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Americaís Ports: Chalk One Up for the "New Protectionists"
Our Buy American Mention of the Week!
by Roger Simmermaker
March 18, 2006

According to the writers of the Wall Street Journalís "Review & Outlook" section in a March 10, 2006 article titled "The New Protectionists," the broad coalition of Americans that formed to oppose the Bush-pushed Dubai deal is a dangerous re-emergence of those who foolishly rank national security higher in importance than global commerce.

But before I delve too deeply into the ports issue, letís briefly explore what protectionism really means in todayís economy since it so often mentioned but never defined. To free-market advocates, protectionism is any trade policy that doesnít give foreign producers a competitive advantage over American producers. The ports issue, however, is more of an issue of commerce than it is trade policy or competition between producers. And since a foreign company didnít win control of Americaís ports and an American company will, thatís protectionism, and thatís bad.

The only thing bad about protectionism is the bad rap it has received from free-market economists and free-trade politicians who feel that American producers that must obey U.S. laws deserve no protection from foreign producers that donít. During the Dubai debate, free traders even saw fit to bring up the Smoot-Hawley tariffs of the 1930s and how they supposedly caused capital flows to collapse, deepening the Great Depression. President Bushís former chief economic adviser Lawrence Lindsey warns us that by protecting Americaís ports from Arab ownership, we risk an entire breakdown of the movement of global capital, and that the Smoot-Hawley tariffs prove economic history "is not hopeful in this regard."

But new Federal Reserve Chairman Ben Bernanke, who regards himself as a "Great Depression buff" in the way others are Civil War buffs, began writing a book in 2000 called "Age of Delusion: How Politicians and Central Bankers Created the Great Depression" that appears to contradict that view. The book was never published as he had to put it aside as a condition of public service, but a lengthy article in the Wall Street Journal on December 7, 2005 about the unpublished work never even mentioned the word "tariff" in detailing how Mr. Bernanke feels the lessons of the Great Depression are still relevant today. The article speculates on other scapegoats such as excess investment, an inept Federal Reserve and flawed corporate governance.

At this critical stage in our history, we should quickly brush aside any tendency to disregard the term "protectionism" when it is portrayed in a bad light. Forget how it sounds and forget how it looks. What does it do for me and what does it do for America? Those are the questions we should be concerned with. The answer is that it would level the playing field and make competition fair, which is what we should all strive for in any competitive activity, be it poker, basketball or world trade.

Proponents of the Arab-ownership of Americaís ports warned us that we needed to let the deal go through in the spirit of cooperation between supposed allies in the war on terror. But if history is any guide, increased trade and commerce is no guarantee of cozy relations between countries. Just prior to World War II, for example, Japan and Germany were Americaís two biggest trading partners.

Current American ally Britain still lives by the words of their former Prime Minister Lord Palmerston who said "nations have no permanent allies, only permanent interests." Had the Dubai deal gone through, the USA would have no permanent ally in the UAE (United Arab Emirates), but the UAE would have a permanent interest in the USA. And despite all the talk of the attractiveness of foreign investment, foreign companies arenít investing in America as much as they are using America to invest in themselves. Foreign companies operating in the United States reap profits for their headquarters located in foreign countries, who often loan the money we send them back to us with interest. In the Bible, the book of Proverbs tells us that "the borrower is slave to the lender."

Another flawed outlook of the pro foreign-acquisition crowd is that this deal would somehow encourage favoritism from foreigners down the road. But if a major issue comes to a head in 2007, are we so naÔve to we think that we could ask UAE to side with us because we let them run our ports in 2006? Again, history is not on our side.

China has run our West Coast ports from Seattle to San Diego for years. And guess what? China still doesnít like us. Recent American pressure to protect American intellectual property rights was met with a stern rebuke from Chinaís foreign ministry spokesman Qin Gang. He said "Imposing pressure or sanctions to solve problems between the two will not be beneficial for China-US trade relations and will not be beneficial for the United Statesí interests."

America is engaged in a game of "do you like me yet?" with foreign countries and some are willing to sacrifice our front-line assets and our national security to play. Free traders and laissez-faire proponents always stand ready to give away more slices of the American pie. To them, protection in any form is dangerous unless of course itís protecting Social Security, police protection, fire protection, etc.

Free market advocates are also on the wrong side of history according to the U.S. Constitution, which doesnít mention free trade or free markets in any form. It tells us to form a "more perfect union" not a more perfect global economy. George Washington and Abraham Lincoln were both protectionists. Teddy Roosevelt said "Thank God Iím not a free trader." Even leaders of Americaís modern day "free market" institutions recognize the need for regulation. According to NASDAQ CEO Robert Greifeld, "Good regulation is good business."

The writers of the Wall Street Journalís "Review & Outlook" section also warn us that moves such as denying Dubai access to our ports will result in a "financial security crisis." But on March 10 (the day the deal was pronounced dead) the Dow peak over 11,000 again gaining over 100 points (nearly 1%). The NASDAQ gained over 12 points (over half of one percent) and the S&P gained nearly 10 points (almost three-quarters of a percent). And by March 15, the Dow Jones Industrial Average reached its highest point since June 2001. Certainly there is no evidence of a "financial security crisis" in the financial markets. The markets are up even since other supposedly objectionable American regulation moves such as Chinaís rebuffed bid to acquire American oil gem Unocal and American icon Maytag.

Possibly one of the saddest areas surrounding the debate on this issue is that we have a president who "just doesnít get it" on not only trade policy in general and the crisis facing domestic automakers, but now also on national security. Not only did he basically claim there was no possible scenario imaginable that might compromise the safety and security of the nation in any way by allowing a questionable country a role in managing our ports, but he was willing to swim against an overwhelming tide of public sentiment to try and ram it through.

A February 24 poll from the Rasmussen Reports showed only 17% of Americans agreed that Dubai Ports World should be allowed to buy the rights to operate our ports, while 64% were opposed. Members of the U.S. Congress across the country saw no lessening of the opposition over a three week span, despite the Bush Administrationís offer to better educate us on the issue, a presidential veto threat, and vows from the DP World CEO to complete the acquisition. Insane comments by the Chamber of Commerce didnít help make Americans feel more secure either. Executive Vice-President Bruce Josten was quoted as saying "Implementing laws that could harm the health of our economy in the name of national security would be a grave mistake." Itís hard to imagine denying this deal to go through could actually harm our economy, especially when one of the main selling points of the deal was that it would grant the UAE such an insignificant role.

The writers of the Wall Street Journalís Review & Outlook section donít get it either, as is the case with most laissez-faire lovers. And on issues where they do seem to get it, they feel a need to distort the viewpoint of the opposing side in order to make their point of view look more favorable. Such tactics damage the overall integrity of the writer. Thatís why I am always careful to characterize free traders accurately when I criticize them.

On February 25, they claimed opposition exists "for no other reason than it would be an Arab-owned company" making the acquisition since other foreign countries including China already operate many U.S. ports. Apparently the Wall Street Journal writers have conveniently forgotten that in the mid-1990s, the U.S. Congress denied Chinese-owned COSCO approval to lease a facility near a port they operate that was once part of the Long Beach Naval Station. Why did congress deny the lease? National security.

It clearly isnít just the fact that DP World is Arab owned since House Armed Services Committee Chairman Duncan Hunter (R-CA) has introduced legislation that mandates only U.S. companies would be allowed to claim ownership of domestic infrastructure critical to the security of the United States.

There are other reasons to oppose the deal that should be of importance to President Bush:

  1. The United Arab Emirates previously recognized the Taliban in Afghanistan as a legitimate regime.
  2. The United Arab Emirates refuses to support the use of U.S. sanctions on Iran.
  3. Dubai is suspected of being used as a hub to send and receive illegal components for nuclear weapons.
  4. Dubai served as headquarters for the Pakistani-run black market, which has been accused of shipping both Libya and North Korea nuclear weapons-related materials.
  5. Two of the 9/11 hijackers carried UAE-issued passports.
  6. The United Arab Emirates has vowed support for the destruction of Israel.

Aside from the dangers of granting a foreign company even partial control of anything to do with a vulnerable entry point to America, itís easy to recognize that American companies are much more likely to react much more favorably to American pressure than foreign companies. Isnít that reason enough for American companies to run Americaís ports? Prior to the Iraq War, American-owned oil companies like Chevron stopped loading oil at Iraqi ports for fear of political backlash at home. Could we have expected the same from Venezuelan-owned Citgo, who forced President Clinton to change our clean air laws because of a World Trade Organization decision and whose president has now vowed to "Bring down the U.S. government?" I doubt it.

The United States isnít the only country becoming increasingly nationalist while questioning the supposed benefits of the global economy. On February 27, France arranged for a merger of French utility concerns companies to thwart a bid by an Italian company. The day before, Spain denied a buyout bid by a German power company. Paris and Madrid are protecting their national champions in industries that are deemed strategic to their national infrastructure, and Washington, DC should too.

A move in that direction should come as no surprise to the United Arab Emirates. On Thursday Feb. 23, the English-language Gulf News in Dubai claimed "It must be realized that Americans, in general, are protectionist by nature" and "they abhor the idea of their Ďcherished institutionsí being in the hands of Ďforeignersí of any persuasion." Apparently even the Arabs understand that this is no Arab-only phenomenon. The writers of the Wall Street Journalís "Review & Outlook" section must have missed that too. But thatís no big deal. Itís just an indication that when these writers are having a fit about the progress of globalization in America, it only means that itís likely weíre all headed in the right direction.


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