Common Sense on Ports

Isn't this precisely what the United States preaches? Don't we want places like Dubai to fight terror and to grow, to invest, to buy, to trade, to adopt Western commercial practices, to expose themselves to the rest of the world and thus become tolerant and moderate?

Yes, James, it seems to have worked well everywhere else.

My right wing bloggers are in a full blown tizzy over the United Arab Emirates port deal, but the free marketers are finally getting their side out. And I have to agree with folks like James Glassman in TCS.

Instead, congressional leaders are trying to kill the deal, which is set to go into effect next week. Why? "Outsourcing the operations of our largest ports to a country with a dubious record on terrorism is a homeland security and commerce accident waiting to happen," says Schumer.

This is rank racist nonsense. Schumer knows very well that responsibility for port security in the United States lies not with DP World or any other operator, but instead with the U.S. Coast Guard and U.S. Customs. "Nothing changes with respect to security under the contract," said Defense Secretary Donald Rumsfeld. "The Coast Guard is in charge of security, not the corporation."

Using Schumeresque logic, the U.S. should ban flights into the U.S. by airlines from Arab countries, and we should certainly bar any cargo from being loaded in Arab ports and bound for the U.S. ("If you are worried about a bomb in a box going off in New York, you need to worry about who loads the container overseas rather than the terminal operator who unloads it in the U.S.," says someone who actually knows something about port security, Theodore Price of Optimization Alternatives, a Texas company that provides terminal-operating software.) In fact, one would suppose that Dubai, with billions at stake, would be more careful -- not less -- about assisting in anti-terror activities at U.S. ports if it is actually operating them.

Nationalist undertones are a great tool for protectionists. Now that their arguments have failed economically, they will seek to use security. Sorry gang, free trade not only makes us all richer, it also promotes freedom without endangering a single US Marine.

Zachary Karabell, in a guest editorial in the Wall Street Journal, sounds the same themes (paid link, sorry!)

Most troubling of all is the larger pattern of hyperbolic and xenophobic reactions against the tide of globalization. Strip away the particulars and the response to this current deal is almost identical to the reactions last summer when oil giant Unocal was nearly purchased by the Chinese company Cnooc. Then, Republican Rep. Richard Pombo warned that the deal could have "disastrous consequences for our economic and national security," while Democratic Sen. Ron Wyden noted, "Being a free-trader isn't synonymous with being a sucker and a patsy."

Then and now, the response to an economic challenge has been to raise the flag of national security to prevent foreign companies from acquiring U.S. assets. At the time of the Unocal deal, a common rejoinder was, "Well, the Chinese wouldn't let us acquire a vital asset of theirs," but then China began selling portions of its primary state-owned banks to the likes of Goldman Sachs and Citigroup. The specifics of the Dubai deal aside, there are signs that our preferred way to meet the challenge of a globalized economy is not to innovate and compete but to erect walls, invoke sovereign rights and bury our heads in the sand.

Economics and Markets Posted by jk at February 23, 2006 12:45 PM