A note on the American Ports Deal

At first blush, I had no problem with the American deal to sell several ports to Dubai Ports World, a company based in the United Arab Emirates. It appeared to me that the uproar in the US over the potential dangers of the deal was based mostly on xenophobic economic protectionism rather than legitimate security concerns. Security, I thought, should not be a problem because, first, no one was suggesting that the Coast Guard would cease to oversee the port operations, and, second, because DP World has a financial stake in its own reputation, and would thus take the utmost care in preserving the company's image of a secure and competent manager of ports. Moreover, mere xenophobia is not a sufficiently good reason to block trade from the United Arab Emirates, which happens to be one of the most pro-Western Arab countries.

Once I had the chance to delve beyond the headlines, my discovery that DP World is wholly owned by the government of Dubai tempered my support for the deal. Indeed, it would be a positive development, both in the U.S. and Canada, if shipping ports are sold to private companies. As I mentioned before, since private companies have a stake in their own success, they are likely to maximize the efficiency of the operations while minimizing the risk of security breaches which would be detrimental to both their own assets and their reputation. However, the same can not always be said of publicly owned companies since their governments will always be willing to bail them out in the event of failure (witness Canadian Crown Corporations or even the likes of Bombardier). This deal, in effect, may just be ceding control of vital infrastructure to a foreign government, which may well be mired by the same inefficiencies as the domestic government, but is less risk-averse.

Several days later, my flip-flop on this issue is complete. Jerusalem Post has now learned that the Dubai ports firm enforces a boycott of Israel. From JP:

"Yes, of course the boycott is still in place and is still enforced," Muhammad Rashid a-Din, a staff member of the Dubai Customs Department's Office for the Boycott of Israel, told the Post in a telephone interview.

"If a product contained even some components that were made in Israel, and you wanted to import it to Dubai, it would be a problem," he said.

A-Din noted that while the head office for the anti-Israel boycott sits in Damascus, he and his fellow staff members are paid employees of the Dubai Customs Department, which is a division of the PCZC, the same Dubai government-owned entity that runs Dubai Ports World.

Moreover, the Post found that the website for Dubai's Jebel Ali Free Zone Area, which is also part of the PCZC, advises importers that they will need to comply with the terms of the boycott.

In a section entitled "Frequently Asked Questions", the site lists six documents that are required in order to clear an item through the Dubai Customs Department. One of them, called a "Certificate of Origin," "is used by customs to confirm the country of origin and needs to be seen by the office which ensures any trade boycotts are enforced," according to the website.

A-Din of the Israel boycott office confirmed that his office examines certificates of origin as a means of verifying whether a product originated in the Jewish state.

So there you go. This deal has nothing to do with free and open trade - it is, in fact, antithetical to the concept - and thus I had no reason to deride the American uproar. If this deal goes through, several American ports will be boycotting trade from an American ally with whom they have a free-trade agreement.

For the Americans, cancelling the Dubai ports deal will not be an excersize in xenophobia but, rather, a defense against it. Overturning this one will be a wise decision.