

ANNAN: No, move on to a serious -- move on to a serious journalist.

Go ahead. You go ahead.

ROTH: The U.N. Correspondents Association, UNCA, protested Annan's response.

JAMES WURST, U.N. CORRESPONDENTS ASSOCIATION: I have to tell you that James Bone is not an embarrassment. He's a member in good standing of UNCA. He had every right to ask the question.

ANNAN: I agree he has a right to ask questions, and I came here to answer questions. But I think you also have to understand that we have to treat each other with some respect. And you can ask questions. There are ways of asking questions and ways not to ask questions.

(END VIDEOTAPE)

ROTH: The reporter, James Bone, has been on a one-man mission on the Mercedes question, consistently raising it at the daily press briefings where Annan does not attend. But the U.N. spokespeople can only refer people to the final Volcker Report, the independent inquiry into oil-for-food, in which case Annan was not specifically linked to his son getting a diplomatic discount on the car.

The secretary-general, Kitty, may have ignited things by telling the press corps they missed the story on oil-for-food, they follow too many leaks and other people's agendas -- Kitty.

PILGRIM: Richard, you've been at the U.N. for a while. You are a veteran there. This is pretty incendiary stuff over at the U.N. It generally stays almost noncommittal, polite.

What do you think really was behind this outburst? This is very uncharacteristic.

ROTH: It's the angriest I've ever seen him. And this has been going on for years. This really was the big blowup.

It wasn't just James Bone asking about oil-for-food. Annan has taken a very diplomatic line. For months, before the Volcker final report, he said let's wait until Volcker says what he says. But then Annan only took three questions at the post-oil-for-food press conference.

Earlier this year he said, "Move on, Chap" to a different reporter asking. So it's always been bubbling. And in a way, he baited the press corps.

Some here think he went too far. Others think James has been, as Annan said, badgering the spokespeople on this one issue. Annan has other bigger agenda items such as reform issues falling apart here this year.

PILGRIM: Richard, though, did he ever really answer the question?

ROTH: He never really went to answer it. He told me when I asked about the Mercedes earlier, "Talk to the lawyers. Some people are obsessed about the Mercedes. Talk to Volcker. Talk to the lawyers."

PILGRIM: Unbelievable. Thank you very much. Richard Roth.

Still ahead, Mexico continues its senseless attacks against a proposed U.S. border fence. We'll talk to the man in charge of boosting Mexico's tarnished image in America. That's coming up.

Plus, New York's transit nightmare, day two. Tomorrow could be a very decisive day in this ongoing labor dispute. We'll have a live report ahead. (COMMERCIAL BREAK)

PILGRIM: Coming up, Mexico's blunt attack against our nation and the efforts to build a border fence. We're going to hear from both sides of the issue.

But first, today's news headlines.

Investigators have made what could be a key discovery after Monday's seaplane crash off of Miami Beach, Florida. They found a huge crack in the plane's wing, on a key support beam. The owner of the aircraft announced today that it is grounding its entire fleet for inspection after that crash. The crash killed 20 people.

In suburban Baltimore today, two city police officers, a man and a woman, have been found shot to death in a home. Now, the suspect in custody is a fellow Baltimore police officer who knew the victims. He turned himself in two hours after the shooting.

And two New Orleans police officers caught in a tape beating a man in the French Quarter in October have been fired. Police said 64- year-old Robert Davis was drunk and resisting arrest. Davis denies those charges, and his trial begins next month.

Day two of the New York City transit strike. Still no end in sight.

New York City Mayor Bloomberg made his feelings all too clear about this walkout during a news conference today.

(BEGIN VIDEO CLIP)

MAYOR MICHAEL BLOOMBERG (R), NEW YORK: The illegal, selfish strike of 2005. This illegal, selfish strike is hurting our New York. This illegal and selfish strike, this strike is illegal. It's against the law. You can't go out and break the law because you think it's in your self-interest.

(END VIDEO CLIP)

PILGRIM: No question there.

Well, transit union leaders could be thrown in jail as soon as tomorrow for approving this strike.

Adaora Udoji is live tonight at New York's Penn Station -- Adaora.

ADAORA UDOJI, CNN CORRESPONDENT: Hi there, Kitty.

A long and frustrating day for seven million people in New York who are trying to get anywhere with the subways and bus workers still on strike. And we're at Penn Station, and we want to you take a look here, because it's really incredible.

Essentially, the police have blocked off an entire street. They've set up barricades. And what you're looking at is thousands of people who are trying to get home. They are trying to get on the Long Island Railroad, the New Jersey Transit as well as Amtrak. Those railways are unaffected by the strike. But because of the strike, there have been so many more people trying to get on those railways that they had to literally shut down this street.

The mayor says the city is still functioning, as you've just heard. Of course, he's very frustrated himself. There's also a tremendous amount of pressure on the unions today, because as you mentioned, a judge tomorrow says he'll consider jailing union leaders because of the earlier decision of holding them in contempt because of the failure to stop this strike which has been deemed illegal under state law.

Already the union is facing a million dollars a day fine and the workers are facing docked pay: two days docked pay for every day that they are missing out on strike. And the two sides have been meeting with an arbiter, but so far doesn't seem like we have -- obviously, they are still striking, and that has as we've seen, made Mayor Michael Bloomberg extremely frustrated. Here's what he had to say.

(BEGIN VIDEO CLIP)

MAYOR MICHAEL BLOOMBERG (R), NEW YORK: Working people are the ones that are being hurt. Bus boys are getting hurt, garment industry workers are getting hurt, owners of mom and pop businesses are being hurt. No one is being spared. And the people that get hurt the most are those that can least afford it.

(END VIDEO CLIP)

UDOJI: Also today, the union leader Roger Toussaint, he asked for patience here in New York and he responded a little bit to what the mayor and the governor have been saying about this illegal strike.

(BEGIN VIDEO CLIP)

ROGER TOUSSAINT, PRESIDENT, TWU LOCAL 100: Much has been said about the question of the -- that this strike is illegal, and that it violates the Taylor Law. And we have pointed out that there is a higher calling than the law, and that's justice and equality.

(END VIDEO CLIP)

UDOJI: After he made those statements, Mr. Toussaint said that he had to get right back to meeting with the state mediator who was trying to figure out exactly how far apart the two sides are on the big issue, it seems, holding everything up.

At least according to the union leader is pensions and how much employers have to contribute. So we're hopeful, lots of fingers and toes are crossed here in New York City that this strike will come to an end soon, Kitty.

PILGRIM: Lots of cold fingers and toes, right, Adaora? Thanks very much, Adaora Udoji at Penn Station in the thick of it. Now turning now to our nation's illegal alien crisis. The Mexican government's shameless attempts to influence U.S. foreign policy coming under increasing attack tonight. Critics say Mexico has a lot of nerve telling the United States how to best protect it's citizens by urging a defeat of the U.S. border fence proposal. Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Mexican President Vicente Fox has a long history with the Dallas-based public relations firm Allyn & Company. Rob Allyn worked on Fox's 2000 election campaign. The company's Web site boasts they're the Texans who made Fox president.

Now Allyn and Fox are at it again, but this time Mexico has hired the uber-flack to stir up opposition to a bill passed by the U.S. House of Representatives that would require a fence along about a third of the Mexican border.

COLIN HANNA, WENEEDAFENCE.COM: The Mexican government, if it's truly to be an ally of the United States, should do everything possible to stem the tide of illegal immigration, rather than firing P.R. barbs at the U.S. as a people and the U.S. Congress.

WIAN: Already Mexico is airing radio ads in Mexico, urging workers injured on the job in the United States to sue. And it's lobbying religious, business and community leaders in the United States. Mexico's U.S. P.R. firm has also worked for President Bush. It's trying to persuade either the White House or the Senate to water down border security legislation. In addition to more fences, the House bill increases penalties for illegal immigration and businesses who hire illegal aliens.

LUIS ERNESTO DERBEZ, MEXICAN FOREIGN MINISTER (through translator): A group of people that don't represent the majority of the United States have accomplished a temporary victory. They are trying to give the impression they have concerns about security and not immigration issues.

WIAN: Mexico's lobbying effort is likely just the beginning of an expensive battle that could dwarf national election campaigns.

JOHN STAUBER, CENTER FOR MEDIA & DEMOCRACY: There are many coalitions of political and business interests. Even the Republican Party is divided on this issue. And we're going to see, probably, tens or hundreds of millions of dollars put into political fights over border issues just between the United States and Mexico.

WIAN: For Mexico that's a small price to pay to protect the $20 billion a year it's citizens send home from the United States.

(END VIDEOTAPE)

WIAN: Mexico has effectively used U.S. P.R. muscle before, including in the early 1990s when it was promoting the passage of NAFTA. That trade agreement helped create the illegal immigration crisis now facing the United States, Kitty.

PILGRIM: Thanks very much, Casey Wian. Thanks, Casey.

Well, Rob Allyn, whose public relations firm is working with the Mexican government to weaken U.S. border security proposals joins me tonight from Dallas. Thanks for joining us, Sir.

Let me ask you, President Fox denounced the U.S. measures as shameful and his foreign secretary called the wall, "stupid." Isn't it detrimental to Mexico's P.R. to be using such language?

ROB ALLYN, PRESIDENT, ALLYN & COMPANY: Well, first of all, speaking of language, I think you've utterly mischaracterized our relationship. Our job is not to, as you say, weaken border security. Our job are to get the facts out about Mexico and about the progress that Mexico has made toward democracy, toward clean government, and toward economic stability over these last five years.

PILGRIM: Basically a P.R. campaign, correct?

ALLYN: Absolutely.

PILGRIM: Is that a characterization...

ALLYN: ... the job is to try to communicate facts and factual information about these issues. And I think if people had a fuller appreciation of what Mexico is really like and the role that Mexico plays in our economy, the positive role that Mexico plays as the second biggest trading partner of the United States, where we export $111 billion worth of U.S. products to Mexico every year.

If people had an appreciation of all the facts of that economic relationship, they would see issues like migration and border security at a completely different light.

PILGRIM: Well, fair enough, and yet there is this very difficult issue, politically, in the United States, of these massive illegal immigration going on. How do you deal with that in a P.R. campaign? Certainly you must address it, you can't simply talk about trade benefits.

ALLYN: We agree with President Bush and Senator McCain and many other leaders across the United States. The U.S. chamber of commerce, who believe that immigration is not only a fact, it is the central fact of the history of the United States of America.

I mean, these folks are pioneers who are coming in search of a better life. And the idea is to put the Statue of Liberty out there, welcoming those workers, not erect a wall. We should be building bridges with Mexico, not walls.

PILGRIM: Should we be welcoming illegal migrants?

ALLYN: Well, we should make the process safe and legal and orderly, as President Bush and Senator McCain and others have proposed, by creating a temporary guest worker program that allows us to have a controlled migration situation where people who are coming here for no criminal purpose.

But to make a positive economic contribution to the United States, to build our buildings, to farm our crops and to serve in our hospitality industry, et cetera, can be recognized and legal and have legal status and then be able to return home periodically to renew their homeland ties.

PILGRIM: Is that not Mexico dabbling in U.S. policy to be suggesting solutions to a domestic situation in the United States?

ALLYN: This is an issue that is important for both parties. And it's very much a U.S. issue as well. It's very much in the United States interest to form a better and closer relationship with Mexico. And we've made great strides in doing so, as Mexico made such great strides.

You know, Mexico under this government has reduced poverty by 30 percent. There are 30 percent less people living in extreme poverty in Mexico.

PILGRIM: Then why are people coming to the United States for the job opportunities that they seek illegally. Poverty has been reduced so drastically in Mexico, Sir?

ALLYN: Because there are -- certainly, there are higher wages. These are markets, market forces on either side. Mexico is a business partner of the United States. And they supplied labor that we badly need in this country for our industries, and they also supply a market for our products.

You know, we export more products to Mexico than all of the rest of Latin America -- I'm sorry, let me finish, than China, than to Japan, thank to German. Mexico is our second biggest trading partner after Canada. We should look at Mexicans as business partners, not as enemies.

PILGRIM: Certainly the trade benefits are considerable, and we give you that point. Certainly there are other very deep concerns. And one is the border violence that goes on, on a daily basis on one of our country's important borders. And should Americans have to deal with that? That is a problem that Mexico should address also?

ALLYN: Well, if you're speaking about the drug gangs along the border.

PILGRIM: And the violence with the immigration.

ALLYN: At border at Laredo, for example. We need to keep in mind that all of the money that pays for the weapons that these gangs use all comes from drug consumers in the United States.

This is an issue for both the United States and Mexico, and the two nations have agreed to work together on reducing violence. And what you're really seeing right now at the border is a situation where President Fox and a clean rule of law government in Mexico has finally decided to crack down on corruption and crime and drugs. And so when you shine the light in those drug corners, all the cockroaches scurry out.

PILGRIM: We'll see how effective that policy is. The numbers will tell soon enough. Mr. Allyn we do have to cut it off here. We do appreciate you coming on to discuss it. I'm sure this is grounds for further discussion.

ALLYN: Thank you, I'm honored to be here.

PILGRIM: That brings us to the subject of our poll tonight. Do you believe American companies should be representing the interests of the Mexican government in the battle over border security in this country. We'll bring you the results later in the broadcast.

Congressman Tom Tancredo of Colorado, one of our nation's fiercest border security advocates, joins us tonight from Denver with his take on Mexico's fight to weaken our border security. And thanks for being with us, sir.

REP. TOM TANCREDO (R), IMMIGRATION REFORM CAUCUS: Pleasure. Especially after listening to that. I mean, you think to yourself, now, I wonder if I had more money than the Mexican government has in buying that PR firm, would he be explaining my facts to you? I think so.

He made it look as though he's committed to this on moral grounds. He's committed because they wrote him a check.

PILGRIM: It's a commercial relationship, clearly.

TANCREDO: Right, clearly.

PILGRIM: And let's get to some of the things which you said which are very compelling, very harsh comments directed at the Mexican president, and also let's look first at the entire issue of the President Fox taking on the United States and really trying to dictate domestic policy.

You said recently, which U.S. citizen voted Vicente Fox into office. Vicente Fox was not elected by the American people. I'm assuming you think it's highly inappropriate that the Mexican president is discussing a bill that passed in our House of Representatives by a fairly wide margin.

TANCREDO: I cannot believe that I am -- I'm certainly not the only one complaining. I'm sure there are other members of Congress complaining about this. I hope so. But the person I want to hear complaining about this is the president of the United States.

His silence here is deafening. Here is a president of another country, a foreign country, condemning the actions of the American Congress, threatening, mind you, threatening to get international support in order to stop us.

What is he going to do? Get a coalition of the willing to attack the border fence? It is incredible. I don't know, as I've said, I don't know what chutzpah is in Spanish, but whatever it, is this guy's got it. The president of Mexico.

And as for the wonderful things he's done for Mexico. The economy booming, everybody happy, the Pew poll you reported not too long ago shows half of the Mexican population wants out. They want to get the heck out of the country, they'll come north, they'll go south, they'll go any place they can go for a better life. I don't blame them.

The country of Mexico, the government of Mexico, is corrupt from the cop on the street to the highest levels of government. That is the way it is. I wish it were not the case.

And believe me, all of this -- this rhetoric about turning a new leaf in Mexico and creating a better -- a more -- a framework for laws to be interpreted and acted out, doing something about reining in their military, it's just words.

You should see what's happening on the border, with the Mexican military. The military, providing actually cover for the transportation of drugs into this country. There is nothing that I would trust that they would trust that they would say about what their future plans are, and then on top of it, you add the insult of the president of Mexico telling us we can't try to defend and protect our own border. That's gutsy.

PILGRIM: Well, we certainly appreciate you coming on the program and speaking your mind on it.

TANCREDO: It's a pleasure.

PILGRIM: This topic is very much on the forefront of our program. Thank you very much, Tom Tancredo.

TANCREDO: Thank you.

PILGRIM: Still ahead, communist China's alarming new oil deal. A complex deal that will give China key oil assets in terrorist linked Syria.

Plus the latest on America's troop withdrawal plans in the war against radical Islamist terrorists. General David Grange is next. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Tonight, communist China is once again making a blatant power grab for key global oil assets. And China is teaming up with a one-time arch enemy, India, in a new effort to fuel its massive economic and military expansion. Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): Canada's got what China wants, oil. China currently imports about 40 percent of its oil and the U.S. Energy Department forecasts that amount will rise to 75 percent over the next two decades. This week, China's national petroleum company joined forces with India's oil and natural gas company to buy Petro Canada's 38 percent stake in Syria's al-Furat Petroleum Company. The two companies already work together in Sudan. Expect to see more of that cooperation.

JOSHUA EISENMAN, AMERICAN FOREIGN POLICY COUNCIL: I think, because they're state run companies, because there is political influence being wielded here, we should also expect to see this expand to other places, and yes, this is probably the beginning of what we'll see in the next several years is a cooperative effort by the two giants of Asia.

TUCKER: Opinion polls reflect an unease with China's growing power. In polling done earlier this month, Gallup found that 50 percent of Americans consider China a military threat. 64 percent see China as an economic threat. Twice as many as those who don't.

And the concerns are not just those of Americans alone. A poll conducted in Japan and in the United States found that 53 percent of Americans and 72 percent of Japanese don't trust China.

FRANK GAFFNEY, PRES. & CEO, CENTER FOR STRATEGIC POLICY: Sun Tzu, the famous strategic thinker are of ancient China used to say, you want to beat your enemy without having to go to war with them. That's what China is trying to do, using our money in very strategic ways.

The public gets it, I hope our politicians will wake up to the danger, too.

(END VIDEOTAPE)

TUCKER (on camera): While the new figures rank China as the sixth largest economy of the world, it's torrid rate of growth this year alone is believed to have pushed it to be the number four economy, trailing only the United States, Japan and Germany, Kitty?

PILGRIM: Thank you very much, Bill Tucker.

Coming up at the top of the hour here on CNN, THE SITUATION ROOM, and Wolf Blitzer. Wolf?

WOLF BLITZER, CNN ANCHOR: Thank you very much, Kitty. Lots going on in THE SITUATION ROOM. Saddam Hussein, angry and defiant in court. This time he claims he's been beaten. We'll take you inside the court room.

Also Congressman John Murtha on the war of the White House secret wiretaps. He's also in THE SITUATION ROOM.

Plus, Hillary Clinton knocking off her Republican competition. We'll find out why her Senate challenger has now dropped out of the race.

And Elton John ties the knot along with hundreds of other gay couples across the United Kingdom. Is the United States ready for same sex unions as well? We'll take a closer look.

All that, much more at top of the hour -- Kitty.

PILGRIM: Look forward to it, Wolf. Thanks.

Worshipers at the Vatican did a double take when the Pope-mobile drove by in St. Peter's Square. Pope Benedict was dressed in a red cape and a red hat which made him look a little like St. Nick. The pope was just trying to keep warm. Any resemblance to Santa Claus was purely incidental.

Vatican watchers say this is the first time that the pope has worn this particular hat or a pope, since the 1960's.

And just ahead, the Pentagon is cutting the number of U.S. troops in Afghanistan. General David Grange joins us next.

And communist Cuba at it again. We'll report on Cuba's blistering attack against the top new U.S. diplomat in Havana. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: The Pentagon has announced plans to cut the number of U.S. troops in Afghanistan. Now, that reduction means the number of American troops in Afghanistan will fall to 16,000 next spring. The U.S. troops are replaced by NATO troops. NATO will then be responsible for security in about three-quarters of Afghanistan.

Joining me now is General David Grange. Thanks for being with us. Do you think NATO's up to the task?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Oh, I believe so, and it really depends on the countries that provide those troops. It's not a one for one. Some countries provide troops better trained in certain requirements than others, so you have to match the task to that country's troops that are being provided.

PILGRIM: You know, it was announced yesterday that the 4th Brigade 10th Mountain Division will not go to Afghanistan this coming March. How do you assess that?

GRANGE: Well, I think it's always been the planned reduction in Afghanistan, just like in Iraq, and if the conditions are met, which I think that they are in this case, then it's easier to not send a scheduled unit and just bring back the one that you are going to reduce, and that way you meet your objective of reduced numbers.

PILGRIM: So it's a plan that makes sense to you?

GRANGE: I think so.

PILGRIM: OK. Let's talk about the new Afghan National Army. They have about 26,800 people. The Afghan National Police Force has about 55,000 people in it at this point. Are these forces sufficient for keeping order in the country, do you think? GRANGE: They're sufficient with the NATO and the remaining American forces working together again, task specific, who you use where in this country. For defensive or offensive operations it all depends, but together they're sufficient.

PILGRIM: General grange, Defense Secretary Rumsfeld said he doesn't really know where bin Laden is. Is it important that we do know that?

GRANGE: Well, he could be dead, he could be alive. If he's alive, I doubt if he's in a cave. I think he's in a secretive safe house living quite well if that's the case.

PILGRIM: Could that be Pakistan, do you think?

GRANGE: I think Pakistan.

PILGRIM: Yes, thank you very much, General David Grange.

GRANGE: My pleasure.

PILGRIM: Thank you.

Well, still ahead tonight, a diplomatic welcome, Havana style, a SPECIAL REPORT on communist Cuba's disgraceful treatment of America's newest top diplomat.

Plus we'll also have the results of tonight's poll. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Tonight, America's newest diplomat in Cuba could be excused for having second thoughts about his new position. Michael Parmly has served our country in some of this world's most dangerous locations. But he's never received the kind of savage welcome he's receiving in communist Cuba. Lucia Newman reports from Havana.

(BEGIN VIDEOTAPE)

LUCIA NEWMAN, CNN HAVANA BUREAU CHIEF (voice-over): The honeymoon, if there ever was one, is over for Washington's new man in Havana, Michael Parmly. For two nights running, Cuban State Television, a mouthpiece of the communist government, has carried out a political crucifixion of Washington's top diplomat, likening him to a pig in sheep's clothing.

ARLEEN RODRIGUEZ, "ROUND TABLE" PANELIST (through translator): He's like a pig that puts on clothes but is still a pig. And in this case, the pig is the American policy against Cuba, a policy that attempts to strangle us one way or another.

NEWMAN: The government accuses Parmly, seen here hosting a reception for Cuban dissidents on Human Rights Day, of being the new point man for the Bush administration's Cuban transition plan, that aims to hasten the downfall of the communist regime, a goal Secretary of State Condoleezza Rice reaffirmed just this week. Parmly so far won't respond to the Cuban TV attacks.

MICHAEL PARMLY, U.S. ENVOY TO CUBA: For the benefit of the Cuban people.

NEWMAN: But, in an interview last week at his residence, this elegant Bostonian who was stationed in Afghanistan and speaks impeccable Spanish told us his great love is working for post-conflict situations.

(on camera): So are you here to prepare for the transition? That would be the obvious question.

PARMLY: I think the transition has already started. So I can help by being of assistance to any Cuban who is pushing for change.

NEWMAN (voice-over): The Cuban government describes the Cuban dissidents as shameless mercenaries of Washington. It's plastered the city with posters telling Cubans the Bush transition plan will take away everything that is sacred.

PARMLY: The plan Bush is going to take away your right to rest, it's going to take away your right to friendship, it's going to take -- what? Where? What page in the plan Bush, as they call it, is that written?

NEWMAN: Parmly refutes a common perception that the Bush administration is attempting to choreograph regime change in Cuba.

PARMLY: No, no, no. It's for the Cuban people to decide. We are there to assist.

NEWMAN: All this poison to the ears of the Cuban government which last December put up graphic posters of Abu Ghraib prisoners in front of the U.S. diplomatic mission.

(on camera): Does that bother you, that Abu Ghraib poster?

PARMLY: No, no, freedom of speech. Would that it were freedom of speech. I wish those posters had actually come from the Cuban people as opposed to the Cuban government.

NEWMAN (voice-over): A government that's made Michael Parmly the latest target of its anti-American wrath.

PARMLY: All Latin American studies ...

NEWMAN: Lucia Newman, CNN, Havana.

(END VIDEOTAPE)

PILGRIM: Now the results of tonight's poll. Ninety-three percent of you said no American company should be representing the interests of the Mexican government in the battle over border security in this country. Pretty clear vote on that.

Thanks for being with us tonight. Please join us tomorrow. We'll have much more on the outrage over Mexico's effort to block a U.S. border fence. Our guests include Congressman J.D. Hayworth of Arizona.

For all of us here, good night from New York. "THE SITUATION ROOM" starts right now with Wolf Blitzer -- Wolf.

BLITZER: Thanks very much, Kitty.

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