Scuttle the ports deal?


U.S. news sources reported today that by a 62-2 margin, the U.S. House of Representatives Appropriations Committee voted to bar DP World, which is run by the government of Dubai in the United Arab Emirates, from holding leases or contracts at U.S. ports.  Thus far most of the debate has centered around national security concerns and the prospect that some key U.S. ports would be operated by a foreign operator.  Less attention has been paid to whether it makes sense from a trade policy standpoint to allow DP World to take over some U.S. port operations.  I think that an unusually bipartisan House made the right decision to scuttle the deal.  However, I would have supported the bill for a reason other than national security.
 
The argument that U.S. ports should not be operated by foreign operators is baseless.  "This is a national security issue," said Appropriations Committee Chairman Jerry Lewis (R-California), adding that the move to bar DP World would "keep America’s ports in American hands."  This statement is fallacious and is myth being perpetuated by both Democrats and Republicans for political reasons.  Britain-based Peninsular & Oriental Steam Navigation Company (P&O) currently operates the ports in question.  DP World is merely acquiring the company and assuming control through its acquisition of P&O.  Few critics of the DP World deal are concerned about the fact that P&O is also a foreign company.  The widespread, bipartisan support for banning DP World from operating U.S. ports over national security concerns may be inherently discriminatory.  Dubai-based DP World is located in a country no more prone to terrorist activity than is Britain-based P&O.  More terrorist cells, including IRA and radical Muslim terrorist cells, are based in Great Britain than in Dubai, despite the fact that Dubai is located in the Middle East.  DP World may be victim of a U.S. polity that is overly cautious about doing business with Middle Eastern firms and under estimating the global reach of terrorists.  P&O’s port operations could be infiltrated by terrorists as readily would port operations under DP World.  U.S. port controls may actually improve under DP World, which successfully operates the Middle East’s largest port and the world’s 10th largest.
 
Of greater concern is the fact that DP World is owned by the Government of Dubai.  I am critical of any quasi-private company that seeks to globally expand while their national or regional government owns a sizable stake in the company.  National companies, including national railways, airlines, and postal services, among others, exist to serve domestic markets.  When these companies begin acting as multinational corporations, acquiring other companies, serving foreign markets, and expanding their global reach, they gain an unfair advantage when backed by their home governments.  I was critical of CNOOC’s deal to purchase Unocal, a petroleum company, for this reason.  I would have preferred that Congress acted to block T-Mobile, a division of Deutsche Telekom, the German national telecommunications company, from purchasing VoiceStream Wireless, a fast-growing private U.S. company.  I was preturbed when I read that DHL, Deutsche Post’s air freight forwarding company, purchased Seattle-based Airborne Express and moved its operations, putting many Seattle-based employees out of work.  Companies whose largest shareholder is a foreign government have no business buying up the domestic assets of another country until they privatize–especially if it puts people out of work.  For this reason, I too oppose DP World’s takeover of U.S. ports–not because I am concerned about national security, but rather because the Government of Dubai needs to privatize the company before it takes over another country’s port operations.
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