by Gary Clyde Hufbauer, Peterson Institute for International Economics
Op-ed in the New York Daily News
February 27, 2006
© New York Daily News
Mix political grandstanding and old-fashioned nationalism, with a dab of racism, and what do you get? A political brouhaha.
Last year, Peninsular & Oriental Steam Navigation Co. of London agreed to sell, for $6.8 billion, its terminal operations in New York, New Jersey, and four other major US ports to Dubai Ports World. After scrutiny by Homeland Security, the Pentagon, and the CIA, an interagency committee vetted the deal in accordance with US law: no adverse impact on US national security, no problem. Why the brouhaha?
Democrats want to keep President Bush's popularity in low double-digits. No surprise there. The mystery is why so many Republicans, including Governor Pataki, piled on. Perhaps they thought Bush would back down, as he did in the battle between Chevron and a state-owned Chinese oil company to take over Unocal after fierce opposition by Congress. Now, Bush has stood defiant—and alone—amid growing hostility toward the ports deal, unwavering in his support. This time, the Republican senators and governors had it wrong. Praise the president.
The flag-wavers would have a case if they could show that the administration's interagency review was flawed. Weeks ago, if they were serious, congressional intelligence committees could have summoned administration officials to review the interagency findings in executive session. That was never done.
Even today, congressional leaders could offer legislation barring any and all foreign control of terminals in US ports. The legislation would be foolish, both because private terminal operations are perfectly consistent with national security and because some of the most efficient port operators (like Dubai Ports World) are based outside the United States. But at least the legislation would not be tainted by ethnic discrimination.
Instead, at the eleventh hour, an innuendo campaign has erupted. The "logic" is simple. Some of the 9/11 terrorists passed through Dubai. Money laundering has occurred in that city-state. And of course the population is predominantly Arab and Muslim. Ergo, there's an unacceptable risk that Dubai Ports World is a front for al Qaeda and Osama bin Laden.
Just when did guilt-by-association become national policy? By this shoddy "logic," any company based in German cities where the terrorists studied, or Egypt and Saudi Arabia, where most of the foot soldiers and masterminds were born, becomes equally suspect.
The potential costs of the innuendo campaign—whether it succeeds or fails—are higher than the flag-wavers think. The United Arab Emirates and neighboring Bahrain are strong allies in the war against terror. US naval vessels regularly dock there. US armed forces take R&R there. The alliance will continue with or without the ports deal, but relations will not be quite so cordial.
Middle East oil countries are major purchasers of US goods and services. US exports, including aircraft, power plants, financial services, and much else, exceed $35 billion annually.
Will some of these sales swing to competing suppliers in Europe and Japan if the United States gives Dubai Ports World the brush-off? You bet.
But the biggest cost is the damage to the US campaign to deepen our economic ties with the Middle East. The United States has valiantly urged the region to embrace open trade and investment policies. How will our Middle Eastern friends characterize Americans if we reject the Dubai Ports World deal? "Hypocrites" would be the nicest thing they could say.
Policy Brief 13-1: The World Needs a Multilateral Investment Agreement January 2013
Working Paper 12-16: Transactions: A New Look at Services Sector Foreign Direct Investment in Asia October 2012
Working Paper 08-7: Policy Liberalization and FDI Growth, 1982 to 2006 August 2008
Book: US National Security and Foreign Direct Investment May 2006
Op-ed: Avoiding Another Dubai February 28, 2006
Book: Does Foreign Direct Investment Promote Development? May 2005