They're Taking Our Jerrbs!

While the hysterical storm over the DPW deal continues to rage and members of the House Appropriations Committee scurry for political cover like rabbits, the WSJ calmly examines the issue of foreign ownership of US ports:

Amid the political firestorm surrounding Dubai Ports World, one fact is often lost -- foreign companies already manage most of the terminals at American ports, the result of a longtime dominance of global shipping lines that often run the facilities that handle their cargoes.

Today, more than 60% of the container terminals at the nation's 10 busiest ports are at least partly managed by foreign operators, and in some cases, companies controlled by foreign governments. That figure rises to 80% at the biggest ports -- Los Angeles, Long Beach and Oakland in California and New York/New Jersey, which together handle half of all containers that pass through U.S. ports.

"I don't think Americans have any realization of the global nature of the maritime industry," says Peter Shaef, managing director of New York-based AMA Capital Partners LLC, a merchant bank focusing on the transportation industry.

I would add that I don't think many Americans have any realization about the global nature of business in general, the opposition to the ports deal being the latest example of this wide-spread ignorance.

Large ports often have multiple terminals operated by multiple companies. In Los Angeles, for instance, there are terminals managed by companies from China, Taiwan, Japan, Singapore and Denmark. Of the eight terminals in Oakland, four are managed by foreign companies, two by U.S.-foreign joint operations and just two are purely American.

Even though opponents of the DP World deal have focused on national security issues, security -- such as the inspection of containers -- is conducted by federal enforcement agencies including the U.S. Coast Guard and the U.S. Customs and Border Protection no matter who operates the terminal.

That last point simply can't be repeated enough.

One of the constant refrains from opponents of the deal is that they would prefer to have American firms manage the port terminals. In a perfect economic world so would I. Unfortunately, that ship has already sailed.

In the 1970s and 1980s, U.S. flag shipping lines, carrying high labor costs and tax and regulatory burdens, faced increasingly tough competition from foreign companies, which employed low-cost Asian crews and operated under flags of convenience from countries with more relaxed regulatory and tax policies. Over time, several American companies were bought by foreign owners. In 1997, APL was bought by Singapore's NOL. In 1999, CSX Corp. sold Sea-Land to AP Moller-Maersk, the Copenhagen-based operator of the largest container-shipping network in the world.

The American divestment was driven partly by economics in an industry where margins are historically low. "It's not a particularly profitable business," said Neil Davidson, research director for Drewry Shipping Consultants Ltd. in London. "There are a hundred other things [where] American investors can put their money to better use and more profitable use."

So after driving US companies out of the business by taxes and over-regulation, we're now going to look to the same government to mandate that only US firms be allowed to manage our ports? Yeah, that's gonna work out just grand. Why don't we just have the Department of Homeland Security manage our port terminals in addition to the 37,809 other duties that they already perform so effectively?

And the new high def plasma TV that you're waiting for? It's going to cost twice as much and take three times as long to get here.

But hey, at least we'll be safer, right? Right?

The only Americans who will be safer if the DP ports deal is nixed are politicians in Washington worried about the 2006 election. They're playing on nativist fears and claiming that this is about national security. In reality, it's really more about the security of their own seats of power.

Term limits, anyone?

Update-- Dubai Port Company to Divest Itself of American Holdings:

The United Arab Emirates company that was attempting to take over management operations at six U.S. ports announced today that it will divest itself of all American interests.

The announcement appears to head off a major confrontation that was brewing between Congress and the Bush administration over the controversial deal.

Sen. John Warner (R-Va.) announced on the Senate floor shortly before 2 p.m. that Dubai Ports World would "transfer fully the operations of U.S. ports to a U.S. entity." Warner, who had been trying to broker a compromise on the issue, said DP World would divest itself of U.S. interests "in an orderly fashion" so as not to suffer "economic loss."

Whew. I feel safer already.