A political row over a Middle Eastern company's plan to manage terminals and stevedoring operations at U.S. ports spotlights a dilemma hidden from the public view - how to ensure the country's security when its economic prosperity depends on total openness to global business. A House Appropriations Committee vote against the president over port security raises doubt over the continuity of the U.S. open-door policy for foreign investors.

News surfaced in February that contracts to run terminal operations at six major U.S. seaports would be transferred from a British company to one owned by the government of Dubai, one of the United Arab Emirates with an imperfect record on fighting terrorism.

The surprise hit nerves linked to national security and economic security. Add election year partisanship, and the result is a national headache that keeps getting worse.

Ever since 9/11, Americans have seen in globalization both an appealing business face and a threatening terrorist shadow.

Americans need leadership that clearly defines where global business ends and national security begins, and how to balance both. To keep the U.S. economy moving as an engine of globalization, the rest of the world needs U.S. leaders to strike a wise balance between business and security.

Americans question their political representatives in letters and telephone calls, blogs and national polls. They can't tell whether the current leadership knows where global business ends and national security begins.

The rest of the world may wonder why Americans are so upset. After all, companies from outside the U.S. operate terminals in the vast majority of U.S. ports.

And yet, ever since 9/11, Americans have seen in globalization both an appealing business face and a threatening terrorist shadow.

Airplanes that bring millions of tourists and a cornucopia of goods to America's shores also became deadly missiles in the hands of terrorists on 9/11.

Immigrant students fill U.S. universities and generate disproportionately high numbers of new Silicon Valley businesses. But among the ranks of student immigrants were the terrorists who studied how to fly planes.

Americans worry that Dubai Ports World poses a security risk. The Bush administration did not appear to take those security concerns seriously when approving DP World's acquisition of Peninsular & Oriental Steam Navigation Co. after a 30-day review.

Americans might have welcomed the ports deal with less alarm if they understood how their own economy has become inextricably intertwined with the global economy. The ports issue has come at a time when many Americans, seeing factories and jobs moving off-shore, worry about whether the global economy helps or hurts them.

Outsourcing of services has taken a toll on white-collar jobs as back-office customer relations, accounting, X-ray interpretation, and even tax preparation move to lower wage countries.

Sure, another year is underway in a record run of import consumption. But record household debt has underwritten consumption of those imports. Imports from low-wage countries, in turn, have eliminated many manufacturing jobs.

Even American cars, once the nation's pride, are lagging. While the port debate has raged, an influential magazine published a list of the 10 best cars. All were Japanese.

After manufacturing plants disappear, so do benefits and pensions for blue-collar workers. New service jobs often pay less, with lower benefits.

Outsourcing of services, meanwhile, has taken a toll on white-collar jobs as back-office customer relations, accounting, X-ray interpretation, and even tax preparation move to lower wage countries. More worrisome, outsourcing is moving up the skill ladder, from computer software programming to research and development and design.

National incomes show the dampening effect of these developments. U.S. census figures from last year report that median household income was "unchanged in real terms" from 2002 to 2004. In that year, half of American households made more and half made less than 44,389 USD. The poverty rate rose for four consecutive years from 2001-2004.

On top of those pressures, most Americans learned for the first time in February that U.S. seaports are not the world's most efficient, U.S. port operating firms are not the world's biggest, and U.S. firms have been abandoning port operations since the administration of President Jimmy Carter.

To some Americans, it seems as if their own leaders are trading the country away.

If the basic operations of American ports cannot stay in American hands, many Americans reason, what is next?

U.S. census figures from last year report that median household income was "unchanged in real terms" from 2002 to 2004.

Worse, U.S. ports are little more secure than on 9/11. About 6 percent of the 6 million marine shipping containers coming through 361 U.S. ports are physically screened for weapons or weapons materials - compared to 100 percent of airline passengers.

President Bush is scrambling to explain what has not been traded away.

He stumbled by first insisting that Americans should let global business affairs as usual proceed, and then accusing Americans of xenophobia for worrying more about ports being operated by a company from the Middle East than one from Britain. Coming at a time of flat earnings by a majority of American people, anxiety over the future and war in the Middle East, his words could not have been more poorly timed.

And yet, Bush is right on the merits of the ports case. Americans need foreign investment to create jobs, foreign companies to bring the most competitive services to the U.S. market, and foreign investors willing to purchase U.S. Treasury bills to pay for all those imports reflected in the huge U.S. trade surplus.

Foreign investors will be discouraged if Americans single out foreign investors for unusual security investigations for what seem like partisan reasons. This year, an Arab operator of seaport terminals hits the headlines. Last year, it was a Chinese government-owned oil company bid for U.S.-owned Unocal. A dozen years ago, headlines featured Japanese companies that were buying landmark U.S. real estate.

Politicians are loath to tell the public about economic interdependence for fear of appearing unpatriotic or weak on defense.

President Bush finally realized that he needed to show Americans he understands where business ends and security begins. U.S. authorities are now conducting the 45-day review of security issues raised by Dubai Ports World's takeover of Peninsular & Oriental Steam Navigation Co. or P&O.

Foreign investors will be discouraged if Americans single out foreign investors for unusual security investigations for what seem like partisan reasons.

To succeed, the review must do more than go through the motions. It should address the real issues of port security that have made this debate more than the usual election year flap. Several compromise suggestions already have been floated to balance the need for security against the business needs of a global just-in-time production chain. DP World, as it is known, has offered to transfer the sensitive U.S. port operations to a U.S.-owned entity. Adopting one of these compromises would be the best way for President Bush to beat back a revolt among his fellow Republicans. A vote on the Senate floor might now follow the sentiment of the lower house, which was reflected in the committee vote Wednesday night to block DP World from operating any U.S. seaport terminals. One third of senators and all House members, unlike the president, face an election later this year and members of both parties are trying to outshine their rivals on national security.

The Bush administration should also use the review period to assure the rest of the world that other foreign investments in the U.S. market will not run afoul of political partisanship or xenophobia. Some Congress members are proposing more stringent reviews of all foreign investors. Bush should propose conducting security reviews across the board, so that Arab investors are not singled out.

To quell this political firestorm, Americans must begin honest debate about finding a better balance between security and business.




Contributed by S.L. Bachman, the author of "Globalization in the San Francisco Bay Area," published by the Pacific Council on International Policy. Reprinted with permission from YaleGlobal Online.

To read another Global Envision article about America's fears concerning globalization, see Anxious America- Part II.



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