Bush's Loss on Ports Deal Dents Image, Exposes Republican Rifts
March 10 (Bloomberg) -- The collapse of a plan to let a Dubai company manage U.S. ports marks another setback for President George W. Bush, exposing deteriorating relations with fellow Republicans and underscoring a perception of incompetence stemming from the government's response to Hurricane Katrina.
Bush found himself publicly rebuked by members of his own party -- many of whom are seeking re-election this year -- amid strong public opposition to the deal.
``It's hurt him, and it's hurt him where he has always believed he had great strength, and that's in executive management,'' said Charles Jones, a retired political science professor at the University of Wisconsin in Madison who is now a senior fellow at the Washington-based Brookings Institution. ``This looks like they don't know what they are doing.''
With Congress poised to pass legislation blocking the Bush- backed agreement, state-owned DP World yesterday abandoned its effort to assume control of operations at six major U.S. seaports and cargo unloading businesses at 15 others as part of its $6.8 billion acquisition of London-based Peninsular & Oriental Steam Navigation Co. DP World said it would sell P&O's leases on the ports to a U.S. entity.
The dispute also raised fears of damage to commercial and diplomatic ties between the U.S. and the United Arab Emirates, of which Dubai is part, as well as other Middle Eastern countries. Reem al-Hashimy, commercial attaché of the U.A.E. Embassy in Washington, said in an interview that ``the decision was really done primarily to salvage the relationship between the U.A.E. and the United States.''
Political Damage
The controversy has damaged what was supposed to be a political rebuilding year for Bush, who in 2005 failed to sell to the U.S. public and Congress his plan to change Social Security, which he had framed as the signature domestic issue of his second term. The response to Katrina and sectarian fighting in Iraq intensified criticism of him, and Americans in the most recent Bloomberg/Los Angeles Times poll opposed the port deal by a margin of more than three to one.
``I have said all along that I thought the administration didn't handle this very well, and I'm glad now that at least to most people's satisfaction, it's been resolved,'' said Senator Rick Santorum, a Republican from Pennsylvania who is running for a third term this fall.
DP World's pullout ends a stalemate between Congress and Bush, who had threatened to veto any legislation blocking the deal.
`No Acrimony'
``This is over, we can all go forward, there's no acrimony,'' New York Republican Representative Peter King, chairman of the Homeland Security Committee and an opponent of the ports plan, said at the White House. ``There's no more problem. There's no more division. We all stand together.''
Still, some in Congress want more say in how such acquisitions are approved and will work to change the process, now handled solely by the executive branch. One proposal by Minnesota Republican Senator Norm Coleman would bar foreign government ownership of vital U.S. assets.
The administration in January approved DP World's purchase of P&O after a 30-day review. Congressional criticism drove DP World to agree to a new 45-day review of the deal. That extended review had just begun.
`I think that Congress has to have a say,'' said Senator Richard Shelby, an Alabama Republican. ``We've got to have a meaningful way to vet these deals.''
Upper Hand
The debate also let Democrats gain the upper hand on national security, an issue that has always been a strong suit for Bush. Democratic strategists said the controversy could lessen the Republican advantage on that issue.
``Any political observer will tell you that any development that lessens or negates the Republican advantage on security is a good thing for Democrats, which is why they will keep talking about it,'' said Joe Lockhart, a strategist who served as press secretary to President Bill Clinton.
The administration may also find it needs to consult more with Congress to have success on other policy matters, said Republican strategist Rich Galen, who headed GOPAC, the political action committee run by former House speaker Newt Gingrich.
``Departments didn't talk to departments, agencies didn't talk to agencies, and then, once the news reached the White House, the White House didn't think to talk to Congress,'' Galen said. ``It's almost unprecedented.''
Anxious Party
Galen said the issue isn't likely to have a lasting effect on Bush, because members of his own party anxious to separate themselves from the president heading into November's elections can now do so.
``If any Democrat campaigns against them by saying they are Bush clones, they can say, `Oh yeah? What about the Dubai ports deal?' '' Galen said. ``For most members, they have established as much distance from the president as they need.''
Tom Rath, Republican national committeeman from New Hampshire, said the controversy reflected the realities of an election year. ``It's March, and there are congressional elections in November, and at some point it's every person for himself,'' he said.
Fighting terrorism has been the source of Bush's primary political strength since the Sept. 11 attacks. The DP World deal helped change that: For the first time, a majority of Americans, 54 percent, disapprove of Bush's handling of terrorism, according to the Bloomberg/Los Angeles Times poll, which was taken February 25 to March 1. That was up five points from January and a reversal from January of last year, when 54 percent of Americans approved.
Shying Away
Some analysts said Middle East investors may shy away from high-profile purchases of U.S. companies following the port flap. ``It will have a chilling effect on Middle East direct investment in companies,'' said Gary Hufbauer a senior fellow at the Institute for International Economics in Washington. ``I don't think it does anything to Middle East investment in bonds and shares.''
The effect on foreign investment from other countries depends on any changes Congress may make to the law governing such investment, analysts said.
``Congress needs to walk a fine line in ensuring transactions continue to be scrutinized without chilling the foreign investment the U.S. needs,'' said David Marchik, a partner at the Washington law firm Covington & Burling and author of a soon-to-be published book on foreign investment. |
