NEWS -- Dubya does Dubai

It's not often I say this. Maybe it's because I went to the dentist Wednesday, and the laughing gas somehow took effect before I got there and still hasn't warn off yet. However, I think I agree with President Bush on this one.

I first heard about the stink over the deal, which would transfer a contract to operate ports in New Orleans, Miami, Baltimore, Philadelphia, and the New York area (including ports in New Jersey) from British company P&O to United Arab Emirates-based Dubai Ports World, about a week ago. My first impression was that Congress was making a stink over a favored foreign company selling out to a less-favored one. As time went on, I learned that Dubai Ports World is owned by the government of Dubai and that the deal was hatched in comparative secrecy, both of which made me much more skeptical of the deal. Thinking about the subject further, though, there's one key issue at stake: property rights.

OK. The property in question is a government contract being sold by a foreign corporation to a company owned by the government of Dubai. Property rights issues such as this give free-market-loving libertarians headaches.

That said, let's reduce the issue to it's simplest. If P&O has the legal right to transfer these contracts--this hasn't been clearly established since we don't know the exact terms of the contracts or what promises may have been made in the negotiations (and those terms, spelled out in lengthy legalese, are quite possibly not available to the public for any number of reasons anyway)--then the government subsequently objecting to a legitimate transfer would mean the various port authorities in question, in effect, defrauded their contractor. I will assume that all rights and obligations in P&O's contract are transferable as is or with minimal renegotiation--that is a big assumption, but I can't imagine how a deal like this takeover could happen were it not true.

There are security issues at stake, granted. It's possible that al Qaeda could slip a sleeper agent into a sensitive position with Dubai Ports World. That's a risk with any operator, though. On specifics, the concerns strike me as vague at best. A New York Post editorial read on the Sean Hannity show on Wednesday, Feb. 22, for example, cites six reasons. Those reasons are:

[1] * The UAE — and, specifically, Dubai — has been a breeding ground for terrorism.

[2] * Its banking system — considered the commercial center of the Arab world — provided most of the cash for the 9/11 hijackers.

[3] * It continues to stonewall the U.S. Treasury Department's efforts to track al Qaeda's bank accounts.

[4] * Some of the operational planning for 9/11 took place inside the UAE.

[5] * It exchanged ambassadors with the Taliban when the latter subjugated Afghanistan.

[6] * And it trans-shipped [sic] weapons to Iran.

(The points were not numbered in the original. I have added those for clarity.)

Point 1 is simply too vague for consideration. Point 2 is also a tough one to consider--does this mean the money just passed through their hands? Did private entities in the U.A.E. fund al Qaeda? The implication is that the government of the U.A.E. did, or at least turned its back on such behavior, but this is also a vague and unsupported implication only. If the banking system is as central and important as this point claims--an assertion that is consistent with what I know about the U.A.E. from elsewhere--then it's possible the money passed through their hands only because they were a middleman handling lots of money, most of it for routine and innocent transactions. Point 6 is also meaningless--the very word "transshipped" means they did not originate the cargo--it simply passed through their country. Either they did not inquire into cargo destined for another country, or they knew there were weapons in the shipment, but did not intercept cargo they felt they had no right to seize. (Also, remember where Dubai is--at the mouth of the Persian Gulf, they're quite likely to transship many tons of cargo destined for Iran, Iraq, and every other country touching the Gulf.)

When I heard Point 3 on the radio, my first comment was, "Two words: banking privacy. Some people still value it." The fact that they won't roll over and eviscerate their domestic bank privacy laws is, so far, one of the best things I've heard about them.

Point 4 is a concern--but it doesn't mean the government sanctioned the planning. As I recall official accounts, the September 11 terrorists did some of their operational planning in Florida, but no one has suggested that Florida companies should be excluded from the management of the port of Miami for that reason.

Point 5 is the biggest concern. I cannot refute that they may have diplomatically recognized the Taliban. I can't evaluate the fact in isolation, however, and it is not fully consistent with what else I believe about the U.A.E.. The most I can conclude is that if the fact is true, it is either a stain on their record or it is something they did for reasons I can't fathom.

Beyond those points, many of the arguments against the deal focus primarily on the fact that the company is an "Arab" or a "Muslim" company. This is the most supremely irrelevant of arguments--it is racism and race-baiting hidden behind the illusuion of being concerned for national security. I know, I know--al Qaeda claims to be Islamic. Just like the Ku Klux Klan claims to be Christian. As this story has been presented so far, the references to Dubai Ports World being an "Arab Company" or a "Muslim Company" have generally been presented in a vacuum. Without any more solid connections, I take it to be meaningless racism. Imagine for a moment the ports were being taken over by a Japanese company, and use the appropriate adjectives. Now imagine they were being taken over by New Yorkers, and repeat the exercise. As you can see from that, to a great degree, the fear about the port deal is racism and bigotry. To a lesser degree, it's a general anti-globalism/anti-outsourcing backlash. The bottom line, though, is that it's a red herring--and a very ugly one at that.

Yes, there are security concerns. Whoever unloads the ships has the chance to steal cargo or help smugglers. I'm not convinced Dubai Ports World is a greater security risk than any other company in this regard. It is important to remember that Dubai Ports World is ONLY responsible for unloading the ships--the U. S. Customs Service and the U. S. Coast Guard are now and will continue to be responsible for port security. This doesn't mean security at ports could be described as good--the Department of Homeland Security runs both agencies and has also done such wonderful things as tell us to use duct tape to protect against poison gas attacks, run the TSA who so effectively screen airline passengers, and organize the federal end of the response to Hurricane Katrina. With a track record like that, one should doubt whether they can do anything right. The point is, however, that this inadequate agency doesn't handle port security because P&O unloads ships at some ports, and shifting the operation to Dubai Ports World will change NOTHING in this regard. Dubai Ports World can't fix what they're not able to change; no private contractor could.

One point that made me skeptical of the deal was the secrecy. I wouldn't necessarily dismiss the possibility of some corruption behind the deal, although the connections John Snow has with both the administration and Dubai Ports World seem vague to me. Even so, if there is corruption, it's still possible the Bush administration is doing the right thing for the wrong reasons. That may not be the full reason for the secrecy, however. Considering how the proverbial fecal mater has impacted the oscillating wind machine, I'm not sure those who wanted to keep the deal on the QT didn't have a point. I'm also not completely certain this was a deliberate attempt at secrecy--apparently, the president himself didn't now about the deal until recently, either, in which case, the "secrecy" was really nothing more than a blasé attitude to a prosaic deal. The main reason, however, may have been something buried deep in a Houston Chronicle article on the subject:

"The conditions over the sale were detailed in U.S. documents marked 'confidential.' Such records are regularly guarded as trade secrets, and it is highly unusual for them to be made public."

If this sort of deal sounds creepy for its secrecy, remember that the public demand to know every aspect of the deal is to Dubai Ports World analogous to demanding that Coca-Cola disclose every aspect of its contract to buy sugar.

No one else has voiced the argument that makes me wonder about the deal: is Dubai Ports World socialistic? I don't think it's proper for a government to be running port. Which government--be it the federal or a state government here, or a any foreign government--doesn't matter. Which port--be it Miami, Port Newark, or Hong Kong, doesn't matter. Properly, that is a function appropriate to a private entity--not the government. However, in the case of Dubai Ports World, this is a concern of the people of Dubai.

The main problems regarding government control of what should be private enterprise are the inefficiency that usually plagues socialism, and the unusual nature of government as an institution with powers denied to other organizations. In the case of the former, Dubai Ports World, functioning as a private contractor--even thought they're government-owned--will be held to the standards of their contract. Regarding the latter, the government of Dubai has negligible power here. (They could use diplomatic couriers to transmit company papers in a way that other companies couldn't, but the real mischief comes from things like a cozy relationship with the police or special immunity from certain lawsuits--these are things that Dubai Ports World would lack in this country.) In short, their nature as a foreign government works in favor of the deal on this point--they lack governmental power here.

Of course, there are many often-ignored points in favor of the deal. The first is that this is a chance to get a better contract. I'm hesitant to endorse using this deal as an excuse to force re-negotiation, since that would be going back on the original deal, also, and therefore wrong. Endorse it or not, though, this may be already be a moot point--apparently the negotiations are done, the terms have been modified somewhat, and critics are complaining that Bush hasn't asked for everything he could have. Now that congress is screaming and the deal is being reconsidered, who knows what's going to happen to THAT agreement.

Whether or not the deal is renegotiated, efficient operation of the ports is desirable. P&O offered, theoretically, the best available deal. (In practice, the contract could have been the result of corruption. If that is the case, it's a total crapshoot whether the next deal would be better or worse.) Starting with the best deal available, and renegotiating it in our favor, Dubai Ports World is likely the most efficient operator for the ports. If the deal is killed, then the port authorities will have to go back to the negotiating table, with at least one efficient competitor taken out of the equation (and probably more than one--it's likely a number of other foreign companies wouldn't even bid for such a contract in the aftermath--fearing bad publicity in perusing a deal they can't get). In such a case, the new port deal would likely be considerably worse than the current deal. For example, P&O might be contractually obligated to repair damage to the Port of New Orleans from Katrina and damage to the Port of Miami from Wilma. Dubai Ports World would likely inherit those obligations in the deal. If this deal is nixed, I have a hard time imagining a new company would assume those obligations--leaving the Federal or local governments holding the bag.

What if Dubai Ports World doesn't perform? Of course, as Thomas Knapp pointed out in his blog, if a private contractor misbehaves and the result is a terrorist attack, then the worst that is likely to happen is the contract will be cancelled. If Dubai Ports World misbehaves that way, our government may cancel the city of Dubai. Even if the government didn't take such drastic action (which would be unjustified, since the people of Dubai would be largely innocent in all likelihood), as Ivan Eland pointed out in his column, the guilt by association that has smeared Dubai Ports World so far would likely mean they'd lose more business than a non-Arab company as a result of a breach.

Regardless of how we'd treat Dubai and the U.A.E. if something went wrong, it is still important to consider how we're treating them now. Bush and his allies seem to be right to point out that the U.A.E. is pretty close to what we want the Middle East to be--that is, comparatively free and open, and willing to help us fight al Qaeda. This can be very hard to measure, and I don't always believe them when they say such-and-such a country is a trustworthy friend or deadly enemy: I don't think Pakistan or Saudi Arabia are as trustworthy as the administration seems to think they are, and I didn't think Ba'athist Iraq was, tyrannical as Hussein's regime was, the imminent and deadly threat they were portrayed to be in 2002 and 2003. All that said, I'm inclined to think the U.A.E. is the real deal--if only because some of the positive talk about the country was from BEFORE the port deal. (I'm thinking most specifically of National Geographic Channel's show Megastructures, the episode, "Impossible Islands"--which focuses on the building of a major resort in Dubai. The show will be rebroadcast on March 7, 2006, at 9 PM Eastern and again at midnight/9PM Pacific.) I'm also inclined to think well of Dubai and the U.A.E. because even some of the criticism of them claims Dubai is an important transportation and banking hub--while the status as a transportation hub could be an accident of geography, their clout in the banking community at least suggests that Dubai is relatively free for the region. Is the U.A.E. a perfect country? If I thought they were perfect, or even vastly better, I'd probably be writing this from Dubai. They're not. The U.S. isn't perfect either. However, imperfect doesn't mean horrible. What about the charges that they support terrorism? On that point, Senator McCain (another politician I'm loathe to agree with or quote as support) maintained, in his interview on This Week with George Stephanopoulos on Sunday, Feb. 26, that the situation there has improved since the September 11 attacks.

If the U.A.E. is doing what we want--it's only fair that they should benefit from such co-operation. This deal is one of the benefits they would reap from their relationship with us. Is it really a wise policy to deny such benefits to a country that is behaving the way we want out of vague fears about the region they're in? If we reject the U.A.E. as an ally, I wonder if they might not turn to Iran for support.

As for the company, getting beyond the fact that they're owned by the government, most of what I've heard about them is good. Certainly, Dubai Ports World seems to be reasonable in their behavior--even going so far as to lodge no objections to a 45-day security review of the deal.

All of that said, however, the most important consideration in my mind is property rights. The port authorities in question made a deal in good faith. If they didn't want the contract to be transferred without review on their part, they should have spelled that out in the original contract. At this point, we're not talking about stopping the deal, we're talking about rescinding it. None of the vague talk about security comes close to trumping those concerns in my mind.

I must admit, I can't claim to be an expert on Dubai or the U.A.E.. I'd heard some positive talk about the country before this whole stink erupted. Since the controversy, I've seen a lot of news accounts. Depending on which you believe, they're either the worst hotbed of terrorism since Taliban-controlled Afghanistan, or freer than a typical Bible-belt state. I tend to think the latter is somewhat closer to the truth--since it's more consistent with what I'd heard about them before the port deal gave people an incentive to skew the reporting. However, being a train buff, I do know a little bit about ports. In all the talk about this deal everyone seems to agree that the deal covers operations at six major ports. This is a simple fact to check, and is incorrect: the ports of northern New Jersey are governed by a common authority as those of New York City. When Port Elizabeth and Port Newark in NJ and the port facilities of New York City all get counted as two cities, even thought they're all under the Port Authority of New York and New Jersey (and, in effect, one port), one has to wonder whether anyone out there knows what they're talking about when it comes to this deal.