Bush fears terror setback

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.

He compared the proposal to the acquisition of Chrysler Corp. by Daimler-Benz of Germany in 1998. The cars are still made in America, he said, but the company is under German control.

"I think we have to make sure that we're not simply going to change the nameplate on the car and call it something else," Foley said Thursday.

Company representatives declined to comment yesterday.

If DP World plans to sell the U.S. portion of P&O;'s holdings and relinquish control, "that would be a significant step forward," Schumer said in his letter to Bush. But the company's statement doesn't make that clear, he said.

Key questions, Schumer said, include whether the U.S. company would be completely independent of DP World and whether the parent company would have any control over the U.S. entity's board of directors or other personnel.


Schumer also asked for more information about the way the administration would handle the revised deal, including whether the Treasury Department would still review the transaction.

Getting the answers to those questions is "essential to determine how we go forward," said Schumer, who plans to continue pushing for a Senate vote condemning the deal.

Review still active

For now, said McLaughlin at the Treasury Department, the "review that we're undertaking will remain active."

In the House, DP World's move has not changed plans to vote next week on a provision that would bar the company from holding leases or contracts in the United States.

The provision is attached to a $91 billion supplemental spending bill to pay for the wars in Iraq and Afghanistan, and for more aid for victims of Hurricane Katrina.


Rep. Jerry Lewis, a California Republican who is chairman of the House Appropriations Committee - which voted 62-2 to attach the amendment - said there is no reason to strike the language because it could be a safeguard in case DP World's plans to sell the U.S. assets fall through.

"I don't think it does anything that's negative if it is in the bill on the floor," Lewis said.

Lawmakers plan to overhaul the process for reviewing proposed foreign investment deals, which they say should be scrutinized more closely for their potential impacts on national security.

The DP World controversy has highlighted what many politicians say are serious deficiencies in the reviews conducted by the Committee on Foreign Investment in the United States, which approved the sale in January, concluding that there were no national security concerns.

Ohio Rep. Deborah Pryce, chairwoman of the House Republican conference, said yesterday that she thinks changes in the CFIUS process are "definitely going to happen."

McClellan said the White House "absolutely" sees the need for such reforms.


Another byproduct of the tempest over the DP World deal is likely to be a strong effort to address the broader issue of port security.

Democratic efforts in the House and Senate to boost funding for ports failed this week, but lawmakers from both parties have vowed to seize the opportunity to address a security vulnerability that has failed to garner much public attention until now.

"Dubai could really turn into something positive, because we need to re-evaluate where we put our money and our resources in terms of national security," Ruppersberger said.