Bush fears terror setback

U.S. efforts could be undercut by collapse of Dubai port deal, he says


WASHINGTON -- President Bush, who lost a power struggle with Congress over a Dubai company's bid to buy into terminals at some U.S. ports, said yesterday that he is concerned that the backlash against the deal could undercut his administration's efforts to fight terrorism.

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

He spoke a day after Dubai Ports World - a state-owned company that was set to lease terminals at six major U.S. ports, including Baltimore's - announced plans to abandon that effort and as some members of Congress signaled that the domestic firestorm over the deal isn't over.

In an indication of the episode's potential international ramifications, the administration also announced yesterday that trade talks with the United Arab Emirates are on hold.

With lawmakers in both parties crowing about having sunk the deal, which they had said would have threatened national security, Rob Portman, Bush's top trade negotiator, said talks on a U.S.-UAE free-trade pact, which had been scheduled for next week, would be postponed.

DP World announced Thursday that it would divest itself of the U.S. operations and turn them over to a U.S. entity. It was unclear how the company would accomplish that, and some members of Congress said they remain skeptical, worrying that DP World would retain some control over U.S. port operations.

Democratic Sen. Charles E. Schumer of New York wrote Bush yesterday demanding more information about the details of DP World's intentions.

`Very concerned'

"I am very concerned that the legal structure of the U.S. entity will not have a sufficient wall between the company and the Dubai government," he said.

Neena Moorjani, a spokeswoman for the U.S. trade representative, declined to say whether the postponement of the latest round of trade talks, which began in November 2004, was a result of the DP World deal's collapse, but she portrayed such schedule changes as routine.

"In order to get an agreement that both sides can successfully implement, we need additional time to prepare for the next round of negotiations. We continue to work on our negotiating issues. This is not unusual," Moorjani said.

Reem al-Hashimy, the UAE Embassy's commercial attache, told CNN that the postponed trade talks and the port deal's collapse were unrelated.

But people close to the talks said negotiators believe that the climate for the discussions had been poisoned by the flap.

`Cooling-off period'

"Both sides agreed that they needed a little cooling-off period, and this wasn't an optimum time to get together to talk about free trade," said David Hamod of the National U.S.-Arab Chamber of Commerce.

In remarks to a National Newspaper Association conference yesterday, Bush called the UAE "a valued and strategic partner."

"I'm committed to strengthening our relationship with UAE and explaining why it's important to Congress and the American people," he said.

Working to put the deal behind it, the White House announced that the president will deliver next week speeches on Iraq designed to allay public concerns about the conflict there.

Aides said they hope DP World's decision will allow Bush to close the book on the affair and concentrate on other matters.

The company is working with the Treasury Department on details of its decision to "transfer fully" to a U.S. entity the American holdings involved in its purchase of Peninsular & Oriental Steam Navigation Co., a British company.

Those assets - including control of some operations in Baltimore, Miami, New Jersey, New Orleans, New York and Philadelphia - account for about 10 percent of the $6.8 billion deal DP World made last year to buy P&O. DP World assumed control of P&O on Thursday.

"What's clear is that the ports will not be operated by DP World. They will be operated by a U.S. entity," said Brookly McLaughlin, a Treasury Department spokeswoman. "We're reviewing the details and speaking to [DP World executives] to get a better determination of how the plan that they announced would work."

Lawmakers welcomed the company's decision, but many of the deal's most vocal opponents said they will keep a close eye on the situation until DP World sells the U.S. assets. They received few answers to their questions about the sale yesterday.

"You have got to get the details. You're just going to have to find out who is going to be in charge, and where the money comes from," said Maryland Rep. C.A. Dutch Ruppersberger, a Democrat whose district includes the port of Baltimore.

Rep. Mark Foley, a Florida Republican, said he wants to be certain that DP World's offer is not simply a face-saving measure aimed at cooling tempers.

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