Anchors Aweigh

Diane Francis column Thursday Post March 9:

NEW YORK CITY - The fuss over the purchase of this city's port by Middle Eastern interests is another example of how protectionist economic nationalism is being cloaked as legitimate national security concerns.

The deal involves an estimated US$6.8-billion purchase of a British company by Dubai Ports World, owned by the United Arab Emirates government. The company manages ports around the world but also in New York and New Jersey; Philadelphia, Pennsylvania; Baltimore; Miami; and New Orleans.

The transaction has been delayed voluntarily in the wake of the political firestorm which erupted in Congress.
Key Republican, Senator Bill Frist, said he will introduce legislation to stop the transaction. President George Bush said he will veto any such law.

Last week, President Bush said the U.S. would send "mixed signals" by attacking a Middle East company on the basis of foreign ownership after the ports had been run for years by a British firm.

Homeland Security and other government agencies have also examined the deal and signed off, he said.

"I don't understand why it's OK for a British company to operate our ports but not a company from the Middle East when we've already determined security is not an issue," Bush told reporters aboard Air Force One after Frist urged the administration to block the deal.

Security is a non-issue.

This is because port logistics may be managed by a private-sector firm, but customs, law enforcement and other U.S. government agencies really run the ports, having the final say as well as access at all times.

The situation also involves an interesting sideshow concerning the Clintons.

New York Senator Hillary Clinton fiercely opposes the and is co-sponsor of a bill which would ban foreign ownership of ports. At the same time, her husband - former President Bill Clinton - has been on a Middle East gravy train.

News reports say in private meetings he is favoring the deal his wife opposes.

Both husband and wife deny they are at odds, but Mr. Clinton's lucrative post-presidential career makes for interesting reading.

News reports say that the UAE shelled out a total of US$600,000 to Clinton to give speeches there in 2002 and 2005 and Dubai chipped in US$1 million to the Clinton presidential Library in Little Rock, Arkansas.

The Dubai debacle is also embarrassing for the Bush administration because it involves economic discrimination against its best allies in the Middle East, apart from Israel.

Dubai, United Arab Emirates, Qatar and Kuwait are these liberalized and progressive Gulf states that are fiercely pro-American. Qatar is host to the Americans' large military contingent in the region while Dubai and UAE is in the process of building a Singaporean financial capital and high-end, sun-drenched playground for Europeans.

All four are also moving slowly toward democratization, which is near and dear to the administration's heart.
But politics trumps sound economic or diplomatic policies.

So does unenlightened self-interest on the part of American companies who may want to discourage foreign ownership by invoking security or other concerns merely to pick up local assets more cheaply.

This was obviously at play last year when U.S. Senators actually criticized China for paying too much to buy U.S.-owned oil giant, Unocal Corporation.

Since when did free enterprisers criticize an auction that yielded a better price for American shareholders?

National security matters were trotted out then too as the principal reason to hold up the deal pending a Congressional investigation.

But the real modus operandi behind opposition was to allow Chevron Corporation to buy Unocal for less money by forming clouds in Congress over China's offer.

One wag dubbed these anti-China politicians as the "Senators from Chevron".

All of which goes to show that economic nationalism is rearing its ugly head more frequently as well as selectively.
As the President pointed out, nobody objected to a British company owning these port business, but only did so when it decided to sell to Middle Eastern interest.

This was not because Britain is considered a friendly after sending troops to Iraq. It was probably because some American rival is now lurking around, hiring lobbyists, in order to scoop these assets from the Brits and the Arabs by eliminating a bidder.

Even Canadian companies have been caught in such crossfires. Take the bid by Canadian National Railways a few years back to buy a high-profile U.S. railway giant. The "national security" issue was raised in regulatory hearings and led to CNR's withdrawal.

Interestingly, that didn't stop CNR from buying another large railway giant later in a deal that was unopposed, probably because there wasn't another American bidder pulling lobbying strings backstage.