TCS Daily


Good for America

By James K. Glassman - February 23, 2006 12:00 AM

Just last week, the shareholders of P&O, that venerable relic of the British Empire, agreed to sell their company to a group called Dubai Ports World, for $6.8 billion. DP World won a bidding war with another company from a developing country, Temasek Holdings of Singapore.

Pacific & Oriental Steam Navigation was created in the 1830s and, by 1868, had the largest steamship fleet in the world. But the days of Kipling and Maugham (who, by the way, wrote a wonderful short story called "P&O") are over. Today, four-fifths of P&O's revenues come not from ships but from ports.

The irony is that, while the British understand that empire has given way to globalization, many Americans -- especially protectionist politicians like Sens. Charles Schumer (D-NY) and Lindsey Graham (R-SC) and xenophobic TV hosts like Lou Dobbs -- do not.

DP World is a firm based in Dubai, in the United Arab Emirates, next to Saudi Arabia and just across the Persian Gulf from Iran. It is a company that knows this business well, currently running what The Guardian, the British newspaper, calls "one of the most efficient port organizations in the world," including deepwater facilities in Turkey, Hong Kong, three ports in mainland China, Australia, Germany, the Dominician Republic, Venezuela and South Korea. "Its port operations are breathtakingly fast and efficient." Meanwhile, Dubai itself is building a freeport hub, "so vast that approaching a fifth of the world's cranes are now to be found at work there."

And Dubai -- I don't have to tell you -- is an Arab nation. Yes, two of the 9/11 hijackers were citizens of the UAE, but, then again, as Ivan Eland of the Independent Institute notes, Richard Reid, the attempted "shoe bomber," was a British citizen, and Jose Padilla, among others, is an American citizen (as was Timothy McVeigh). The UAE has been a staunch ally in the war on terror, training security forces in Iraq and helping to cut off the flow of money to al Qaeda.

Isn't this precisely what the United States preaches? Don't we want places like Dubai to fight terror and to grow, to invest, to buy, to trade, to adopt Western commercial practices, to expose themselves to the rest of the world and thus become tolerant and moderate?

Instead, congressional leaders are trying to kill the deal, which is set to go into effect next week. Why? "Outsourcing the operations of our largest ports to a country with a dubious record on terrorism is a homeland security and commerce accident waiting to happen," says Schumer.

This is rank racist nonsense. Schumer knows very well that responsibility for port security in the United States lies not with DP World or any other operator, but instead with the U.S. Coast Guard and U.S. Customs. "Nothing changes with respect to security under the contract," said Defense Secretary Donald Rumsfeld. "The Coast Guard is in charge of security, not the corporation."

Using Schumeresque logic, the U.S. should ban flights into the U.S. by airlines from Arab countries, and we should certainly bar any cargo from being loaded in Arab ports and bound for the U.S. ("If you are worried about a bomb in a box going off in New York, you need to worry about who loads the container overseas rather than the terminal operator who unloads it in the U.S.," says someone who actually knows something about port security, Theodore Price of Optimization Alternatives, a Texas company that provides terminal-operating software.) In fact, one would suppose that Dubai, with billions at stake, would be more careful -- not less -- about assisting in anti-terror activities at U.S. ports if it is actually operating them.

This is not to make light of national security. It is the top consideration in such a transfer, which is why the sale underwent scrutiny by experts on the Committee on Foreign Investment in the U.S., as mandated by Congress. The DP World deal passed its CFIUS investigation. Now, we have folks like Chuck Schumer second-guessing the security experts. No thanks.

President Bush, to his great credit, says he will veto any legislation that would hold up the transfer of P&O's U.S. businesses to DP World.

You can fault this administration for many of its actions, but in one area its success is immense and undeniable: George W. Bush has kept America safe. It is now close to four and a half years since 9/11 and, still, no attacks on U.S. soil. "If there was any chance this transaction would jeopardize the security of the United States," Bush said Monday, "it would not go forward." Whom do you trust on security, Schumer or Bush?

But, of course, this is far from just a security matter. In the same way it prevented the sale of Unocal to CNOOC, a Chinese company, last year, this protectionist Congress can't seem to imagine that non-Europeans -- people not like us, not like Kipling or Maugham -- would be owning companies that maintain facilities at our ports.

Globalization, according to Dobbs, Schumer & Co., is a one-way street. We can buy you (that is, your businesses, your oil, your toys, your electronics), but you can't buy us. National security in this case is a very bright red herring.

The world has changed since Rudyard Kipling took P&O steamers back and forth to colonial India. It has changed vastly for the better -- and not just for Indians. For example, if the deal goes through, DP Ports will become the third-largest port operator in the world. Numbers one and two are based in Hong Kong and Singapore and number-five in Beijing.

Developing nations are selling things to developed nations. That's very, very good. The U.S., for example, buys such things with dollars, and the developing nations then use those dollars for investment in U.S. assets. Lately, those assets have mainly been Treasury bonds -- thus allowing the U.S. government to maintain its profligate ways at little cost in higher interest rates (rates that determine what you pay for your mortgage). But now, developing nations are making equity investments and direct purchases. In my view, that's even better.

The reason is that the United States has been a great place to invest -- not just for its commercial market but for its relatively unfettered investment environment. With CNOOC and now with DP World, the virtuous circle may be interrupted. As a Wall Street Journal news story put it, "A successful move to block the deal could send a chilling signal about some foreign investment in the U.S. at a time when such investment has been critical in sustaining growth."

That is the real danger here. We shouldn't flatter ourselves. We aren't the center of the world. P&O operates 29 ports, only six of which are in the U.S. The real growth terminals are in Asia. PSA International, owned by Temsaek, runs the world's largest hub, and it's not in New York or Los Angeles. It's in Singapore.

Absolutely, keep our ports safe. Trust no one to do that -- not the Brits, not the Singaporeans, not the Arabs -- but our own law enforcement and military. Their job is to keep the lanes of commerce and communication and travel open, and, so far, they have done a spectacular job. That's the way the system works now, and it won't change when P&O hands over operations to DP World.

The United States benefits mightily from a globalized world. Our ties through trade, in fact, have made us more safe as our trading partners become more prosperous, open and democratic. But our politicians and pundits should know that we can't pick and choose. If we decide to deny firms from developing nations -- Arab, Asian or otherwise -- from investing in the United States, those firms will go elsewhere. And we will pay the price -- in higher interest rates, higher inflation, lower stock prices, less participation in a world growing more and more exuberant, creative and exciting.

James K. Glassman is resident fellow at the American Enterprise Institute and Founder of TCS Daily.

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29 Comments

Not Good for America
You forgot to mention that Dubai World Port is 100% owned by the Dubai Royal Family. It is no way a "public corporation", as your article alluded to.

COO of DWP was on CNN and bragged about how they will have 50 port contracts around the world. He also said that the receiver cannot be always held responsible for something shipped from overseas and inspected there. In America, we're talking 5% actual inspection.
Well, DWP could ship from DWP facility in one country and receive in DWP port in U.S.
It's a lot easier if you are both the shipping port and receiving port with a 5% inspection rate.

Bush told phone companies to let him intercept international calls to and from U.S.
without warrants. He told them he had the authority for such a request. Who's to question Bush.

Dubai Royal family says.......... to DWP. Are they going to say no? I think not.

All speculative, but do you need this possible risk factor when it comes to our ports?

Unleashing the dogs of war
Problem is, post 9/11 the Bush Administration actively promoted a simplistic view of the world. Now that such simple-minded thinking is an impediment, the inertia of such powerful, and at times demagogic, rhetoric may be to great to come to a quick stop.

Non-obvious vulnerability
While everyone talks about the obvious but minimal to non-existent security vulnerabilities of letting a foreign government run our ports, the most obvious vulnerability has gone unnoticed. With over 50% of our port operations controlled by China and UAE with this deal, what would happen if one or both of them decided to obstruct or simply close down port operations during a critical time such as during a run up to an invasion of Iran or some other country? China currently has the capability to close down most of the ports on the west coast and the Panama Canal at least for several weeks. Anyone who believes this is not a real and significant national security vulnerability is a fool. We need to ensure that no foreign power is so easily able to disrupt our critical port operations during times of national emergency or military conflict.

While your at it
AS you pass that law add in that no US company can own a foreign port.

Simple Solution
If you all don't like who's buying P&O there is a very simple solution.

If each of you gave $100, perhaps you could outbid them.
Everyone wins. Good luck with that.

Remember the outrage when the Japanese were buying everything... yawn.

Need confirmation
Anyone know who granted the contract to P&O to unload cargo at the US ports?
I contend the port authority in each location granted that contract.
Anyone know?

Non-obvious non-vulnerability
If they close down the port in wartime, then it should be a simple matter for the government to re-open them rather quickly.

Sense at last!
This article is 100% correct.

Time for us all to stop jerking our knees in time to the MSM and the IDIOTS in Congress who so love to jerk our chairs for their own personal good!!

Hear hear! GREAT Article!!!
Danae

This is a no duh moment.
Right. Shut down operations. Think about how stupid that is.
1) If we are at war with China, I don't think they will be operating a Port for them to shut down.'
2) Shutting down the ports would cost THEM more than it would us. They MUST sell their goods here. Eliminating the source of American Dollars which they MUST have to support their own monitary system is pure idiocy.
3) The Ports are Leverage for US. Not the country operating them. They don't get into the business of Leasing Ports to LOSE money. They do it to MAKE money. Shutting them down would be leverage that WE would use, not the other way around.

Great article -- I'm in full agreement
I visited Dubai in 2004 and was amazed at how advanced and open the country is. It reminds me of Las Vegas more than anywhere. It shows that there is hope for the future in the Middle East.

If we deny this deal we are the one's showing the rest of the world that we do not want the Middle East to move into the 21st Century.

Denying the deal will make us look really bad.

Why not encourage capitialism in the PRC by awarding them the Los Alamos Guard Contract
This is truly one of the biggest pieces of nonsense you have ever published. The issue is national security. It is a joke trying to comapre a British firm's record with the activities of a national government that is as such an ally to the US as is France.

The argument the author makes is laughable. It is akin to rehabilitating a pedophile by allowing him to babysit. Would anyone allow this country to administer US nuclear facilities? Well if that makes you feel uneasy how about allowing a nation with close ties to the Taliban easy access to US port security measures and procedures. Make sense?

Fine with me
But I don't think there are any US companies running foreign ports. In any case this is irrelevent. Its not up to the US to decide what type of foreign ownership or control another country wants to allow. Each country has the absolute right to decide that for themselves and they are under no obligation to justify their decision to anyone else. All those who say that there is no disadvantage to the US for allowing foreign governments to run our ports needs to reconcile that position with the fact that the Chinese government obviously believes that an advantage accrues to them by acquiring control of 70%+ of our west coast port operations.

A temporary disruption is still a vulnerability
First of all, its not necessary to close down all operations only slow it down a lot. Second, where would this supposed authority of the government to run the port come from. And third, how long do you think it would take for some judge to file an injuction against the government on behalf of the foreign government that has the contract to operate the port. Yes, theoretically, we would EVENTUALLY get the port running again. But the point is that the delay that might be achieved is all that the foreign government may require to gain their objective. The vulnerability is in ability of foreign government to cause temporariy disruptions, not permament ones.

One line in the article says the real reason.
"Lately, those assets have mainly been Treasury bonds "

The socialists in government are afraid that we will see a shift in the buying preferences of foreigners from treasury bonds into harder assets. Both the purchase of Unocal and the Port Manager show this.

The government wants the gravy train to keep going so they can keep spending. If the foreign governments holding lots of Treasury securitites start buying assets well the government will have to stop spending.

Election year
I feel that certain Democrats that have opined about our treatment of terrorists in captivity and The Patriot Act have come to the conclusion that opposing this deal will make them appear tough on homeland defense. It will not work and make them look Arab phobic. Isn't this the same as the racial profiling of Arab looking people by our security forces at home they were against?

Well Said James!
Think about it folks; You're a terrorist and you want to blow something up, and you have access to several billion dollars. Would you buy a business to operate ports?

Now assume you are a business man who just spent several billion dollars on a business to operate ports. Would you have any interest in allowing terrorists to ruin your investment?

James is right. This is xenophobia.

Democrats like Sue Myrick??
"...But congressional Republicans renewed their vow to prevent the sale from being finalized next month and warned Bush, sometimes in taunting terms, that an overwhelming majority of lawmakers will oppose the sale on national security grounds. "Dear Mr President: In regards to selling American ports to the United Arab Emirates, not just NO but HELL NO!" Rep. Sue Myrick (R-N.C.) wrote to Bush in a one-sentence letter."

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/22/AR2006022201609.html

of course, this was in the dreaded MSM, so it probably never happened.

merchantilist redux
Most of these politicans,Schumer et.al., are nothing more than regurgitated 18th century merchantilist. They exist and think in the murky world of economic illiteracy and unprincipled delusion---all the while whoring themselves for votes, which renders them to flopping around like suffocating fish having been hooked and caught by what the latest polls show the ignorant are thinking.
This the current state of American political genius. And to think that these dunces are making many decisions which used to be strictly the business of free individuals.

I have no problem with the UAE, but I have a real problem with the hippocrites.
The hippocrites would have us believe that having the UAE run some of our ports would be a security risk.

Can they name the country where most of the US Navy ships dock outside the USA? The UAE.

Can they name the countries where we launched air strikes from during the Liberation of Iraq? The UAE let us use their air fields when the Saudis said we couldn't use an airfield we built in the desert and our NATO ally Turkey said we couldn't use their air fields.

Where does US Central Command have their forward headquarters? The UAE.

The hypocrites would have us believe that the Bush Administration kept the review process secret. The process followed a law passed by Congress that took the chairmanship of contract security reviews away from the Defense Department and gave it to the Treasury Department decades ago. This change tells us that making money is more important than defense. I am more concerned about that process than what the hipporites have to say, unless they say, "We were wrong."

Why pick on this company?
You can infiltrate workers into any company and conduct a campaign to subvert port security. The only way that this particular company should be denied the right to purchase P&O is if it is at elevated and unacceptable risk. What makes this company special is that it's owned by the Royal family of the UAE.

The question then becomes whether that fact of ownership is something to soothe our su****ions or heighten them. If we don't trust these guys, we shouldn't trust them for real. That means that we shouldn't be accepting goods from DPW operated facilities or we should be inspecting 100% of cargo coming from such facilities.

If we're not willing to be serious about the idea that we don't trust DPW, then the noise surrounding this deal is just not genuine. I'm all in favor of security but I'm not in favor of some disgusting kabuki dance masquerading as security. The fact that nobody is complaining about receiving goods shipped via such a supposedly untrustworthy company means this is kabuki.

*****ction? Nonsense.
During wartime, the US government has a greatly expanded power to seize stuff. It's not infinite (see Truman and the "steel seizure" cases) but it certainly would include expropriating enemy nation companies domestic subsidiaries for at least the duration of the war.

If we were going to war against the PRC (which I think isn't going to happen) and the port operators were owned by the PRC, we'd seize the US subsidiary so fast, their owners' heads would spin. They are assets owned by the enemy and legitimate spoils of war. The ownership link would be broken and, importantly, it would be declared a military operation which has an insanely high standard for courts to even accept jurisdiction, much less issue an order.

If President Reagan could order military air traffic controllers on the job to replace strikers without court *****ction, the army corps of engineers could certainly take over port operations to support upcoming or ongoing combat operations even if the US workers would go against their own nation's interest and support their international employer's.

Use language properly of not at all - this isn't about racism or xenophobia
1. Racism doesn't apply because Muslims come in all races and this is about reasonable fear of Muslims. It's lunacy to permit control of the ports by a Muslim owned or dominated company because at least tens of millions of Muslims want us dead, and the government of Dubai has demonstrably catered to those incipient terrorists and sympathizers.

2. Xenophobia is fear of foreigners. This is not a question of xenophobia because no one is or was concerned about having a British company run the ports. The concern is about putting Osama Bin Laden's cousin's nephew's aunt's son in control of U.S. ports. No one ever said that Franklin Roosevelt was xenophobic because he failed to share nuclear technology with Stalin even though he shared that technology with Churchill.

the bipartisan opposition to this deal is good news
Finally both Democrats and Republicans have recognized and are acting on the simple reality that it is madness to turn over aspects of our domestic security to Muslims in any way shape or form.

The author makes a good point, even if left handedly when he reminds us that every day Muslims are piloting aircraft that are coming to the U.S. That should be stopped, just as issuance of visas to Muslims should be stopped.

Good for America... When pigs fly!
Security risks need to be stopped and not fed. Would you want unsecure access to wharf and pier design, container terminals, bulk and neobulk terminals, liquid bulk terminals, cargo handling equipment and systems, geotechnical and environmental issues, dredging, marine facilities, and port rehabilitation and upgrades being given to a foreign entity? We should not have ANY Foreign company or state runing our ports of entry anywhere! It is a bad idea that must stop. Let us get the ports under American control again. Anyone ask the teamster union their opinion? I bet the majority of them would stop what they thought to be a terrorist threat. ;)

Non-obvious vulnerability is not obvious to many.
I agree. This is much more than a stupid or greedy move. It can kill us. I hope Americans raise a voice that will keep {all ports of entry} onto our soil from foreign entrigue. This would mean a huge pull out of foreign cash and graft, which would mean American corporate greed & political pay-offs would have to stop the outsource of our country. We could have strong American run ports again. Just think of the jobs restored to our country. Lets take the keys to our future back from people who don't want us to have a future!

Would we disqualify a domestic business owned by a peace-nik?
Exactly. If the prospect of businesses going on strike were such a great danger, we should never let domestic businesses do the job either. But we do, because we know that if push comes to shove, the military has the ability to take control. Would we disqualify a domestic business owned by a peace-nik? No, we would just sieze his assets if he withheld them. The only other option is having the military run everything. Or some form of "loyalty test" for all applicants. No thanks.

Port deal is good for America...
...if your goal is a perpetual, global war on terror. The UAE is one of the largest US military bases in the world. More US Navy ships in the UAE than anywhere outside the US.

Saying no to the port deal is tantamount to telling the UAE, and more importantly all Arab people, that we only want their money and their ports on our terms. Saying no to the port deal means we don't reciprocate by allowing them the same right to invest in the US that we allow anyone else with billions in petrodollars.

Will UAE ask the US military to pack up and leave if the port deal is scuttled? This is one question the free-marketeers don't want to have to think about.

The UAE is an ally of convenience, and we are to them an ally of convenience
The UAE lets us use their ports because they want our military presence in the region, and they sell us their oil because they want our dollars and the things those dollars can buy.

We buy their oil because it is the cheapest of several sources of energy we can use.

If they ask us to pack up and leave and/or decide to stop doing business with us then we should pack up and leave, unless it is our national interest to change their regime.

Turning over any aspect of our domestic security to muslims and/or allowing more Muslim immigration to our country is tantamount to suicide. The clear and present domestic danger trumps all considerations of overseas interests.

DP World
The US should not reward a terrorist nation such as the UAE.
They openly supported the taliban.
The UAE through its banking system that has never come clean is nothing more than a front for terror.
Lets keep our ports safe.

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