The Dubai Ports Issue is Really Wal-Mart and Toyota All Over Again!

Good Heavens! George Bush is threatening to veto a piece of Congressional legislation, breaking his record of never having used the veto. What's going on?

A coalition of Democrats led by New York Senators Charles Schumer and Hillary Clinton, joined Republican Senate leader, Bill Frist, as well as Christian conservatives such as Cal Thomas, see Dubai's acquisition of P&O's port concessions as a threat to American security. Why, two of the 911 bombers came from that small nation!

Bush's "War on Terror" having cried "wolf" everywhere, including Saddam's Iraq, is now having the issue come back, as it were, to "bite the President in the rear."

Beneath all of this "security" clamor, it's really the Wal-Mart question again, in a slightly different guise!

There have been protests around America over the last few years as Wal-Mart has sought to open new stores in a various communities. The hue and cry has come basically from two groups pushing two separate issues.

The first is that Wal-Mart's "low" wages and lack of other benefits is threat to the American worker. Yet, thousands of people line up for the potential job openings as a new Wal-Mart prepares to open its doors. The unions operating in a number of America's other supermarket chains have complained to politicians about that competition. The unions at General Motors and Ford have said the same thing about Japanese and other foreign auto makers building new plants in this country, especially in the South.

Well, are American ports any different? Only slightly.

American ports used to be controlled by a corrupt alliance of politicians and unions. One can recall with nostalgia a half century ago, as Oscar week approaches, Marlon Brando and Karl Mauldin in On the Waterfront, offering us a glimpse of this relationship. And, as we observe the posturing of Chuck and Hillary, we are reminded that all of our actors are not in Hollywood! As a former Floridian and co-author of A History of Florida (3rd ed., 1999) I can attest that the Port of Miami has been a case study in such shenanigans, and that explains why some of the pols there are so upset.

A piece by John Nichols, "Corporate Control of Ports is the Problem," lets the cat out of the bag.

Nichols concedes that, Dubai and security issues aside, no corporation should be operating an American port, " it would be a bad idea." Further, "Ports are essential pieces of the infrastructure of the United States, and they are best run by public authorities that are accountable to elected officials and the people those officials represent. While traditional port authorities still exist, they are increasingly marginalized as privatization schemes have allowed corporations -- often with tough anti-union attitudes and even tougher bottom lines -- to take charge of more and more of the basic operations at the nation's ports."

So, the real issue is privatization. Mr. Nichols would prefer government ownership. In all of this talk of accountability, nowhere is there any mention of the historical reality that American ports were long bastions of the unholy alliance of corrupt politicians, bureaucrats and union officials. No wonder all of the unions, from teachers to longshoremen, are behind Chuck and Hillary on this issue.

In the course of criticizing the idea that corporations are in business to make money, Nchols inadvertently concedes the phoniness of the "security" issue. " First: Like most American firms, most Arab-owned firms are committed to making money, and the vast majority of them are not about to compromise their potential profits by throwing in with terrorists."

The other side of the Wal-Mart equation, the threat to smaller business interests, is revealed in a piece by Robert Wright in the Financial Times, "Backlash to Dubai deal sends danger signal to US ports sector," which is, unfortunately, available online only to subscribers. I shall, therefore, quote generously from it.

Wright reminds us this is not the first time such a controversy has arisen, citing the effort of the Chinese company Cosco in 1998 to take control of the Port of Long Beach. Cosco simply switched to nearby Los Angeles and used the facilities there.

First, the "legislation proposed by US senators now could affect a number of companies that already operate container terminals in the US, possibly forcing them to sell."

Secondly: "The dispute could also put at risk the US's reputation in the maritime industry as a safe, predictable place to do business, observers believe."

Finally: "The ultimate effect may be to divorce practice in the US's relatively protected, inefficient container ports sector further from that elsewhere in the industrialised world, where large international companies have generally developed more efficient businesses."

Neil Davidson, a container ports analyst at London-based Drewry Shipping Consultants, indicates "the US container port industry would be unworkable without companies controlled by foreign governments. Proposed emergency legislation by senators Hillary Clinton and Robert Menendez would prevent foreign governments from controlling US container port assets."

"Among key companies that could be barred from operating US container terminals are China Shipping, the state-owned Chinese line, which has a terminal at the Port of Los Angeles, and APL, a line based in Oakland, California, and owned by Singapore's state-owned NOL," and "There are a number of major state-owned shipping lines that have terminals in the US," Davidson notes.

Further, "The law would prevent DP World, which is owned by the emirate of Dubai, from making any future investments but also lock out permanently Singapore's PSA, the world number three container port operator by capacity, owned by the Singaporean government. DP World will become the world number four through the P&O takeover but will be only just behind PSA and Denmark's APM Terminals."

Finally: "Without DP World and PSA, the US would be further cut off from the influence of the world's largest, most efficient container port operators. Hong Kong's Hutchison Ports, the world number one, already refuses to invest in the US because its executives are skeptical of how the container ports industry is organized."

Still, "that may suit the mainly small family-owned companies that lease container terminals at many US ports from the publicly owned port authorities controlling nearly all of them, Such small companies dominate the sector in the US, along with shipping lines, which lease dedicated terminals for their ships at many ports, especially on the west coast."

Thus, "Although the restrictive practices at union-dominated US ports mean profits are not as high as in other parts of the world, business for such family-controlled companies has generally been good, according to Mr Davidson. Few have chosen to sell out in the same way as the owners of ITO, the small terminal operator that sold P&O its north American assets in June 1999."

Finally, "US politicians well beyond Washington might also benefit if the deal were to fall apart. Many local port authorities are run by political appointees, who might benefit from attacking Arab interests if P&O North America's terminal leases were surrendered and could be relet."

Concludes Mr Davidson, "The US ports business is a pretty political animal."

So, in summary, privatization has been going on for some time in American ports with modest profits as the efficiency of our ports has fallen relative to the operations of larger companies in Asia and elsewhere. Like the small businesses opposing a local Wal-Mart, these companies would like things to remain much as they are, and they are relying on Chuck, Hillary and Bill to keep it that way. If I might refer once again to a film analogy, I hope this time George will "veto one for the Gipper!"