DUMB, DUMBER, DUMBEST.
So who are the dumb? Democrats who think the public will ignore all their votes against tighter security if they can stop an Arab company, Dubai Ports World, taking control of six American ports.
The dumber? Republicans who leapt on the anti-deal bandwagon for fear of being outflanked on the right by the Democrats.
And the dumbest? President George Bush’s staff, none of whom thought to tell the president that a company owned by an Arab government was spending $6.8 billion (£3.9 billion) to buy P&O, the venerable Peninsular and Oriental Steam Navigation Company, established in the year in which Queen Victoria acceded to the throne. The company manages 29 ports around the world, among them facilities in Miami, New York, New Jersey, Baltimore, Philadelphia and New Orleans.
Bush, forced to admit that he didn’t know about the deal or its approval until he read about it in the papers, was late engaging his critics. In addition to the usual gaggle of politicians eager to position themselves to the right of the president by pandering to public fears about terrorist shipments of nuclear materials, he faced opponents genuinely worried about national security. After all, two of the attackers on the World Trade Center were from the United Arab Emirates (UAE), of which Dubai is a component state. Dubai also is alleged to be home to banks that laundered money for the attackers.
In his fight-back Bush is pointing out that Dubai has co-operated with America in the war on terror, arresting several key Al-Qaeda operatives, welcoming visits by American naval vessels, providing landing rights for American aircraft, and helped in the inspection of cargoes headed for American ports.
That might have been enough to ease public concern, but the administration badly mishandled the process. The transaction was approved by the Treasury’s Committee on Foreign Investment in the United States (Cifus), a multi-agency body set up in 1975 to consider the national-security implications of foreign acquisitions. But the committee operates in secrecy, and has no formal obligation to keep Congress informed of its deliberations and decisions. That it should have done so anyhow is now clear.
Even the president’s natural supporters were caught on the hop, leaving them little choice but to ride the negative wave of public reaction lest they drown in it. Many congressmen must face the voters later this year and in 2008.
Unfortunately, the White House has been piling new errors on old. First, the president threatened to veto any legislation that might force a re-evaluation of the security implications of turning port management over to a Dubai company. But the president has never used that power, even when the legislation put on his desk has been against his views. That history, combined with his decision last week to give Congress more time to consider the transaction, has led some in Congress to conclude that he is bluffing and will give lots of ground. Second, the White House trotted out Michael Chertoff, homeland security secretary, to reassure the public — just as Congress was detailing his agency’s inept handling of the aftermath of hurricane Katrina.
Third, it sent confusing messages. Donald Rumsfeld, defence secretary, issued a statement saying: “Nothing changes with respect to security under the contract.” But at the same time an official at the Department of Homeland Security contradicted Rumsfeld by listing a series of changes on security, implying that additional “safeguards” are required precisely because the acquirer is owned by an Arab state. This is not unreasonable, given that Dubai Ports World, being government-owned, has no obligation of transparency to shareholders, as did P&O, and might some day come under pressure from terrorists to co-operate lest Dubai’s immunity from terrorist attack end.
All of this Sturm und Drang will probably result in legislation forcing a further review that includes Congress in an oversight role. But there is no question that the president will eventually bless the transaction, and that Senator Hillary Rodham Clinton and other Democrats preparing for a presidential run in 2008 will continue to oppose it. This is their best chance to appear tougher on national security than the Republicans since the twin towers were brought down.
Most important, the trade-offs in this decision have become more complicated. Against any security problems created by Arab control of some port operations, and all disinterested experts say these are negligible, must be weighed the geopolitical consequences of telling a friendly Arab state that it is unwelcome in America.
That’s not all. If America puts down an unwelcome mat for Dubai, it will also be sending a signal to foreign investors in China, Russia and the Middle East that hostility to foreign investment is high. They might decide to put their money elsewhere.
America might, indeed, decide that investment by companies owned by hostile states is a bad thing. Such enterprises operate in the geopolitical interests of their countries, rather than solely in response to market forces. But such a policy should be adopted only after calm study of the effects of higher interest rates and other consequences of such a move towards autarky, not during a highly politicised debate between Democrats seeking to embarrass the president, and a White House that has elevated inarticulateness to new heights.
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Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute
