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US groups fear ports uproar may hurt UAE trade deal

Wed Feb 22, 2006

US groups fear ports uproar may hurt UAE trade deal

By Doug Palmer

WASHINGTON (Reuters) - U.S. business leaders voiced worry on Wednesday that a congressional uproar over an Arab company’s takeover of operations at key U.S. ports could slow proposed free trade pacts in the Middle East, particularly with the United Arab Emirates, where the company is based.

The purchase of a British company that runs several U.S. ports, including New York, by state-owned Dubai Ports World has sparked an uproar on Capitol Hill, with many lawmakers saying the deal should be overturned because of security concerns.

"The message is just an awful one: support the United States, help out on terrorism and then we’re going to treat you like a terrorist anyway," said Bill Reinsch, president of the National Foreign Trade Council, which represents leading U.S. multinational corporations.

U.S. Treasury Secretary John Snow echoed this sentiment.

"Having vetted the process, and having concluded that it would not present national security risks, the implication of failing to approve this would be to tell the world that investments in the United States from certain parts of the world aren’t welcome," Snow told reporters during a plant tour in Connecticut.

The United States launched talks with the UAE in March 2005 as part of a larger push to create a free trade zone throughout the Middle East by 2013.

U.S. Trade Representative Rob Portman told Congress last week he hoped to finish the pact with the UAE this year.

The United States already has such deals with Morocco, Jordan, Israel and Bahrain and has concluded another with Oman that is expected to go before Congress this year.


President George W. Bush responded on Tuesday to lawmaker objections, defending the UAE as an ally in the war on terror and pledging to veto any bill that blocks the deal.

"After careful review by our government, I believe the transaction ought to go forward," he told reporters.

Reinsch said he was worried the ports furor could make it tough to finish a trade deal with the UAE, a member of OPEC and the United States’ third-largest Middle East trading partner.

"The congressional message seems to be if you’re an Arab state we’re going to consider you a terrorist," Reinsch said, adding he hoped Bush’s strong stance would minimize damage to the United States’ commercial reputation in the region.

Frank Vargo, vice president of the National Association of Manufacturers, agreed the uproar may hurt UAE deal prospects.

"That thought went through my mind. Geez, how on the one hand can we be saying, ’we don’t want them investing in the U.S. ... but we do want to have an FTA’?" Vargo said.

The ports deal was approved by the Committee on Foreign Investment in the United States, or CFIUS, an interagency panel that examines deals for possible threats to national security.

"The CFIUS process really works ... The Defense Department, Treasury, Commerce, other agencies would not agree willy-nilly to something they thought would compromise such an essential nature of U.S. security in any way," Vargo said.

But Jeffrey Schott, senior fellow at the Institute for International Economics, said the Bush administration should have done a better job of preparing lawmakers.

"It hasn’t been handled very well. I would have thought the administration would have learned a lesson from the CNOOC debacle of last year," Schott said.

CNOOC Ltd., a state-owned Chinese oil company withdrew its bid to buy American oil company Unocal, in the face of strong opposition from many members of Congress.

 source: Reuters