Comment on the Dubai Ports World Fiasco--BECKER

Posner rightly distinguishes the attempted purchase last year of the American oil company Unocal by the Chinese government-owned company, CNOOC, from the proposed operation of six American ports by Dubai Ports World, a company owned by the Dubai government. The case against the takeover of Unical by SNOOC was extremely weak for the various reasons we gave in our blog discussion last August. The case against allowing this Dubai company to be in charge of loading and unloading ships at several ports is stronger, perhaps much stronger, but in my judgment not strong enough. So I do support the decision of the Bush administration to allow the transaction to go through, and regret the Congressional and media opposition that torpedoed it. Posner too readily dismisses the degree of opposition in some American circles to the takeover by foreign companies of certain types of American assets. Such protectionism not only blocked the Unocal takeover, for reasons he agrees are flimsy, but also prevents foreign airlines, even those as innocent as British Airways, from owning American airlines, and from flying from one American city to another. Protectionism is the only reason for the pressure on China to control the rate of increase in its textile exports to the United States. American protectionist sentiment arises whenever it can be disguised as concern over national security, terrorism, health, and other legitimate issues. Protectionism was also manifest when Japanese companies in the 1980's and 1990's took ownership of certain assets, like Rockefeller Center, considered to be American jewels. Anti-Japanese attitudes allowed protectionists to create opposition to these transactions that would not have been possible if British or say Italian companies were involved. In the same way, although the operation of these ports was being simply transferred from one foreign company (British) to another one, dislike of Muslims by many Americans enabled protectionism to be disguised under the cloak of concern over Islamic terrorism. I instinctively am dubious about the legitimacy of the opposition to the Dubai Ports World transaction when it is led by the new Lou Dobbs, the CNN business commentator, who saved his sinking ratings by discovering that he never met any imports to the United States that he likes, whether of goods, services, or people. He may by accident be right in the Dubai ports situation, but his opposition makes me suspicious of the motives behind much of the more vocal opposition. How serious is the risk that this government-owned Dubai company, headed by an American, would either intentionally or through lax management of the ports, have allowed terrorists or major weapons to enter America through the ports they would have operated? This risk is not zero, but I do not believe it is strong enough to justify blocking the transaction. It is doubtful that any information provided to headquarters of the company by American dockworkers, or even by any of the very few Muslim managers of the company, would be of greater value to terrorists than information about port security that can be picked up from media reports, surveillance, and the internet. Furthermore, the major terrorist attacks in recent years, such as 9/11 and those in other countries, did not (as far as I know) depend on information passed to the terrorists by sympathetic companies operating trains, ports, airports, airlines, or other vital sectors. I have expressed my support of appropriate ethnic and other profiling in prior blog discussions and elsewhere, but the risk has to be sufficiently large to justify taking actions that inevitably arouse antagonism. Several airlines from Muslim nations, such as Kuwait Airlines, Biman Bangladesh Airlines, Emirates Airlines, and Saudi Arabian Airlines, fly into the United States every day. Should they be banned because someone in these companies might connive to allow terrorists on board who plan to hijack a plane and then fly it into a major building in New York, Washington, or elsewhere? Should all citizens from Saudi Arabia be banned from entering this country because a few might turn out to be dangerous terrorists? Terrorist profiling means that extra attention is paid to members of groups that are likely to commit terrorist acts, not in most cases that they are completely excluded from entering. For this reason, applicants from a country like Saudi Arabia who want to enter this country to study or as tourists should be scrutinized much more carefully than applicants from say Sweden. Extra scrutiny should be given to the activities of airlines with access to American air space that may pose greater risks than airlines like BA. Extra scrutiny should have been the way to handle any terrorist risk posed by the Dubai Ports World management of the ports under their control. The extra cost of an intensive inspection of cargoes entering these ports would have been worth furthering the belief that the US does not simply plead the case for globalization when confronted by restrictions placed by other nations on American exports. Such an action would have sent a message that while the US takes terrorism very seriously, it would not use that concern as a cover for opposition to foreign ownership of American assets. As Posner indicates, part of the concern arises from the apparent laxity in protecting against terrorist threats entering through ports. That has been noted many times as a defect that deserves high priority. I am no expert on this, but I would be easily convinced that this country is not doing a good job of inspecting containers entering American ports, and personnel on ships that dock at these ports. These concerns should be addressed, and exposure and correction of lax port enforcement should have high priority. However, blocking the operation of several ports by this Dubai company at best trivially help overall enforcement. Worse still, it could create complacency about protection of entry of terrorists and weapons through American ports that would be far more damaging to US security that allowing the Dubai transaction to go through. Perhaps as Posner argues, not much harm will result from opposing the Dubai Ports World management of a few American ports. Yet it gives still another signal to the world that when conditions are ripe, protectionist sentiment in the US will gain the upper hand. This is presented as anti-Islam or anti-terrorist, but is I believe at heart anti-free trade and anti-globalization. To me that is the main cost of the Dubai Ports World fiasco.

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