This is a partial transcript from "The O'Reilly Factor," July 8, 2005, that has been edited for clarity.

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BILL O'REILLY, HOST: In the "Impact" segment tonight: Many nations in the European Union, including Great Britain, have very liberal immigration policies that have resulted in millions of Muslims moving to Europe from the Middle East and Africa. The USA is much tougher about that.

Joining us now from Washington is our Jim Carafano, an analyst on national security for the Heritage Foundation, a conservative group.

Why does Britain let so many Muslims, if you go to London, Edgware Road and other areas of London is just packed with just dense Muslim neighborhoods which breed this kind of contempt for western society. Why do they let them in?

JAMES CARAFANO, COUNTERTERRORISM ANALYST: Well, it's not just Britain. It's European wide. There's three reasons:

One is the European population is shrinking and aging. They need a lot of cheap, young labor. So they let people from Africa and the Middle East into the country.

Two, a lot of them have long-standing relations with their former colleagues. So they've got communities there. So they let these people in, because it's been the tradition to always let them in.

Three, Europeans bill themselves as very, very liberal. So they have incredibly liberal amnesty laws. You know, you say you've been abused — you know, come to my country. We'll let you in.

And in fact, the terrorists know that. And they specifically use the amnesty clauses to sneak people in. They do it in Europe. And they also do it in Canada, which is very, very...

O'REILLY: Would you say, and I know Canada, we'll get to that in a minute, would you say it's out of control now? Ten percent of the French population is Muslim. I don't know what the percentage is in Britain, but is it out of control there?

CARAFANO: Well, the Europeans have a problem the United States doesn't have. Muslims in the United States are geographically diverse. And they're ethically diverse.

I mean, we are a relatively assimilating country. So people move about pretty freely. In Europe, people tend to be geographically and ethically isolated. They go into these little ghettos and they stay there. And it's makes perfect breeding grounds for these terrorist guys to run around. So they really have these kind of free zones.

There are parts of London they call "Londonistan." So that Europeans really created this problem because they really treated them as marginal populations. They've encouraged them to group ethnically and geographically. And the terrorists know that these are great places to go and hang out.

O'REILLY: Absolutely. But now in Holland, for example, they're re-evaluating their very liberal policy after the death of Van Gogh, the filmmaker. Are other countries doing that? I mean, are they getting fed up with it?

CARAFANO: Well, there are two extremes. One is it's really draconian to try to deal with these things. I mean, the Dutch have offered some things that I think are pretty drastic.

And the other is this kind of silliness, like quite frankly, that they've got in England, which had tried to negotiate with these communities.

The problem is is very few of these guys are terrorists. It's a very, very small minority. But you've got to have the courage to go into these communities and separate decent, honest people from terrorists.

And a lot of times that's very, very politically difficult. And in Germany and in Britain, a lot of times they've been reticent to do the...

O'REILLY: Yes, because as soon as you go in, they're going to — you're going to be called a racist and an anti-Muslim person. And there will be a fatwah and all of that.

Now the frightening thing for us here in the United States is two fold. Number one, Canada lets anybody in. And then they can infiltrate across the border, because we have terrible border control here.

And number two, if you have an English passport, you can get here with very little control from London. So you can be a British citizen, a terrorist, al Qaeda, work a cell, zip over to the USA if you're carrying a British passport.

And remember, Atta, the head 9/11 hijacker, came from a cell in Hamburg, Germany. So now, it's — they're not coming from their country of origin. Saudi Arabia, wherever it may be. They're hopping into Europe and then hopping over here.

CARAFANO: That's true. Germany and England and Canada have what's called the visa waiver program, which means if you're a citizen of their country, you have a passport, you don't need a visa to come into the United States for 90 days.

Now we don't want to eliminate that program, because if we eliminated that program, the bulk of the people come from visa waiver countries, we would never - we would basically stop travel to the United States because we couldn't screen all that people.

Now what we have done since 9/11 is, although I agree with you that they can get these passports, we have made terrorist travel more difficult. There is good terrorist cooperation between the United States and Europe and the Canadians.

But you know, as we saw with the problem in England, is these — the problem is, you know, the cow has left the barn. They're running all over Europe. And the Europeans don't have the instruments in place to really find them all.

O'REILLY: No, they don't. They - you know, when I was flying over here from Shannon in Ireland yesterday, they pulled two mid Eastern guys off the plane. They had checked them in.


O'REILLY: And then they pulled them after.


O'REILLY: .because U.S. had Customs right there in Shannon. Mr. Carafano, I've got to run.

CARAFANO: Terrorist travel. It's important.

O'REILLY: Right, we appreciate it.

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