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28/02/2006 | Ports Deal on Hold; Issue Still Hot

Tim Starks

A business deal granting operational control of terminals at six U.S. ports to a United Arab Emirates company last week sparked a contentious debate, exacerbated by post-Sept. 11 concerns, over what role national security should play in commercial decisions.

 

In this case, the fight deepened a fissure between Bush and lawmakers from his own party, who sought to distance themselves from the administration's decision to approve the transfer of management at the ports to Dubai-owned DP World, in a move that would make it the third-largest global operator of cargo container terminals.   A potent mix of elements - national security vs. free trade, presidential powers vs. congressional oversight, and election-year politics - ignited Feb. 21 when Republican congressional leaders joined a growing bipartisan movement to block the management transfer.   Bush then shot back with a threat to veto any legislation that tried to do so.   By week's end, the administration had offered concessions to Congress as part of a full-scale campaign to rein in the opposition. On Feb. 23, the White House signaled that it would be open to a delay of the transfer. And DP World announced that, while it would close its $6.8 billion acquisition of British-owned Peninsular and Oriental Steam Navigation Co. on schedule March 2, it would defer taking operational control of P&O's U.S. port facilities until congressional concerns had been addressed. (Timeline, p. 551)   But those moves did little to muffle the uproar. Some lawmakers said the administration still needed to conduct a more exhaustive review of the purchase or the delay would be meaningless. And Congress might still consider legislation addressing a variety of related issues, from port security to a law (PL 100-418) governing foreign investment in U.S. infrastructure.   DP World and P&O first approached the Treasury Department about their potential deal in October, Treasury officials said. P&O manages 29 container terminals at ports in 19 countries. These include container terminals in Baltimore, Miami, New Jersey, New Orleans, and Philadelphia, and a passenger terminal in New York.   The Treasury Department is the lead agency in the Committee on Foreign Investment in the United States (CFIUS), a group representing six Cabinet departments and six other government offices, whose mandate is to review foreign investments that might have national security implications. (CFIUS details, p. 553; 2005 CQ Weekly, p. 1952)
Word Gets Out
  The group signed off on the purchase without objection from any member. Word of the pending transaction had been reported in the financial and trade press since the fall, but news of the completed sale hit the mainstream media only after P&O shareholders approved it Feb. 13.   Lawmakers weighed in for the first time on Feb. 16, when a bipartisan group of senators and House members, most of them from the New York metropolitan area, held a news conference to voice their concerns about the deal. Although the United Arab Emirates is considered a U.S. ally, critics of the deal said the country - a confederation of seven emirates - was home to two of the Sept. 11 hijackers and was a transfer point for nuclear components shipped to Iran, North Korea and Libya. Critics also contend that the UAE was one of three countries that previously recognized the Taliban as the legitimate government of Afghanistan. (UAE, p. 552) "If we were told that a company controlled by a nation with dubious history regarding terrorist activities were to take over airport security, we would all ask the question of 'What's going on here?' " said Republican Rep. Vito J. Fossella, who represents New York's Staten Island and Brooklyn. "I think the same level of scrutiny should apply when it comes to port security."   Lawmakers said they were particularly concerned that the administration did not trigger a longer, second-level 45-day review required if the company is owned by a foreign government and the deal affects national security. Democratic Sens. Hillary Rodham Clinton of New York and Robert Menendez of New Jersey quickly announced that they would offer legislation to block foreign management of ports.   Then bloggers latched on to the issue, and the Sunday talk show hosts followed up Feb. 19, asking guest lawmakers and administration officials about the deal.   By Feb. 21, Senate Majority Leader Bill Frist, R-Tenn., entered the fray, threatening legislation to delay the deal unless the administration conducted a review.   House Speaker J. Dennis Hastert, R-Ill., stepped in as well. "I am very concerned about the national security implications that this could have for the safety of the American people," Hastert said in a letter to Bush. "Therefore, I believe there should be an immediate moratorium placed on this seaport deal in order to further examine its effects on our port security."   With the barrage of critical statements from lawmakers growing more intense, and influential lawmakers such as Republican Peter T. King of New York, chairman of the House Homeland Security Committee, pledging legislation to block the ports deal, Bush spoke Feb. 21 to reporters aboard Air Force One, threatening a veto.   "I want those who are questioning it to step up and explain why all of a sudden a Middle Eastern company is held to a different standard than a Great British company," he said. "I am trying to conduct foreign policy now by saying to the people of the world, 'We'll treat you fairly.' "
 
Political Punches Fly
  While Republicans have demonstrated an increasing willingness to challenge their president on security issues, the sudden intensity of the new feud was unlike previous intramural conflicts over issues such as the renewal of the 2001 anti-terrorism law (PL 107-56) known as the Patriot Act and Bush's domestic spying program. (Spying, CQ Weekly, p. 434; anti-terrorism law, p. 493)   The Democratic National Committee gloated that Democrats had proposed action first, a bid to position themselves to the right of Republicans on national security. Democrats also took the opportunity to attack the GOP record on port security.   "This deal once again highlighted the issue of port security vulnerabilities in the United States," said Democratic Reps. Edward J. Markey of Massachusetts and Rahm Emanuel of Illinois, chairman of the Democratic Congressional Campaign Committee. "But these concerns are not new. This Congress and the administration have a record of neglect on port security."   After Bush's initial response to lawmakers, the White House began to demonstrate a lighter touch.   Administration officials visited Capitol Hill, offering informational briefings to virtually every pertinent committee and influential lawmaker on how the DP World deal poses no security threat. Many experts agreed.   "The fact that it's owned by the UAE government does not seriously increase the threat to the United States," said Joseph Bouchard, a retired Navy captain and a port security expert at the National Security Council during the Clinton administration.   Lawmakers said they were particularly upset because they had not been briefed on the deal beforehand. Instead of arguing the point, the White House agreed with them.   "In hindsight, when you look at this and the coverage it has received and the false impression that is left with some, we probably should have briefed members of Congress about it sooner," press spokesman Scott McClellan told reporters.   A pair of prominent Senate Republicans - Armed Services Chairman John W. Warner of Virginia and John McCain of Arizona - sided with the administration in urging Congress to be cautious about attacking the deal. Warner held a public briefing with administration officials on Feb. 23 to try to calm the storm.   DP World executives conducted their own media and lobbying blitz, appearing on talk shows and employing well- connected former lawmakers such as one-time Senate Majority Leader Bob Dole, R-Kan. (1969-96).   After the White House signaled that it was open to delaying the deal, DP World announced Feb. 23 that it would temporarily postpone its March 2 takeover of the U.S. ports, while proceeding with the rest of its deal to acquire the British company. The move will keep U.S. and British executives temporarily in charge of the operations at the ports, but company executives did not say how long the delay will last. A spokesman for Hastert called the delay "a smart move." But others said only a new review could placate them.   "If the company just thinks that by explaining the deal, or the administration thinks by explaining the deal, that Congress is going to get on board, I don't think so," King said. Lawmakers planned to introduce legislation this week, with several approaches under consideration.   A bipartisan group of eight senators announced Feb . 24 that they will introduce a bill to require CFIUS to begin an immediate 45-day investigation on the takeover's effects on national security. They said the move by DP World to delay its takeover of operations at the U.S. ports did not go far enough.   "If the president were to voluntarily institute the investigation and delay the contract, that would be a good step," said Democrat Charles E. Schumer of New York. "But a simple cooling-off period will not allay our very serious concerns about this dubious deal."   He was joined by Democrats Menendez, Clinton and Jack Reed of Rhode Island, and Republicans Norm Coleman of Minnesota, Olympia J. Snowe and Susan Collins of Maine, and Tom Coburn of Oklahoma.   The measure would also require the secretaries of Homeland Security and the Treasury to prepare a full report and brief members of Congress on their findings. It would give Congress the authority to disapprove the sale within 30 days.
 
House May Wait
  In the House, King is sponsoring similar legislation, although after DP World announced its decision to delay the deal, he suggested that the effort could wait until lawmakers have a better sense of how long the delay will be and what review will take place.   Three committees - House Armed Services, Senate Commerce, and Senate Banking, Housing and Urban Affairs - have announced hearings for March 2, the date the transaction was scheduled to close.   Other possible approaches on the Hill include port security bills and legislation to clarify when the administration must conduct 45-day reviews. The administration's interpretation is that a review is triggered when a member of CFIUS is prepared to vote against a deal based on national security concerns. Many lawmakers have argued that review of the DP World deal should have been automatic.   Collins, the chairwoman of the Senate Homeland Security and Governmental Affairs Committee, has said one of her priorities this year will be legislation authorizing $400 million in annual funding for port security grants. Senate Democrats are also pressing for consideration of port security-related legislation. T he Coast Guard has estimated that it would take more than $5 billion to implement security mandates, but so far only about $700 million has been spent.   Although the administration says that it screens 100 percent of the cargo coming into the country, it actually screens 100 percent of cargo manifests. In reality, a small percentage of cargo containers - no more than 6 percent - is targeted for a thorough inspection. And even the targeting method has come into question.   The Bush administration and congressional Republicans point to major increases in port security spending since the 2001 terror attacks. Leah Yoon, a spokeswoman for the Customs and Border Protection division of the Homeland Security Department, said department-wide port security grant funding jumped 700 percent from fiscal 2001 to $1.6 billion in fiscal 2005. She said overseas inspection of cargo and the deployment of cutting-edge technology have created a "multilayered defense strategy."   Congressional Republicans say they have gone beyond Bush's proposals to boost port security funding. In fiscal years 2006 and 2007, Bush requested no specific money for port security grants. However, Congress set aside $175 million for that purpose in fiscal 2006.   Republicans also point to enhanced security on the ground. According to the American Association of Port Authorities, for example, every major port is in compliance with the 2002 Maritime Transportation Security Act (PL 107-295), which required security plans and upgrades.   Nonetheless, congressional Republicans have repeatedly defeated Democratic efforts to greatly increase port security spending.

CQ (Estados Unidos)

 



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