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March 23, 2006
Port passions
Politicians love nothing more than to be on the popular side of a contentious debate. In recent weeks, they had the quintessential chance to do just that. The revelation that an Arab company, Dubai Ports World (DP World), would soon be in a position to operate ports along the east coast of the United States whipped Congress into a frenzy. The matter appeared to resolve itself when DP World eventually pledged to transfer operation of the ports in question to a “U.S. entity.” But its aftermath reflects something deeper and more troubling about the growing Congressional influence in foreign policy and national security.
The specifics of the matter were rather straightforward. DP World, a company owned by the government of the United Arab Emirates (UAE), won a bidding war for the British shipping company Peninsular & Oriental Steam Navigation (P&O) in mid-February. The $6.8 billion deal was approved by the Committee on Foreign Investment in the United States (CFIUS), the twelve-member, interagency body that evaluates the security implications of such transactions, and it was scheduled to go into effect on March 2. Before this happened, however, some in Congress and the media realized that the deal would allow DP World to inherit the container terminals at six U.S. ports operated by P&O. Very quickly, public attention was focused and political passions were ignited.
Opponents of the deal argued that container ports were pieces of “critical infrastructure” and were vital to the U.S. economy. But they also represented a potential national vulnerability. Terrorists, some said, could smuggle any number of dangerous substances—from illegal drugs to weapons of mass destruction—through U.S. ports. And DP World was not just a foreign company. It was owned by the UAE, an Arab state that had been home to two 9/11 hijackers, had been linked to terrorist financing, and had served as a transshipment point in A.Q. Khan's shadow trade in nuclear materials. Senator Robert Menendez (D-NJ) declared that if the deal was consummated, “U.S. ports will be in the hands of a foreign government. That is an unacceptable risk that we cannot tolerate.”
By all indications, President Bush seemed to have been caught off-guard by the uproar. As president, he was not directly responsible for the port sale. But he defended the CFIUS process through which it had been approved. Some suggested that members of his administration had a financial interest in seeing the transaction approved, thus hindering the impartiality of the approval process. But Bush's defense of the transaction went beyond bureaucratic minutiae. He defended the UAE as a staunch ally in the “war on terror,” and he stressed the negative consequences of appearing to oppose the deal on purely “anti-Arab” grounds. Most strikingly, Bush threatened to veto any Congressional measures designed to scuttle the deal. When DP World announced their ultimate decision to transfer operation of the ports in question to a U.S. entity, Bush noted, “I'm concerned about a broader message this issue could send to our friends and allies around the world, particularly in the Middle East.”
The fervor that the Dubai ports deal created in Congress was remarkable. Unlike few other issues, it generated a unified legislative front to oppose the executive. Democrats attacked it on security grounds, arguing that putting U.S. ports in the hands of Arabs was akin to giving Islamic terrorists easier access to the country. Republicans attacked the deal on more nationalistic grounds, questioning why foreigners (and not Americans) should own or operate ports on U.S. soil. In the wake of the deal, House Armed Services Committee Chairman Duncan Hunter (R-CA) pledged to sponsor legislation that would require U.S. ownership of infrastructure deemed critical to homeland security: “The idea that somehow we Americans can project enormous power halfway around the globe, we can offload tons and tons of material, and we can send people to far reaches of the globe in very short periods of time, but we can't run a port—that idea is just not logical.”
The broad outlines of this debate should have been familiar. Last summer, the Chinese state-owned oil company CNOOC made a bid to purchase Unocal, a U.S. oil company. Then, as now, a state-owned foreign entity put itself in a position to own or operate “strategic” U.S. assets. Then, as now, vociferous Congressional opposition scuttled the deal.
The opposition to the Dubai ports deal and to the proposed CNOOC purchase of Unocal is perhaps more reflective of populism than of reason. The concept of “foreign ownership of strategic assets” is very straightforward and easy to oppose, especially when such “foreign owners” are nuclear-armed Communist states (i.e. China) or Muslims from the Middle East (i.e. the UAE). But foreign entities have owned assets in the United States for many years, with little harm resulting from it. Some argue that given the severe imbalance of U.S. trade, the country should welcome foreign investment. Others suggest that the uproar over foreign ownership coming from the United States—the paragon of capitalism and globalization—smacks of irrational protectionism. One need only look at other states known for attempting total economic self-reliance, such as North Korea or Burma, to recognize that it is a questionable course to pursue.
Hypocrisy aside, would the transfer of U.S. ports to DP World have threatened U.S. security? The consensus among experts suggests not. DP World would not have “owned” the ports in question; it would merely have operated terminals at the various ports. They would have been responsible for the speedy loading and off-loading of containers, and for attracting shippers to use their terminals. The Department of Homeland Security, the Coast Guard, and the Customs Service would still have managed port-wide security. Indeed, some have suggested that DP World—a company that successfully operates port terminals worldwide—would have been an exemplary terminal operator, due simply to the additional scrutiny their background would have generated in the United States.
The U.S. image in the Muslim world will surely suffer as a result of the port deal's collapse. But ironically, what may ultimately suffer the most is port security itself. While DP World may not have represented a tremendous threat to the security of U.S. ports, Congress certainly gave the impression that it did. In the wake of the deal's collapse, then, it might be easy to consider the issue of port security concluded and resolved. But it clearly is not. Stephen Flynn, of the Council on Foreign Relations, notes that, “the problem is less about who owns and operates U.S. container terminals than it is that we simply have not addressed far more serious supply chain, maritime, and port security issues that would dramatically reduce the terrorist risk to our homeland.”
This ultimately highlights the risks of greater legislative exertion in the fields of foreign policy and national security. Issues of economic xenophobia are tailor-made to incite popular passion—a passion that Congress is expressly designed to represent and amplify. But whenever passions are excited over a given issue, they risk clouding the subtler, less visible, yet equally vital aspects of public policy. It is easy and popular for legislators to rail against foreign ownership of U.S. ports. Appropriating funds for more Customs inspectors or container scanners, however, is harder and less visible. Congressional checks of the president's foreign policy and national security prerogatives may be a good idea. But such checks work best if they represent sensible and sound public policy.
Foreign Policy Association, 23 March 2006
Posted by Daniel Widome at 10:17 PM to U. S. Politics
