Tuesday, February 21, 2006

Democracy: One more reason to block the ports deal

Is the takeover of six major U.S. ports by Dubai Ports World a national security threat to the United States?

President Bush says no. Homeland Security Secretary Chertoff says no. Defense Secretary Don Rumsfeld says no. Former President Jimmy Carter says no.

Feeling reassured?

Well, you should feel reassured, not because the administration and the world's most esteemed dictator-defender say it's okay, but because James Madison and the boys saw them all coming and protected you.

Today Senate Majority Leader Bill Frist said the president should block Dubai Ports World's takeover of the port operations currently owned by the British-based Peninsular & Oriental Steam company. Senator Frist said he will introduce legislation to halt the deal if the president doesn't act.

Still, that doesn't answer the question of whether the Dubai Ports World deal is a genuine threat or just a deeply unsettling potential threat. Today it's ports, tomorrow it will be something else. How should we evaluate deals with foreign companies to protect U.S. security without strangling global trade?

It's simpler than you think.

Dubai Ports World is a state-owned enterprise. That means the people who control the government control the company.

Today the United Arab Emirates is, in Secretary Rumsfeld's words, "a country that's been involved in the global war on terror...a country (with which) we have very close military relations."

But what happens if the administration's campaign for democracy veers off and hits the UAE by mistake?

If the UAE were to hold elections without privatizing the economy, it's entirely possible that Muslim extremists would take over the government and control of the state-owned enterprises with it.

That's what has happened in the Palestinian Authority and in Iraq. (See our earlier post, "Why the Iraq Policy Isn't Working.")

If Dubai Ports World was a privately held or publicly traded company, we could do business with them and the security risks would be more manageable. But a state-owned enterprise is a tool of the government that controls it.

It's the ownership, not the region, that poses the uncontrollable danger. A takeover of the ports by a state-owned North Korean or Cuban or Chinese enterprise would be the same kind of national security disaster.

So here's the simple test for the national security risk of any business deal with a foreign-based company: Is the company owned privately, or is it owned by a government? If it is owned by a government, the deal should be subjected to the strictest possible national security review, including regularly scheduled continuing reviews. Without privatization, we're only a democratic election away from catastrophe.

Copyright 2006