This is a partial transcript from "HANNITY & COLMES", June 7, 2004, that has been edited for clarity.

SEAN HANNITY, CO-HOST: Thousands of mourners are paying their last respects to former President Ronald Reagan (search) at this hour as his body lies in repose at the Reagan Library in Simi Valley, California.

Joining us now, two men who were among the very closest to Ronald Reagan while he served as president in Washington. Former Secretary of state Alexander Haig and from San Francisco, another former secretary of state, George Shultz. Thank you for joining us.

It's appropriate to have both of you on, because the great legacy -- General Haig, we'll start with you, of Ronald Wilson Reagan is this man led the way and he won the Cold War (search). And because of his hard work and both of your gentlemen's hard work, the world is a safer place.

Is that his greatest legacy, General?

ALEXANDER HAIG, FORMER SECRETARY OF STATE: Well, I think there is no question that Ronald Reagan's policies brought an end to the Soviet Union, but history did the same. Because the internal contradictions in Marxist Leninism is really what brought the Soviet Union down.

But it wouldn't have happened at the pace that it did except for the policies of Ronald Reagan, in my view.

HANNITY: Mr. Secretary Shultz, I want to ask you this. One of the things amazing about him, if you look at the left in America, when he identified the former Soviet Union as an evil empire, when he wanted to build up our nation's defenses, when he sought to pursue SDI as a new policy versus mutually assured destruction, it was amazing, many people predicted he was a cowboy from California, he would start World War III. Just the opposite turned out to be true.

You were a big part of that. Tell us about what was going on behind the scenes with the president as he stood firm with basically a backbone of steel?

GEORGE SHULTZ, FORMER SECRETARY OF STATES: Well, he started with ideas that he had thought through deeply, even before he was president.

And he had thought a lot about to the Soviet Union and communism. He felt that it would self-destruct sooner or later, because it was a flawed system. He was a deep advocate of freedom.

He knew that if -- he was a negotiator -- and he knew that if you had a weak hand you didn't want to be in a negotiation. You wanted to have a strong hand when you went into negotiations.

So he built up our military strength, and he built up our economic strength and he built up our world power as a prelude to what turned out to be fruitful negotiations with the Soviet Union. He had a very clear idea of where he was going and why.

HANNITY: Sure. Sure. You were there at Reykjavik, Mr. Secretary, and the world's eyes were on both the president and Mikhail Gorbachev, and he wouldn't go for a bad deal.

Bring us behind the scenes, because I think it was one of the most poignant moments that really showed the character of Ronald Reagan. Tell us what went on and what that discussion was like?

SHULTZ: We went to Reykjavik, and it was designed to be a sort of prelude to an upcoming Washington summit.

We were very well prepared. We knew all the different things that might come up. And we had a strong delegation with us so that whatever might come up, we could evaluate it quickly and on the spot.

So we go to this place that had been selected called Hudby House. It's isolated. People thought of it as a haunted house.

Anyway, we went up in a small room, President Reagan and me, General Secretary Gorbachev and his foreign minister, Eduard Shevardnadze, and we each had our note taker and our interpreter.

And we sat there for two days talking. And the first morning was astonishing because Gorbachev sat there and he just came through with Soviet concessions. He didn't phrase them as concessions, but they amounted to concessions or agreements with most of our positions.

And we sat there, the president sat there and quietly sort of collected these concessions.

So we regrouped at lunch, and in the afternoon, we spent our time consolidating the idea that we would eliminate intermediate range missiles, that we would cut strategic arms in half.

And that night, we had working groups nailing down, various more detailed aspects of it. We worked out an agreement, I think, for the first time, that they acknowledged that human rights would be a regular recognized subject on the agenda.

ALAN COLMES, CO-HOST: Secretary Shultz...

SHULTZ: Now we start the second day and all of a sudden Gorbachev makes the whole thing conditional on abandoning the Strategic Defense Initiative, and that is where Reagan balked and I think rightly so.

COLMES: General Haig, it's Alan Colmes, good to have you back on the program.

Let me ask you about their relationship. The relationship between Ronald Reagan and Mikhail Gorbachev (search) was to a large extent responsible for what was able to be accomplished.

HAIG: Well, I think the two men genuinely got along together well, not because Gorbachev was no longer a communist but because he was dealing with an individual whose overall demeanor was always outreach and always reason.

And you know, he'd been accused of being a trigger-happy cowboy in those early days, because he had to reestablish American credibility, and the world was beginning to think that the Americans were unwilling to stand and fight for anything.

And Ronald Reagan knew that, and at the same time, he knew that the Soviet Union was in an advanced state of decay.

So the combination of reestablishing credibility and opposing violation of international law, wherever they came from, Gadhafi or whoever, combined with this ability to reach out and to talk and to negotiate, as George said, I think brought about the successful outcome of the Cold War without the firing of a single shot.

And that is a remarkable achievement for one man to accomplish in a lifetime.

COLMES: Secretary Shultz, what is it about? You were there in Iceland, Reykjavik, that when the two leaders got together, what was special about their interaction, the dynamics between the two of them?

SHULTZ: Well, as Al said, they had gotten to take each other's measure for the first time in Geneva, a year or so earlier. They spent a lot of personal time.

It started with the two of them in a room by themselves. It was chosen by us, a small room with a fireplace. And they talked for -- they were scheduled to talk for 10 minutes and they wound up talking for almost an hour.

And in the afternoon, Reagan took Gorbachev off to another place, just the two of them, and talked. So that first meeting in the latter part of 1985 was a time when they took each other's measure, and I think they came away with mutual respect and he built on that.

Copy: Content and Programming Copyright 2004 Fox News Network, L.L.C. ALL RIGHTS RESERVED. Transcription Copyright 2004 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, L.L.C. and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.