Bush worries about ports message

By Steve Holland

WASHINGTON (Reuters) – The collapse of efforts by a Gulf
Arab company to manage U.S. ports may send a worrying message
to Middle East allies, U.S. President George W. Bush said on
Friday, a day after his stinging defeat on the deal.

“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,” Bush told newspaper editors.

In a possible repercussion, the United Arab Emirates broke
off talks on a free trade agreement with the United States the
day after the ports deal fell apart.

Bush suffered an embarrassing defeat at the hands of his
own Republican allies in the U.S. Congress when state-owned
Dubai Ports World surrendered to unrelenting criticism and gave
up trying to manage some terminals at six major U.S. ports.

The UAE company said it would transfer the ports to a U.S.
entity at the behest of Dubai’s ruler, to allay U.S. concerns
that the deal posed a threat to American national security.
Details of the transfer were not outlined.

A leading critic of the ports deal, New York Democratic
Sen. Charles Schumer, said questions remained about the
company’s transfer of port operations to a still-unidentified
U.S. entity and promised to keep pressing the issue.

“If things are as they appear, this is a great victory for
national security. But make no mistake, we are going to
scrutinize this deal with a fine-tooth comb to make sure the
separation between American port operators and Dubai Ports
World is complete and security is tight as a drum,” Schumer
said.

Dubai Ports Chairman Sultan Ahmed Bin Sulayem, asked
whether the company would sell the management rights of the
U.S. ports, told Reuters: “All this is being worked out by our
parties in the States.” He could not say immediately how
separate the U.S. entity would be from Dubai Ports.

Gulf Arabs reacted bitterly to the company’s decision,
saying the political storm that forced the emirate’s hand could
provoke a backlash among regional investors.

“Do you think we are happy this morning? The mood is black,
very, very black,” said a senior official in the region
involved in the Dubai Ports deal.

Bush, who had vowed to veto congressional efforts to block
the deal, praised the UAE as a committed ally in the war on
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 said.

The U.S. Trade Representative’s office said the United
States and UAE had postponed free trade talks that had been set
for next week.

Officials attempted to play down the move. “This is not
unusual,” said USTR spokeswoman Needa Moorjani. “Just in the
past few months, we’ve postponed rounds with Ecuador three
times, Panama twice and Colombia once.”

House of Representatives Speaker Dennis Hastert, an
Illinois Republican, said it was probably best for “both
countries to kind of step back and evaluate a little bit. We’ll
move on from there.”

Treasury Secretary John Snow said the political furor over
the company’s withdrawn bid was an isolated case, as he tried
to limit the damage to the U.S. free-trade image.

He insisted the United States was still “open for
business.”

“I don’t view this as anything but an isolated incident,”
Snow said in an interview with CNBC television. “We don’t want
to be isolationist. We don’t want to turn our backs on the rest
of the world.”

Bush and Snow conceded that the approval process of the
ports deal that led to bitter congressional opposition needed
to be improved.

The Committee on Foreign Investment in the United States,
headed by Snow, had approved the deal in a routine, quiet
manner, and both Bush nor Snow had learned about it only after
it was approved.

Democrats first complained, then Republicans leaped on it
as well, not wanting to be seen as soft on national security
during a congressional election year.

Larry Sabato, a political science professor at the
University of Virginia, said congressional Republicans are
running away from Bush this election year, and the port deal is
the latest and most vivid example.

“In a way, the port deal was a godsend to them,” Sabato
said. “It allowed them to put a lot of daylight between
themselves and a very unpopular president.”

New York City Mayor Michael Bloomberg said the port debate
has ignored the failure of the United States to adequately fund
the U.S. Coast Guard.

“We complain about our ports being open to everybody — but
the Coast Guard is our first line of defense,” Bloomberg told
WABC Radio in New York.

A congressional Republican leadership aide said that among
congressional Republicans “there was a certain level of outrage
about how the whole matter was handled by the administration.”

(Additional reporting by Thomas Ferraro, Susan Cornwell,
Richard Cowan, Tim Ahmann, and Mark Egan in New York)