ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Thursday, February 23, 2006

Ports Redux

Good op-ed in the WSJ today (subscription required) regarding the Ports issue. (For some reason, Port Whine Cheese (spelling intended) keeps popping into my head whenever I post on the subject.) This pretty much sums up my position on the matter (I'm sure that one or more of the conspirators here disagrees with me).

Here is the important bit:

There are at least three issues here. One is the specific concern about the deal itself; another is disquiet over the administration's approach to homeland security; and the last is a larger pattern of American unease about the changing global economy. What the potential deal highlights most of all is that the U.S. cannot have it both ways: We cannot both advocate a global system of free trade with low barriers of entry and then cry foul when foreign companies try to buy U.S. assets.

On the first point, what the disparate opponents have insinuated is that there is a relationship between the government of Dubai (which controls Dubai World Ports) and terrorist groups -- and that therefore the purchase of the port operator will endanger U.S. security. There are serious and legitimate concerns which must be addressed, but halting the deal is not a solution.

Dubai is rapidly becoming a major entrepĂ´t in the Middle East. Like Switzerland, it is a haven for assets owned by individuals who crave anonymity. It has become a duty-free shopping haven that actively courts global companies. It aims to become the financial hub for the region, with a new stock exchange and offices throughout the world. The ruling family currently owns property and assets across the globe -- including a minority share of the gambling and resort company Kerzner International and a controlling interest in the Essex House in New York and Madame Tussaud's of London. Dubai is, in fact, an example of global capitalism taking root in unlikely places, a hybrid cross between Miami and Singapore with a dollop of Las Vegas on the fringe of the Arabian Peninsula. And precisely for these reasons, it has as much to worry about from fundamentalist terrorism as the United States.

On the second point, the purchase allows critics to challenge the way the Bush administration has handled port security. That is an utterly crucial issue, for which the administration deserves criticism. Secure ports should never be sacrificed to economic expediency. Any port operator -- whether American, British or Arab -- must be required to prove its trustworthiness and competence to Congress (no less the American people), and be subject to utmost scrutiny and oversight or else prevented from having a prominent role in running them. In fact, security should never be sold to any company, regardless of where it is domiciled.

However, many American ports are currently operated by foreign entities, a fact which seems to have been overlooked. The port of Los Angeles has terminals run by companies from Taiwan, Denmark, Singapore and even China. The model the administration should follow is that of the airports, which are managed by private companies but whose security is the responsibility of the U.S. government. Yet while decrying the proposed sale is a way to score political points -- because the company is Arab and thus can be easily (and wrongly) equated with Islamic terrorism, and allows for revisiting a failing of the administration's homeland security policies -- it is not without considerable costs. Think of it: America says that it wants Muslim partners in its struggle against terrorism, yet politicians on both sides of the aisle are willing to tar a potential partner. The president may deserve attacking, but doing so in this way is truly cutting off our nose to spite our face.

Most troubling of all is the larger pattern of hyperbolic and xenophobic reactions against the tide of globalization. Strip away the particulars and the response to this current deal is almost identical to the reactions last summer when oil giant Unocal was nearly purchased by the Chinese company Cnooc. Then, Republican Rep. Richard Pombo warned that the deal could have "disastrous consequences for our economic and national security," while Democratic Sen. Ron Wyden noted, "Being a free-trader isn't synonymous with being a sucker and a patsy."

Then and now, the response to an economic challenge has been to raise the flag of national security to prevent foreign companies from acquiring U.S. assets. At the time of the Unocal deal, a common rejoinder was, "Well, the Chinese wouldn't let us acquire a vital asset of theirs," but then China began selling portions of its primary state-owned banks to the likes of Goldman Sachs and Citigroup. The specifics of the Dubai deal aside, there are signs that our preferred way to meet the challenge of a globalized economy is not to innovate and compete but to erect walls, invoke sovereign rights and bury our heads in the sand.

Having committed ourselves to a system and crafted its rules, we are suddenly confronted with the possibility of real competition, whether from China, India or the emirates of the Gulf. There is a debate to be had about the perils and promises of globalization, but invoking national security to block corporate sales or instituting retaliatory tariffs risks eroding both our global leadership and our economic growth. In the coming months there will be calls to label China a "currency manipulator," which may satisfy domestic discontent with the trade deficit but is unlikely to strengthen our economy or enhance our security. In the quid pro quo of international politics, other nations are likely to retaliate the only way they can: by making it more difficult and costly for U.S. companies to operate within their borders.

The concerns over national security and port security are vital and real but should not be conflated with foreign ownership or Arab ownership. Doing so undermines both our ability to craft effective security policies and the global economic system we have spent decades trying to create. The real national security question is not who owns the ports, but how to ensure that they are safe and secure. Period. The economic question is also simple: Do we really want a world where capital and goods flows freely, trade barriers are minimal, and companies can operate on a global scale? Or, do we only want that when it is convenient and comfortable? Nothing the U.S. government can do is likely to halt globalization, but in the process of trying we might unwittingly make the U.S. less competitive, more isolated -- and ultimately less secure.

I have concerns regarding the 1st item, but cancelling the deal won't have much of an impact. As Treasury Sec'y Snow said yesterday, we'll be sending a bad economic and political message if we cancel this deal.

Much of the criticism does come from items 2 and 3 (gut-level opposition to the global, free-market economy and xenophobia, respectively), and I certainly don't agree with either position. All in all, I hope the deal goes through - but not without the appropriate contractual obligations from DPW regarding scope, security issues, etc. I think that will be part of a revised agreement, but right now it looks like Congress and the punditocracy is more focused on killing the deal.

Your Co-Conspirator,
ARC: St Wendeler

Comments (2)
Monterey John said...

I could be wrong, but I think W is going to come out of this smelling like a rose.

Anonymous said...

Actually, I think you're right. The more time that passes on this issue (and the more people are imformed) the sillier the knee jerk reactions on all sides seem.