Thursday, March 09, 2006

The Port Deal

I truly hate politics for politics sake. And by that I mean proposals, legislation, initiatives, etc.. meant only to appease people with little or no regard to valid concerns.

In Canada we have had a long history of this type of legislating, for example, just from the last 12 years of Liberal rule we've had the cancellation of much needed replacement helicopters for our armed forces aged fleet to a multi billion dollar gun registry for hunting rifles to an ethics commissioner whose job was 100% reliant on the good will of the leader of the ruling party. But I think the Republicans in the US have managed to top even those examples of needless, reactionary legislation. Their latest move to make the transfer of the port contracts to Dubai Port World must rank pretty high up on the over reaction scale.

If you are worried about what might happen when one of the most successful port operation companies in the world get their hands on the money pits that are the handful of US port contracts in question, use the agreed upon waiting period to do some deep investigation into the company. Otherwise, stop trying to one up the Democrats in the knee jerk rhetoric department and let capitalism do it stuff.

For all you conspiracy theorists out there here's some of the details of the deal that rarely get mentioned on the evening news:
  • The port of Dubai happens to be the most heavily used US Navy port outside of the US and by all accounts, one of the best run ports in the world.
  • All security over the 6 ports in question will continue to be handled by US Customs and DHS agents as well as the US Coastguard.
  • The majority of inspections of shipped goods is actually done in the country of departure, not arrival. That is why a relatively small percentage of arriving containers are thoroughly searched on US soil, it has already been searched at it's departure point.
  • DPW is buying out the British firm in question to gain control of their lucrative foreign port contracts. The US contract are more of a deterrent than a bonus as the various government regulations and union issues make the US ports very expensive to operate.
  • DPW was involved in a bidding war with a Singapore based company for their purchase of P&O (the British company with the port contracts) which is the reason the final price was so much higher than the current stock price would seem to dictate.
  • The vast majority of US ports are currently operated by foreign nations, including such bastions of freedom as China and Saudi Arabia.
  • There would have been relatively few changes to current local personnel except for cases of reductions or increases in required workers necessary to make the ports more efficient.
Let me be clear, it's ok to want national ports run by domestic companies. They are an important entry point into the country and most people would feel safer if they were run by a local company. That being said, this has not been the case in the US as most of their port operations contracts are foreign owned. The relative lack of control (in some countries the companies actually run the entire port and not just the loading and unloading operations) and poor profit margins make the US ports very unattractive for smaller domestic firms. The only companies generally willing to buy up these contracts are ones which have large foreign operations capable of bearing the cost.

I still haven't seen anyone satisfactorily explain one very important question, if China and Saudi Arabia are able to run ports in the US with nary a grumble from politicians of either stripe until this deal was announced, and the deal itself did not remove any ports from US control, merely transferred operational contracts from one foreign company to another, what was all the fuss over. Unless someone can point out how the UAE is more of a risk than any of the other countries with contracts I cannot see any justification for the outrage by those on the right or left. This is as simple a case of racial profiling as you could hope to find. For no other reason than because they are Arab, DPW is being prevented from performing a standard legal buyout of another company.

If politicians want to make a stand on port security, it's time for them to announce a large scale buyout of all current foreign owned contracts, not just focus on a single company for quick political gain. Of course, once they realize that a take over of US ports by US companies would result in drastic inflation (to make a profit these US companies would most likely have to increase fees as they do not have the plum foreign contracts to help cover their costs) or large scale subsidizing by the government, then they may realize the reasons behind the current domination of US ports by foreign companies.

According to Michelle, and probably with the overwhelming approval of their accountants, DPW has announced they are willing to transfer the US contracts to a US entity. While the domestic company has not yet been named, I wouldn't be surprised if the Feds will be stuck with a huge bill in order to make this thing happen. There was a reason no US companies even bid on these port contracts in the first place, they are highly undesirable. If I were an American company being asked by the Federal government to help them out by taking over these ports I can assure you some form of tax break would be high on my list of demands.


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