Sunday, February 26, 2006

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Still looking for a reason to get riled up....

I'm still trying to find a reason to get exercised about the Dubai port deal. The latest is Mickey Kaus' argument:

I recommend Daniel Engber's Explainer on what a port operator actually does:
It gets cargo containers off of ships and puts them onto trucks or trains. A port operator also provides other services to the shipping industry: It does the paperwork to get incoming shipments through customs and uses its computer system to help connect the goods with potential recipients. ...

Most operators invest in a computerized yard management system to help each trucker connect with his payload. ... The port operator also handles personnel issues.

If we're afraid of bad guys sneaking something dangerous into the U.S., it sure seems like there are lots of opportunities for mischief if you can infiltrate the firm that does the paperwork and runs the computer system and handles the "personnel issues"! Is it comforting matter that "security" at American ports will still be "controlled by U.S. federal agencies led by the Coast Guard and the U.S. Customs and Border Control Agency ... ." Not if what you're worried about is a small cell of people looking for a way to get around the Coast Guard's security. Just having a port operator that is more easily approached by people who speak Arabic vastly increases the risk, at least the risk from Arab jihadists, no? (emphasis added)
I would recommend that Mickey read this Washington Post story by Jim VandeHei and Paul Blustein. It's ostensibly about the White House's lugubrious reaction to the ports controversy, but it also sheds some light on how the CFIUS process addressed U.S. security concerns:
The process began on Oct. 17, when representatives of the Dubai company informally approached the Treasury Department to disclose that they were planning to purchase the British firm, Peninsular and Oriental Steam Navigation Co., according to testimony by administration officials at a Senate hearing last week. Treasury officials directed them to consult with Homeland Security because of the port security question.

The executives of Dubai Ports World -- several of whom are American -- well understood that they might face extensive scrutiny.

"You don't have to do this, but I brought a small team here [from Dubai] to meet with the CFIUS agencies in early December," said Edward H. "Ted" Bilkey, the company's chief operating officer and former U.S. Navy officer. The idea was to give the panel plenty of time even before the company formally filed to start a standard 30-day review.

Homeland Security officials, especially in Customs and Border Protection, had high regard for the company, which is owned by the government of Dubai and operates terminals in 19 ports in Asia, Europe and South America. It was the first in the Middle East to participate in a post-Sept. 11 program in which Customs agents are posted overseas to screen containers before they are loaded onto U.S.-bound ships. U.S. intelligence agencies -- who were asked on Nov. 2 for any information they had on the company -- produced nothing "derogatory" about it, Baker said.

Even so, the department had enough qualms to insist on a number of legally binding conditions for approving the deal -- a frequent CFIUS practice. The company pledged to maintain its participation in the Customs program, "and they agreed to open their books, and give us access to records, without any formal legal process," Baker said.

The department also wanted to ensure that the personnel at the U.S. terminals to be taken over by the company would remain almost entirely American. So it extracted a pledge that the company intended to keep the current management of U.S. operations in place. (emphasis added)

Given the concessions obtained through the CFIUS process -- DPW's participation in the Customs initiative, the transparency of DPW's books, the continuance of the current management team for the U.S. ports -- is there any rational reason to get exercised about this deal? Is Mickey's assertion that jihadists would have a better opportunity to infiltrate DPW's ports a valid one, given the layers of American management involved?

The Post story also aleviates the other small concern I had about this deal -- that the Bush administration bollixed up the process. The New York Times story I cited in my first post on this topic asserted:

The administration's review of the deal was conducted by the Committee on Foreign Investment in the United States, a body that was created in 1975 to review foreign investments in the country that could affect national security. Under that review, officials from the Defense, State, Commerce and Transportation Departments, along with the National Security Council and other agencies, were charged with raising questions and passing judgment. They found no problems to warrant the next stage of review, a 45-day investigation with results reported to the president for a final decision.

However, a 1993 amendment to the law stipulates that such an investigation is mandatory when the acquiring company is controlled by or acting on behalf of a foreign government. Administration officials said they conducted additional inquires because of the ties to the United Arab Emirates, but they could not say why a 45-day investigation did not occur.

VandeHei and Blustein have a different desription of the process in the Post story:
[O]nce Dubai Ports World had agreed to the conditions required by Homeland Security, none of the agencies on CFIUS objected to the transaction when the 30-day review was completed on Jan. 17. If even one agency had objected, the matter would have gone to a 45-day investigation -- which would have required a presidential decision at the end. Moreover, a single dissent would have meant bringing the matter before higher-ranking officials in each department.

But instead, the matter stayed with assistant secretary-level officials, who told the company the transaction could go forward.

I should know which version of the process is correct, but I don't. Readers are encouraged to enlighten me on this [UPDATE: Thank you, Chris! This comment clears up much of the confusion.].

UPDATE: Mickey e-mails me to suggest I read Charles Krauthammer's thoughts on the matter:

[T]he problem is not just the obvious one that an Arab-run company, heavily staffed with Arab employees, is more likely to be infiltrated by terrorists who might want to smuggle an awful weapon into our ports. But that would probably require some cooperation from the operating company. And neither the company nor the government of the UAE, which has been pro-American and a reasonably good ally in the war on terrorism, has any such record.

The greater and more immediate danger is that as soon as the Dubai company takes over operations, it will necessarily become privy to information about security provisions at crucial U.S. ports. That would mean a transfer of information about our security operations -- and perhaps even worse, about the holes in our security operations -- to a company in an Arab state in which there might be employees who, for reasons of corruption or ideology, would pass this invaluable knowledge on to al-Qaeda types.

That is the danger, and it is a risk, probably an unnecessary one.

Color me unimpressed. DPW already gets a lot of this information because Dubai is a participant in the Container Security Initiative. Furthermore, the on-the-ground environments in the ports themselves look like they won't be changed one iota because of this deal. It will still be U.S. longshoremen handling the cargo, U.S. managers running
port operations for DPW, U.S. managers at the upper echelon of DPW, and U.S. law enforcement managing port security. Where's the beef?

A final point -- my support for the Dubai deal should not be misinterpreted as a lack of concern about port security. I'm as sanguine now as I was before the deal -- that is to say, not all that sanguine. It's just that this deal is irrelevant to the real problems at hand for port security -- inadequate inspections.

An excellent primer on port security can be found in Jon D. Haveman, Howard J. Shatz, and Ernesto A. Vilchis (2005) "U.S. Port Security Policy after 9/11: Overview and Evaluation", Journal of Homeland Security and Emergency Management: Vol. 2: No. 4, Article 1.

ANOTHER UPDATE: Looks like DPW has requested the 45 day review, which has gone a long way towards alleviating Congressional concerns.

posted by Dan on 02.26.06 at 10:23 AM



Here is what you are missing: this is about the politics not the policy.

Whether it be Bush's "tone-deaf" approach, his apparent hypocrisy regarding national security (ports versus need for domestic surveillance) and his continued practice of not sharing key information/issues with Congress- the ports issue is not about the logistics/process questions that you've been focused on, but these political questions instead.

posted by: Rick Latshaw on 02.26.06 at 10:23 AM [permalink]

"I'm still trying to find a reason to get exercised about the Dubai port deal. "


posted by: Dave on 02.26.06 at 10:23 AM [permalink]

"I'm still trying to find a reason to get exercised about the Dubai port deal. "

Why? How long do you search before you conclude there's nothing to be found? As Mr. Latshaw points out, it was apparent this was all politics all the time several days ago. This will stay at the top of the heap till the next administration "blunder" or the discovery of the body of Natalie Holloway.

posted by: Richard Heddleson on 02.26.06 at 10:23 AM [permalink]

This one won't go away until it dies. I agree that the merits are not involved.

The "Jacksonian" uprising has begun.

The American people have concluded that Musims in general, and Arabs in particular, are a threat to them. They have also concluded that the federal government, and the Bush administration, have little interest in protecting America at home, and are incompetent at that to boot.

Airport security is the public face of homeland security, and it is a bleeding wound.

I predicted years ago that this would eventually happen:

I just thought it would come as a result of another terrorist attack here.

posted by: Tom Holsinger on 02.26.06 at 10:23 AM [permalink]

Maybe the 45-day "foreign government" process wasn't triggered because, ultimately, DPW is not controlled by a foreign federal government, but by a provincial government. One that has no say in the foreign policy of its nation.

I can guarantee you that there will be no Arabs working in rank and file positions at any of those ports. They don't even do that in Dubai. Few Emiratis leave the country for long stretches, given the generous welfare state at home. They certainly wouldn't care to move to a location where the government takes 30 or 40% of your paycheck. I'm stunned how clueless the American public is about Dubai. You'd think it was a backwater version of Kabul to read some of the stuff on the web.

posted by: bartman on 02.26.06 at 10:23 AM [permalink]

The problem - as most of us know - is that many Americans believe that we're "selling our ports to the Arabs" or that "port security will be run by an Arab country."

I cannot recount how many conversations I've had with friends, co-workers and neighbors - many of whom generally support the Bush Administration - who believe the above.

Somehow allowing DP World to purchase a company that has leased container terminals or stevedore operations has been transformed into "Bush is allowing the UAE to run port operations."

As a former reporter, I'm not usually a fan of bashing the press since it's a difficult job to do well (reporting, that is). But in this case, please, bash at will. Their inability to get the basic information out - e.g., the difference between a port and a terminal or the difference between purchasing and leasing - is stunning. Just stunning.

This White House has been appallingly incompetent. But our press is running a close second.


posted by: SteveMG on 02.26.06 at 10:23 AM [permalink]

Can't caution win out once in a while? If you guys are right that nothing bad will happen, but the deal is dissallowed, then the current port owners get a little less money from the next highest bidder and it is run a few percent less productively. Oh no, the horrors! If the critics of the port deal are right though, losses could be catastrophically higher than that.

The argument that few arab-muslims will have anything to do with our ports due to UAE citizens laziness is uncompelling. If I were a terrorist, I would get over my laziness and actively try to get a job with the port in America Posters here point out that there will likely be few UAE citizens anywhere near the ports to assuage critics, so you acknowledge that it's potentially dangerous for that to occur (19/19 hijackers being muslim is justification enough for profiling). So why don't you take a step further and oppose the deal until it is amended so that no UAE citizens can be involved in directly running the ports, instead of asking critics to rely on the you're ironclad guarantee of UAE citizen laziness? Not PC enough to ever happen you say? Then to hell with the whole deal.

posted by: scottynx on 02.26.06 at 10:23 AM [permalink]

Mr Drezner:

Thank you for injecting rationality into the discuss of this issue!!

Tony Conte

posted by: Tony Conte on 02.26.06 at 10:23 AM [permalink]

One angle I humbly suggest might be worth looking into: the Jones Act of 1920. It bans ships that aren't U.S.-owned from carrying goods from one U.S. port to another. National security was one reason cites for its necessity, but of course trade protectionism is another reason it still exists. The fact that the legislation relates ownership to national security, though, makes me wonder if it could be relevant - but perhaps that mindset is outdated.

As far as the bigger picture, Pat Buchanan said it all on the McLaughlin Group when he admitted opposition to the deal is demagoguery and based on the fact that "we don't trust Arabs." Say what you will about him, at least he doesn't mask his stereotypes.

posted by: b. phillips on 02.26.06 at 10:23 AM [permalink]

Scotty has this right.

Its an unnecessary risk. Period.

You can cite all of the "due diligence" in advance of the contract that you want, but its an audit, not a continuous monitoring from what I have read, and if it is, where is the cost benefit in continually having to "watch" the people "watching" our ports? Even if they pass muster the first time, will scheduled audits be enough to keep things safe over the long haul?

The tone-deafness to the deal politically is definitely fun to talk about and it's probably instructive of character issues, but the bottom line is that in the long run if you have to work just as hard to keep an eye on your own security detail then it doesn't make much sense.

Lastly there is something of a business blackmail undertone to this. Whoring our national interests out for short-term fixes is warning symptom of a shitty policy.

posted by: Babar on 02.26.06 at 10:23 AM [permalink]

Getting riled up about the Dubai ports deal is racism. Not "bordeline" racism, as Tom Friedman would have it. See the Notebooks' link for the detailed argument.

posted by: Candide's Notebooks on 02.26.06 at 10:23 AM [permalink]

Hey, would Israel franchise its ports out to DWP or any other Arab operator -- have they? Just askin'

posted by: Mitchell Young on 02.26.06 at 10:23 AM [permalink]

This is nothing new. Remember the uproar a long time ago when we gave china control of the panama canal?

Well, the details weren't like that, but we had a lot of conservatives very very upset.

It's the same deal all over again.

What it shows is just that Bush is a lame-duck president now. The old ladies who talked about what a nice man he was, who threatened to cancel their prescriptions if the newspapers printed bad things about him, aren't that interested in him any more. I think a lot of them gave up on him back when he spent his political capital trying to dismantle social security. They decided he was lying about social security, and if he'd lie about that, who knows what else he'd lie about?

So the media is free to come up with scandals that they wouldn't have dared to do in say 2004. Whether the scandals actually have something real about them or not.

posted by: J Thomas on 02.26.06 at 10:23 AM [permalink]

Thanks to Al "Father of the Internet" Gore we have the answer.

Israel Ports Development & Assets Company Ltd. (IPC) is responsible for the development of Israel's three commercial seaports in Haifa, Ashdod and Eilat and for providing them with the necessary infrastructure which will allow them to efficiently and competitively handle Israel's international maritime trade. In additional to managing some of the country's largest infrastructure development projects, the company acts as Israel's port property landlord, managing the government's assets allocated for the handling of international maritime commerce.

Now, the Israelis are supposed to be really security conscious, right? Seems they handle the ports themselves--probably a wise decisions. Here's one place where the Israelis could teach us a thing or two.

posted by: Mitchell Young on 02.26.06 at 10:23 AM [permalink]

Let's compare the gross tonnage the Israelis manage versus that of DPW. I'm pretty certain DPW handles more in a day than IPC in a year.

posted by: DC Loser on 02.26.06 at 10:23 AM [permalink]

The answer to your question about the process is that the law, on its face, does appear to require a 45-day investigation when a foreign company acquiring a U.S. entity is government-owned and the purchase is one that "could affect national security." So for example, if a foreign government-owned company bought a U.S. candy company then the 45-day investigation wouldn't be required, because obviously security is not implicated.

Recent administrations--Clinton and Bush--have interpreted this to mean that the decision to go to 45 days is discretionary--if the deal won't affect national security. And they, with encouragement from lawyers who have worked on these cases, have interpreted the "could affect national security" to mean that if security concerns are allayed in the initial review of the deal, then the 45-day investigation isn't necessary.

In this port case security clearly is implicated, but what administration officials have said is that they felt the security issues were addressed in the informal consultations when DPW agreed to several security measures. Once those concerns were addressed, the argument is that national security is not a concern anymore so the 45-day investigation is not necessary.

That's how the law has been interpreted pretty much since it was passed in 1992, though it is still a legitimate question as to whether that's an accurate interpretation. Sen. John Warner has asked for a legal interpretation from the Department of Justice and the Senate legal counsel's office.

posted by: Chris on 02.26.06 at 10:23 AM [permalink]

We have invaded nations for less!!! Real proliferation v. assumed....real links to bin laden v. no links.
Then their is the Bush rhetoric... "WE ARE AT WAR" over and over and over...this is NOT a great war time move. "911 changed everything" etc. Fomenting FEAR... the neo-con surrogates constantly talking up the threat of the "world wide islamofascism" trying to destory us anyway they can. The vague "nexus of terror".
The thing that bothers me the most about this deal is Bush sales pitch "UK and UAE are both good allies" pitch. To compare a nation like the UK, transparent, rule of law based, an ally for 2world wars, korea, the cold war and 2 gulf wars v. the UAE is a joke! I guess it is to be expected from the administration that constantly alluded to the Iraq -911 link...ANYTHING TO MAKE THE SALE!

posted by: centrist on 02.26.06 at 10:23 AM [permalink]

I surprised by the lack of libertarian outrage over this. If this was the US government trying to take over ports rather than the Dubai government...then we would have an uproar!

posted by: centrist on 02.26.06 at 10:23 AM [permalink]


I made that point on the first thread on this topic. My own feeling is that libertarians are basically permanent juveniles, smart but juvenile, rebelling against the 'family' which brought them up -- the nation.

Hence anytime opportunity to criticise the rest of the 'family', the red state Americans worried about an Arab state owned enterprise running our ports in this case, they will jump on it. Same goes with outsourcing, same with immigration, und so weiter.

Now now, don't get in a tizzy about how the nation is not your family -- its a metaphor folks. Although I bet plenty of you on this blog have benefits from interest free education loans, government grants, etc.

posted by: Mitchell Young on 02.26.06 at 10:23 AM [permalink]

He who controls paperwork controls security.

posted by: James on 02.26.06 at 10:23 AM [permalink]

Now it comes out that the Coast Guard did have problems with the deal. Just like in the run up to Iraq, bury any doubts from within.

posted by: centrist on 02.26.06 at 10:23 AM [permalink]

"Color me unimpressed."

Heh. Where have I read that idiomatic expression recently?

posted by: John B. Chilton on 02.26.06 at 10:23 AM [permalink]

I think the following article gives some reason to be concerned about the business style of Dubai.

posted by: clare on 02.26.06 at 10:23 AM [permalink]

If you want a cite for that, the Treasury dept. has some guidelines here. Specifically:

Amendments. Section 837(a) of the National Defense Authorization Act for Fiscal Year 1993, called the "Byrd Amendment," amended Section 721 of the Defense Production Act (the "Exon-Florio provision"). It requires an investigation in cases where:

o the acquirer is controlled by or acting on behalf of a foreign government; and

o the acquisition "could result in control of a person engaged in interstate commerce in the U.S. that could affect the national security of the U.S."

My big "oh, of course" was that it was Senator Byrd's amendment. I'm hoping this reassures you that there is no security concern, only ugly protectionism.

posted by: James of England on 02.26.06 at 10:23 AM [permalink]

Oh, and the suggestion that the Coast Guard felt the deal is unsafe is a filthy AP lie, according to the Coast Guard's depressingly believable press release.

posted by: James of England on 02.26.06 at 10:23 AM [permalink]

Who do you believe? The unclassified part of the Coast Guard report, or the Coast Guard's claim that the classified part contradicts the public part?

Given the current administrations' repeated insistence that CIA etc lie to us?

No way to tell until the whole report gets declassified, if we can assume it didn't get falsified in the meantime.

It's entirely plausible that the classified part of the report actually did contradict the public part. Happens all the time. And it's entirely plausible that the Coast Guard made that announcement under pressure.

There's nothing to go on here to predict the likelihoods except Bayesian analysis on priors.

posted by: J Thomas on 02.26.06 at 10:23 AM [permalink]

Racists playing the race card -> Dubai and Bushco:

posted by: Dan on 02.26.06 at 10:23 AM [permalink]

Dan, that link didn't look particularly racist to me. It just reported a bunch of facts.

Sure, it's reasonable to expect racist stuff from israel, but this time it looked like a pretty fair report to me.

posted by: J Thomas on 02.26.06 at 10:23 AM [permalink]

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