The Newsletter -- Reporting From Port Townsend . . .

Long before this town became a weekend getaway, long before the Victorian houses and historic downtown made it a tourist stop, the economy here was supported by the paper mill. Port Townsend Paper sits at the water's edge on the edge of town, supporting the town with more than 400 jobs.

The mill is under new ownership, in the hands of Northwest owners for the first time in decades. Northwest Capital Appreciation bought the mill last year from a German company that had owned it the past 15 years. Before that, it was owned by Crown Zellerbach, San Francisco.

New owners have brought in new mill managers and have plans for improving its efficiency and expanding its output.

Dave Hartley, operations manager, was able to crank up the mill and set a one-month production record. Hartley believes the mill is a good one, but underused. One new expansion will be installed over the next few months.

The mill purchased new bag-making machines from Longview Fiber. The machines will allow the mill to make paper bags with handles. The mill also feels it is strategically placed to sell into Asian markets; top mill executives were in Asia this week talking with customers.

One big problem for the mill. The pulp and paper business has been in the dumps for several years, with only one brief spike in prices in 1995. When the market turns, however, mill officials say they will be ready to take advantage of it.

Jefferson County and Port Townsend officials are supporting the idea of a new high-speed passenger ferry service from Kingston to Seattle.

Ferry service is being considered and could start in 2000. Such service would cut the trip to and from Seattle by half, according to officials. Now it takes more than three hours on public transportation.

The ferry could boost tourism, providing an alternative to driving to the popular spot.

While prosperous these days, the Jefferson County area lags statewide figures for wages.

The statewide average for manufacturing jobs in 1995 was $37,447, but was only $29,989 in the county in the same category. Average wages are $19,034, compared with $27,446 statewide.

What drives the difference? Some of it is seasonal. Some of it is the tourist business, which tends to have more part-time and more seasonal workers. Some studies indicate that some of the "underemployment" is personal choice - individuals choosing to work part time for personal or lifestyle reasons.

Back in Seattle, the Washington Council on International Trade (WCIT) marked its 25th anniversary this week. The organization is among the most effective trade promotion, information and lobbying groups in the country.

The WCIT was upbeat about its strong record on free trade. But the main speaker at the group's annual dinner, Bill Emmott, editor of The Economist magazine, was downbeat about the future of Asia.

Emmott said the economics of Asia may improve over the next few years. He is most concerned, however, about the politics. "The political risk begins in Indonesia," Emmott said, "extends through China and ends up in Japan if worst comes to worst."

Politics could upset economic progress, he said, and put "most of the risks on the downside.

"Financier Carl Icahn has offered to buy Pan Am in a $43 million deal that could get the airline flying again and out of bankruptcy proceedings.

Flights could resume in about a month if the offer is approved by a judge, said John Olson, an attorney for Pan Am Corp., the parent of the airline. Pan Am grounded its fleet Feb. 28.

Operators of U.S. hotels have never had it so good.

One industry newsletter says rates charged by hotels in big business centers across the country are the highest they've been in 14 years, even in Seattle where more hotels are being built.

Because demand is strong and hotel rooms hard to find during times of peak business travel, room rates will increase at a rate of 7 percent to 10 percent his year, according to the newsletter. ------------------------------- Giving back, coffee division. Tully's Coffee has teamed up with KOMO-TV's "For Kid's Sake" program by creating "KidsCare," with all proceeds going to raise money for the local chapter of the Cystic Fibrosis Foundation. Tom O'Keefe, Tully's president and CEO, has raised money for the disease for a decade.