Bush Bemoans Ports Deal as UAE Talks Delayed

President Bush voiced concern Friday that the political uproar that forced a Dubai-owned company to abandon its plan to operate several U.S. ports would damage relations with Middle East allies, his comments coming as the U.S. and the United Arab Emirates postponed free-trade talks.

The negotiations between the U.S. trade representative’s office and the Emirates began a year ago as part of a larger administration effort to improve trade relations with the Middle East. U.S. and UAE officials said they needed more time to prepare for the next round of discussions.

But the postponement’s timing -- on the heels of the Dubai company’s announcement Thursday that it would find “an American entity” to take over management of the U.S. port facilities it was purchasing -- fueled fears in the U.S. business community and within the White House of a negative ripple effect from the failed deal.

“We’ve now entered the danger zone,” said R. Bruce Josten, executive vice president for government affairs of the U.S. Chamber of Commerce.

The UAE was the third-largest U.S. trading partner in the Middle East in 2005, with transactions between the two countries totaling $10 billion. Dubai is one of the seven emirates that compose the United Arab Emirates.

Bush, in a speech to the National Newspaper Assn., expressed his worries about “a broader message” sent “to our friends and allies ... particularly in the Middle East” by the collapse of the ports deal.

“In order to win the war on terror, we have got to strengthen our friendships and relationships with moderate Arab countries in the Middle East,” he said.

Congressional Republicans, however, continued to chart an independent course from Bush in responding to the ports deal.

GOP lawmakers who usually steadfastly back the administration said Friday that they would press ahead with several bills aimed at tightening the conditions for approval of foreign purchases of U.S. assets.

The Republicans also said a House vote was still planned for next week on a provision that would officially block the transaction involving Dubai Ports World, even though the company had now retreated from it.

Under the deal, the company would have managed the port terminals in New Orleans, Miami, Baltimore, Philadelphia, New York and Newark, N.J.

The Republicans opposed it because of concerns that security at the ports could be jeopardized, despite White House assurances to the contrary.

Members of the business community said they would be watching closely to see how soon the U.S. and the Emirates resumed trade talks.

“Given the high emotions on Capitol Hill, it did not make sense to try and push forward on trade talks that might reignite the port controversy,” said David Hamod, president of the National U.S.-Arab Chamber of Commerce.

“I think both sides realized this is not a conducive environment to hold free-trade talks; we need a cooling off period,” said Hamod, whose group represents U.S. and Arab companies doing business in the region.

Business experts predicted the UAE trade deal would be worked out, although they said the ports furor could complicate matters.

“The notion that the U.S. discriminates against Arabs in general is already widespread, and now we’re facing a situation where people feel the same anti-Arab sentiment is being applied to companies,” said Rochdi Younsi, a Middle East analyst with the Eurasia Group, a Washington consulting firm.

Trade supporters also said that if Congress moved ahead with legislation designed to limit foreign ownership in the U.S., the measures could undercut the Bush administration’s efforts to create a free-trade area in the Middle East by 2013.

The U.S. has trade pacts with Jordan, Israel, Bahrain and Morocco and recently inked a deal with Oman that must still be approved by Congress. Talks with Egypt were put on hold because of human rights concerns.

The U.S. is trying to persuade Middle Eastern governments to open up closed industries and privatize state-owned companies. Trade experts say it may be harder to push through those market-opening measures in the Middle East or in other parts of the world if the U.S. is perceived as protectionist.

Among the bills sparked by the ports controversy is one by Rep. Duncan Hunter (R-El Cajon), chairman of the House Armed Services Committee, that would restrict foreign management of facilities viewed as crucial to national security.

Other measures would revise the process for reviewing foreign purchases of U.S. assets, a proposal that House GOP leaders said Friday they planned to push through the chamber.

“That’s definitely going to happen,” said Deborah Pryce (R-Ohio), chairwoman of the House Republican Conference. The goal, she said, would be to make the process more “transparent and give the American public more confidence in it.”

Bush, in his Friday speech, said he still believed the Dubai company’s management of the U.S. ports would have caused no security risks. But he pledged to cooperate with Congress as it debated the broader issue of how the government evaluates foreign acquisitions and investments in the U.S. “My administration will continue to work with the Congress to provide a greater understanding of how these transactions are approved ... and how we can improve that process in the future,” he said.

Such deals, which require administration approval to proceed, are reviewed by an interagency panel that includes representatives of the departments of Defense, Treasury and Homeland Security. But the ports deal sparked congressional criticism that the panel did not pay enough attention to potential security concerns or alert lawmakers to their proceedings soon enough.

Sen. Richard C. Shelby (R-Ala.), chairman of the Senate Banking Committee, plans to conduct hearings on a measure that would require the panel to work more closely with Congress and make it possible for the House and Senate to scuttle a deal with a joint resolution.

Shelby has been working on the bill since last year, when the Chinese state-owned oil company CNOOC made an unsuccessful bid for Unocal in El Segundo. But the ports controversy focused new attention on it.

“What we want to do is keep the United States open to foreign investment, but not at any cost,” said Andrew Gray, a spokesman for Shelby. “If it’s something sensitive to our national security, we want to have a process that people will have faith in.”

Some Congressional Republicans expressed frustration Friday that the ports controversy focused on foreign ownership and not on port security.

“I wanted a rational dialogue about it, but I just saw some of my colleagues just becoming rabid, so I backed away,” said Rep. Christopher Shays (R-Conn.), a critic of the ports deal.

*

Curtius reported from Washington and Iritani from Los Angeles. Times staff writers Maura Reynolds and Joel Havemann in Washington contributed to this report.