Bush: Ports Storm Sends Bad Message

President Bush speaks at the National Newspaper Association Government Affairs Conference Friday, March 10, 2006 in Washington. (AP Photo/Charles Dharapak)
AP Photo/Charles Dharapak
President Bush said Friday he was troubled by the political storm that forced the reversal of a deal allowing a company in Dubai to take over operations of six American ports, saying it sent a bad message to U.S. allies in the Middle East.

Mr. Bush said the United States needs moderate allies in the Arab world, such as the United Arab Emirates, to win the global war on terrorism.

The president said he had been satisfied that security would be sound at the ports if the Dubai deal had taken effect.

"Nevertheless, Congress was still very much opposed to it," Mr. Bush said. He made his remarks to a conference of the National Newspaper Association.

"I'm concerned about a broader message this issue could send to our friends and allies around the world, particularly in the Middle East," the president said. "In order to win the war on terror we have got to strengthen our friendships and relationships with moderate Arab countries in the Middle East."

The United States sells a lot more to the UAE than it buys, says CBS News correspondent Jim Axelrod. For example, last November, the UAE signed a $9.7 billion contract with Boeing for 42 jets. But Mr. Bush feels the UAE is much more than a good customer.

"UAE is a committed ally in the war on terror," he said. "They are a key partner for our military in a critical region, and outside of our own country, Dubai services more of our military, military ships, than any country in the world.

"They're sharing intelligence so we can hunt down the terrorists. They helped us shut down a world wide proliferation network run by A.Q. Khan," the Pakistani scientist who sold nuclear technology to Iran, North Korea and Libya, he said. "UAE is a valued and strategic partner."

Shortly after Bush's appearance, the administration announced a postponement in the next round negotiations aimed at reaching a free trade agreement with the UAE, but wouldn't say whether it was related to the fallen ports deal.

The office of U.S. Trade Representative Rob Portman said merely that the next round of talks were put off to allow both sides more time to prepare.

Meanwhile, the Dubai-owned company that pledged to surrender its $700 million worth of U.S. port businesses amid a furor on Capitol Hill wants to guarantee it doesn't lose money on the deal. But now that DP World is out of the political frying pan, it could find itself confronting a fire sale of its American assets.

Faced with unrelenting pressure from Congress, Dubai's ruler said DP World will transfer to an unspecified American company all U.S. port operations it acquired when it paid $6.8 billion for London-based Peninsular & Oriental Steam Navigation Co.

CBS News senior White House correspondent Bill Plante reports the announcement came about after the company's consultations with White House political strategist Karl Rove.

In its statement, DP World said its decision was based on the understanding that "DP World will not suffer economic loss."

But experts believe it's unlikely DP World can sell its newly acquired U.S. business for $700 million, given the political pressure to quickly hand over those operations to an American company. They warned this could become an expensive case of buyer's remorse.

"It does seem like they're unloading this in the equivalent of a fire sale," said William Reinsch, president of the National Foreign Trade Council and a former senior Commerce Department official.

While the DP World deal gets all the attention, CBS News correspondent Bob Orr says it's far from the only foreign company operating key U.S. port facilities. It's not even the only Dubai-owned company. Orr notes that Inchcape Shipping Services already operates in more than two dozen American cities, moving cargo, tanker, and cruise ships in and out of ports — including those in New York, Baltimore, and Miami.

Investors from the United Arab Emirates bought Inchcape in January from a British firm — and not one U.S. senator squawked about that deal, Orr says. Since the 1970s, shipping companies from South Korea to Denmark have been unchallenged by U.S. investors, regulators, or elected officials as they've snapped up undervalued American port operations.