Dubai ports debacle threatens the US trade agenda in the Middle East, writes Emad Mekay from Washington United States Congressional leaders are pressing ahead with new legislation that would give the secretary of defense and the US intelligence agencies the right to oversee acquisitions of certain US assets, and the Congress access to confidential business information surrounding such deals. The move comes as a resurrection of protectionist policies, a hard sell for the past few years during one of the highest tides of corporate globalisation, is suddenly taking hold in Congress. But some prominent US business lobbies are resisting the changes and warn that they could be counter-productive especially as the US pursues an aggressive free trade agenda in the Middle East, backed by fragile authoritarian regimes and local business elites. Senator Susan Collins, a Republican from Maine who chairs the Homeland Security Committee, introduced a bill last week to overhaul the national security review process for foreign investments in the United States following the controversy over a bid by an Arab company to operate port facilities in six US cities. The bill would place the Committee on Foreign Investment in the United States (CFIUS), which represents 12 US departments and agencies and is now chaired by the secretary of the treasury, under the direct management of the Department of Homeland Security. It calls for the secretaries of defense and the treasury to serve as vice chairs, while the director of national intelligence would be designated as a standing member, in order to ensure that important intelligence information is part of the deliberative process. Collins's bill, which is backed by several other influential senators, including Joseph Lieberman of Connecticut, requires that members of Congress be briefed in a timely manner about prospective acquisitions in the US. "The Committee on Foreign Investment in the United States focuses too much on the financial component and not enough on security," Collins said. A number of other lawmakers have introduced similar bills. Senators Robert Menendez and Hillary Clinton, both Democrats, have sponsored legislation to block the sale of US port operations to foreign governments, while Rep Duncan Hunter of California, best known for his "Buy American" crusade, says he would use opposition to the ports deal to further place protections on US jobs and businesses at home. Similarly, Republican Benjamin Cardin, the lead Democrat on the House Trade Subcommittee, and the chairman of the subcommittee, Rep Clay Shaw, introduced legislation to prohibit foreign-owned operations at US seaports. And Senator Norm Coleman, a Republican from Minnesota, has introduced his own bill that would also bar foreign government-controlled companies from managing a national security-related "facility or investment". The bill, however, would permit foreign governments to own and invest in such facilities provided that the foreign government establishes a US-based corporate entity. All these initiatives are being pushed despite the fact that the United Arab Emirates (UAE) deal collapsed when the company said it would divest its US ports holdings. And as lawmakers continue to revisit the issue, they are likely to hammer away at legislation targeting foreign investment in the US. Senator Chuck Schumer, a lead critic of allowing Arab company, said he would continue to ask for specific information from the company as to its withdrawal timetable. Dubai Ports World, which is owned and operated by the government of Dubai, one of the emirates making the UAE, backed out of the $6.8-billion deal, which had been approved by CFIUS last month, after Congress's House Appropriations Committee voted 62-2 to bar DP World from holding leases or contracts at US shipping facilities. The Democrats in particular are hoping to capitalise on the unpopularity of the deal, and appear intent on making protectionist measures and national security a centerpiece of the campaigning for midterm elections later this year in the US. "This debate is not over," said Democratic National Committee Spokesman Luis Miranda in a recent statement. The only opposition to this re-energised protectionist sentiment in Congress so far has come from US business groups that fear a backlash against their expansive presence and free trade agenda across the globe. Eight groups representing the US business community sent a letter to Congress cautioning against some of the changes, including a proposed requirement of disclosing confidential information on prospective investments to Congress. Business Roundtable, a major business lobby group, warned that pending legislation in Congress "would also provide a road map for discrimination against US foreign investment overseas". "Congress must proceed with care as foreign investment is a critical component of the US economy and vital to future US economic growth," said John Castellani, president of the Business Roundtable. "The danger in counterproductive legislation is real," he said. "Congress must step back and make certain any changes to the current system are more than political window dressing." US business groups fear that the now-derailed DP ports deal could harden resistance to ongoing attempts by the George W administration and US corporations to force open markets in the cash-rich Gulf nations, including the UAE, and the consumer intensive market in Egypt, now expediently ruled by a cabinet dominated by businessmen. US-UAE free trade talks -- a major step in the larger plan to establish a Middle East Free Trade Agreement (MEFTA), which the administration hopes will link the United States to 22 Arab nations and Israel -- remain postponed. MEFTA could potentially open a market of more than 300 million people to US companies. The United States's trade relationship with the UAE is the third largest in the Middle East, after Israel and Saudi Arabia. Washington has championed open markets in the developing world through its influence in international financial organisations like the Washington-based World Bank and the International Monetary Fund, the Geneva-based World Trade Organisation, as well as through its political influence and aid programme of the US Agency for International Development. The protectionist streak could also have an impact on investments in the US itself by eating away at US credibility. US official figures say that in 2004, the most recent year for which data is available, foreign direct investment in the United States grew by eight per cent, to 1.5 trillion dollars, following five per cent growth in 2003. Foreign-owned companies have contributed almost 500 billion dollars per year to the US gross domestic product, and account for one-fifth of US exports. Direct investment by Arab companies in the United States totaled roughly $9.3 billion in 2004.
