Saturday, February 18, 2006

UAE port operations - perspectives and reality


(UPDATE) - The MSM is, again, misleading the truth of the story by elimination of words. It has gone from Schumer's "sale of operations of ports" to the media's "sale of US ports". This, of course, appeals to the base notion that we're selling out such valuable land holdings when, in fact, that is not true. The ports are publicly held, and long term leases for operations granted. (END UPDATE)

None of us are entirely comfortable with the notion that an UAE/Arab state controlled business would handle port operations for six commercial shipping ports... located in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

Of course it's no surprise that the cry raised would be and blame laid squarely on... who else? Dubya, as
implied in the AP screaming headline, "Administration OK With UAE Running Six Major U.S. Ports"

Everyone from both sides... from Michelle Malkin and Michael Savage on the right to Chuck Schumer, Hillary and chums on the left... were flying off the handle at the mere suggestion of an Arab owned company acquiring the contracts. Such bonding of extreme opposites made me want to take a closer look at things.


If there's one thing Congressional members are good at - both sides of the aisle - it's finding problems. They are, however, deplorable at solutions. And in actuality, this perceived national security problem - if it is one at all - was created by Congressional inadequacy which did not address the problem sooner.

Fact is, the connundrum INRE port operations, and the ability for foreign held companies to acquire these contracts, is a matter of legal framework under which the
Committee on Foreign Investments in the United States must operate.

So to set the record straight about the President's ability to thwart mergers between foreign held private corporations that can affect our national security, we need to consult statutes.

The Statute. Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 amended Section 721 of the Defense Production Act of 1950 to provide authority to the President to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States. The President can exercise this authority under section 721 (also known as the "Exon-Florio provision") to block a foreign acquisition of a U.S. corporation only if he finds:

(1) there is credible evidence that the foreign entity exercising control might take action that threatens national security, and

(2) the provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.

Don't know about that second phasing, but it smells suspiciously of the old FISA, new terror requirements argument that so offends everyone's sensibilities.

Researching DP World shows they don't have the time under their belts that P&O has. They've grown hands over foot by locking up much of the Chinese trade. But what also is a fact with DP World is that they already are the port operations company for terminals in Germany, Romania, Saudi Arabia, South Korea, Australia, China, Morocco, India and Venezula.

Note.. there's alot of other democratic, and or friendly nations in this list with whom we already have with trade agreements. The point? The track record for DP World's performance in a few kindred nations indicates the fears have no grounds. Do you see other countries and their media running around like chickens with their heads cut off in a panic? Post 911, do you see Germany and Australia - already DP World clients - shopping around for another service provider in security fear?

Thus, if the Committee and WH find their hands tied in preventing this merger for national security purposes by existing statutes, the statutes will have to be altered and the threshold of acceptable conditions for such a sale raised.

And who is responsible for statutes? Congress, of course.... So who's fault is it that the WH admin and Committee for Foreign Investments are impotent in this matter? Again... Congress.

The "blame Bush... he's 'outsourcing' our security" assaults by Congress and media pundits alike is Hate-Bush'ese Hype - translated as the Committee and Prez do not have the ability to stop such a merger under current laws - (did I mention, created by Congress?? LOL).

And of course, the largest offense is the misleading headlines that make the average reader believe those in charge of port operations are also charged with US national security.

Realizing they may have something here, Congress now wants to introduce a BILL! Hummm... another road traveled that looks familiar. ALA Congress wanting to rewrite the NSA scene to make Bush's logical monitoring program more "legal" in their eyes.

All fine and good. Introduce a bill for all I care. But before we get all fired up about it's perceived wisdom, let's get some basic facts and a real perspective on the situation.


P&O (Peninsula & Orient) (UK) currently has the contract for the in-question port operations locations. And while most ports are publicly owned (port authorities), about 90% of the terminal operations are farmed out to private companies. In the case of ports, ownership is retained by the state's public (gov't), and long term leases are granted to operators giving some approximation of "ownership". This enables the leasee to improve buildings and facilities. However, they do not own the land, thereby can not "sell the port" as such.

Next reality?

Port operations are NOT cargo inspectors for terrorist imports. The first line of defense is Homeland Security and US Coast Guard. Port operation steps in after the fact

So what is the Congressional solution that is to bolster our port security?
A bill that will forbid the sale of port operations to any foreign held or controlled company.

Interesting since the ports are already under a foreign held or controlled company... What is even more interesting is that, despite lacking evidence that suggests DP World's port business increases terrorist threats, Congress is essentially saying "we don't want an Arab country buying this". Since that is the quintessential racial slur, they have to exclude everyone else - an action smacking of isolationism and intolerance.

Anyone find this behavior in the least bit amusing? I sure do...

Upon passage of such a bill, where does that leave us? Not unlike Halliburton's services, limited to few companies in the world, just how many competitors are on the par of P&O, and capable of managing the major US shipping ports?

Four crop up, including P&O...
PSA Int'l (Singapore), Hutchison Whampoa (Hong Kong), and DP World (Dubai).

Da skinny.... P&O wants to sell.... and
the only two bidders were PSA Int'l and DP World. PSA dropped out, so the only purchaser left was DP World... the subject of the current media hysteria. Then again, had PSA won the bid, they would have become the single largest ports operations group in existance. Would it then have become a monopoly battle? Fascinating....

It may be prudent to note that this same merger that has everyone in a tizzy also includes P&O assets, lease contracts, etc in Canada, Australia, Germany, and Spain, among others, as well. Yet none of these countries' are raising a stink about national security risks. Instead, the Brits lick their wounded pride, lamenting the sale of the historic maritime giant to other than UK hands.

Another British view pretty much poo-poo's the American hypersensitivity to the security issue over the sale, while still lamenting the end of an era for the British megolith. And The Observer's Will Hutton takes the more traditional protectionist'ic view of P&O being out paced in growth by DP World - a sign of economic weakness. Security? Not in question.


As I said, elitist Congress is good at finding problems, and sheeeeet for solutions. BOTH sides of the aisle.

Thus my question to all this bru-hahah is this. Just who da heck do you suggest take over the port operations from P&O? Don't just randomly make up bills that tell us who can't have these contracts (any company or organization not American) without considering what is left (zip, nada, nil). Dang... that's like putting up a detour sign on a one-way, dead end road!

Surely they are not suggesting that the federal government buy out the US port contracts and get into the port operations business... immediately... as a competitor. That is not their Constitutional function. First, it would take an exorbitant amount of taxpayers' cash to buyout these assets. Secondly, after acquisition, could the feds realistically ramp up to speed in the time frame needed? I think we can safey look at other fed role models.... i.e. FEMA's been around for ages, and it's been pretty much an ineffectual loser since day one.

This is all smokescreen and politics. Another attempt at "gotcha Bush". The Reds need to support the Blues in public since it sniffs of border security. In reality, the proposed, and miraculously bipartisan, Congressional bill is worthless, and does nothing more than create a job vacancy that cannot be filled under their new requirements.

The real problem lies not with DP World or any port operations company. It's Homeland Security's performance. And that is something that dearly needs to be addressed by a united Congressional effort.

UPDATE TWO - I am pleased to find I am not the lone voice in my opinions here. Instead I find myself in the illustrious company of AJ Strata at The Strata-Sphere with his musings, "Are We Losing America's Greatness?"

UPDATE III - It's a big blogworld... and once Michelle Malkin started putting up links (including to this post), I read comments from another blogger with a reality grip on the issue, March Hare at The Mad Tea Party.


Mike said...

Just want to commend you for your very succint post on the port issue. I'm a progressive so I would probably disagree with you on most other issues; but here your right on the mark.

There may be something else about this that no one has really mentioned yet, and that is: why are Clinton and Menendez so against this? Sure it could be a concern about a foreign company managing our ports. Others would say it's only just pure politics, anything to beat on Bush. But there may be another angle to it that no one is really looking at. That is: Who else in NY and NJ would have a monetary reason to oppose DP World in getting this contract?

I certainly dont know if there is anybody asking Clinton and Menendez to go to bat for them on this, but knowing what politicians are like, I wouldnt rule it out. Did your research point to anything in this direction at all?

Anyway, great post. Thanks for the added illumination the rest of the blogosphere has failed to see.

MPH said...

Why do they hate us? Western culture, with an underscored respect for reason, capitalism, and individual rights for all members of society is diametrically opposed to the virus of Islamic extremism which is escalating a battle for greater control of the Arab world and beyond. Any progress in lifting the Arab world into modern western standards is not going to be achieved by bribing these regimes to not attack us or capitulating to the demands of the extremists. Our greatest weapon is appealing to the self-interest of Arab companies and workers with the mutual benefits thankfully available through cooperation in modern global markets. Shared interests and shared fortunes with the Arab world will create equal incentives for security both on our shores and theirs. An attack on America by Arabs becomes a self-inflicted wound and sets off internal forces overseas to eradicate the virus.

In the long run, free trade is a more effective diplomacy tool than any number of guns. We are open to working with the Arab world as equals, not as terrorists. Money knows no borders or race or religion.

If these Clintonian political postures are successful, we will send a clear message to the Arab world that America is xenophobic - Arabs need not apply to the modern world, leaving options such as Hamas the seemingly only viable alternative. Assuming the deal is accepted, we send the message that America responds positively to peaceful cooperation and our wrath is only reserved for attacks on the rights that make such free trade available at all.

Sea Eight said...

Regardless if DPW is to buy or long term lease these ports it’s a bad idea with a hint of impropriety involved when one of DPW’s senior executives, Dave Sanborn, has been nominated by US President George W. Bush to serve as U.S. Maritime Administrator.

A no-brainer if you ask me.

Christian Pundits said...

Homeland Security Secretary Michael Chertoff says the panel has done "due diligence" concerning the UAE's purchase of the ports, but excuse me if I don't have much faith in Secretary Chertoff's due diligence right now.

Also wanted to let you know that I've linked to this post over at Christian Pundits.

March Hare said...

Nice to see I'm not alone in my view of "reality." :)

Some of my favorite hyperbole is the one that "they" could "sneak a vessel into the port." Not bloody likely, in my humble experience.

The answer is, of course, to beef up Coast Guard and Customs inspectors and to come up with a better way of data mining inbound manifests.

But that's just my idea...

Keep up the good work!

MataHarley said...

Wow... some very quality posts here. And I thank you all for your tone of presentation, whether dissenting or in concurrence.

I'd like to say that I too would be happier had this situation never arisen. However it has. And the question becomes - do we really incur greater risks, what are the repercussions (agreeing or not to sale) and what are the other, realistic options before us?

Christian Pundit... completely understandable that you don't trust Chertoff. However he wasn't the loan ranger in DPW's historic port operations performance. Perhaps the wisest course is for the the US to make public results of DPW's history, thus qualming nerves. The WH handlers do tend to be a bunch of yutzes when it comes to communication. To me, they are the weakest link in this admin.

I agree with MPH in that nixing this deal, sans any credible evidence in their past port operations in other free nations, sends a very ugly message to the Arab world. We would prove ourselves guilty of terrorists' accusations that we are anti-Islam.

Sea Eight... I'm not sure what your problem with Sanborn is. Many blog pundits suggest some sinister tie with Sanborn-Bush and the sale. Yet that sale was negotiated between P&O and DPW... not between the WH and DPW.

This is old news, people. This sale was announced as an accepted offer back in Nov 2005 in American media outlets, and world wide. (See my post on the main page...) A tad late in hand wringing by everyone, don't you think?

Also pertinent is that the sale and terms were agreed upon 4 months prior to Sanborn's appointment. Thus eliminates any notion that the appointment had anything to do with P&O's acceptance of DPW's terms... as if it could anyway. P&O is the beneficiary of the sale. Not the US.

Sanborn held the position of Director of Operations for Europe and Latin America... not the US ports in question. Additionally he seems well qualified. From his bio...

"Mr Sanborn, a graduate of The United States Merchant Maritime Academy, joined DP World in 2005. He previously held senior roles with shipping lines CMA-CGM (Americas), APL Ltd and Sea-Land and has been based, besides the US, in Brazil, Europe, Hong Kong and Dubai during his career. He has also served in the US Naval Reserve."

While it's not abundantly clear, the presentation is that Sanborn resigns DPW, and accepts the new position this month, with no conflict of interest. Other than that, and unlike Miers, Sanborn looks eminently qualified for the job.

So perhaps you can elaborate on your objections? Are you suggesting he would put the terrorists' goals over his own country's security thru his position? And what in his history would you base that opinion on?

Mike... Thank you for the kind words on my post and cursory research. Since the sale is, in essence, old news, and since only the US is pitching a beef (not the UK, Canada, Australia or Germany, who's ports are also affected), I can only assume this is an opportunity for the Dems to jump on the "we care about national security" bandwagon. Reps have no choice but to play the game or appear "in league" with Arabs for monetary gain.

There's no end to the weird strategy by politicos, eh?


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