US free traders retreat on UAE ports deal

Inter Press Service, 18 February 2006

FINANCE:
U.S. Free Traders Retreat on UAE Ports Deal

Emad Mekay

WASHINGTON, Feb 18 (IPS) - In a replay of congressional efforts last year that foiled a bid by a Chinese company to buy a U.S. oil firm, a group of hawkish U.S. lawmakers, citing national security concerns, are trying to block a deal that gives a major Arab company control over a British firm that runs some U.S. ports.

The move contradicts a forceful U.S. thrust into the Arab world focused on greater openness and free trade.

The Bush administration has proposed a Middle East Free Trade Area (MEFTA), which would link 22 Arab nations, Israel and the United States by 2013.

A free trade agreement between the U.S. and Morocco went into effect on Jan. 1, and a similar agreement with Bahrain was approved by Congress in December and is expected to take force this March. Other trade agreements now exist between the United States and Israel and Jordan.

At issue in the latest flap is a 6.8-billion-dollar deal reached on Feb. 13 that allows Dubai Ports World, a company based in the United Arab Emirates and owned by the government of the emirate of Dubai, to acquire a British firm in a transaction that would also give it rights to operate six major ports in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

The ports were run by the London-based Peninsular and Oriental Steam Navigation Co., the world’s fourth largest port operator, with operations in over 85 ports in 19 countries.

But a number of U.S. lawmakers, responding to an outcry by right-wing media outlets and talk radio shows, called for the Treasury Department to carefully review the new arrangement and scrutinise all security issues before control is turned over completely.

Some U.S. lawmakers went as far as to ask the George W. Bush administration to stop the deal, calling the Arab nation — the third largest U.S. trade partner in the Middle East — lax in the "war on terror".

On Friday, Senators Robert Menendez of New Jersey and Hillary Clinton of New York said they would introduce a bill to ban the deal altogether.

"We wouldn’t turn the border patrol or the customs service over to a foreign government, and we can’t afford to turn our ports over to one either," Menendez said.

Senator Vito J. Fossella, a Republican representing the New York City boroughs of Staten Island and Brooklyn, said the deal was inconsistent with U.S. efforts to enhance national security.

"The lack of transparency has left many questions unanswered as to why the UAE would be granted control of United States strategic assets," he said.

Another U.S. senator said that Washington should not trust the government of the UAE, a confederation of seven emirates on the southeastern border of Saudi Arabia, especially after the Sep. 11, 2001 attacks on U.S. landmarks, in which two of the hijackers were from that country.

"The question that needs to be answered is whether or not they can be trusted to operate our ports in this post 9-11 world," said Charles E. Schumer, a Democrat from New York. "The administration needs to take another look at this deal."

Earlier this week, Schumer sent a letter to Homeland Security Secretary Michael Chertoff urging him to probe the security implications of the takeover and to present a report to Congress within one month.

House Homeland Security Committee Chairman Peter T. King has reportedly met with administration officials and may convene hearings to discuss it.

But some analysts say the loud protests in Congress bring into question the U.S. push for global liberalisation and free markets and warned that it could actually backfire because of the U.S. aggressive trade agenda in the Middle East.

The United States’ trade relationship with the UAE is the third largest in the Middle East, after Israel and Saudi Arabia. The two nations are engaged in bilateral free talks that would liberalise trade between the two countries and would, in theory at least, allow companies to own and operate businesses in both nations.

"There are legitimate security questions to be asked but it would be a mistake and really an insult to one of our leading trading partners in that region to reject this commercial transaction out of hand," said Daniel T. Griswold, who directs the Centre for Trade Policy Studies at the Cato Institute, a Washington-based libertarian think tank.

"This could not only be an economic mistake but a foreign policy blunder," he said.

Washington has championed open markets in the developing world through its influence in international financial organisations like the Washington-based World Bank and the International Monetary Fund, as well as the Geneva-based World Trade Organisation, as well as through its political influence and aid programmes of the U.S. Agency for International Development.

The protectionist streak in Washington prompted U.S. lawmakers last year to oppose a bid by the China National Offshore Oil Corp. to acquire the U.S. oil company Unocal on national security grounds. CNOOC finally dropped its effort and left the company to be bought by U.S. firm Chevron Corp.

The U.S. lawmakers’ protests against the small but rich country of the UAE come even though the deal has already been approved by the Committee on Foreign Investment in the United States (CFIUS), an official inter-agency committee chaired by the U.S. Secretary of Treasury with a mandate to review foreign investments in the country on national security grounds.

Sen. Mark Foley said the UAE was a dubious partner because it has reportedly been pursuing a free trade deal with neighbouring Iran, a country the United States views as a threat to Israel and to U.S. strategic interests in the Middle East.

"This was done in the dead of night," Foley said.

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source: IPS