House preps bills to stop port sale, change foreign ownership criteria
Compromise proposals that would put extra conditions on the sale of U.S. port facilities to the Dubai ports operator appeared dead in the water Tuesday as House Republican leaders moved to immediately kill the controversial deal without the benefit of a 45-day investigation by the administration.
Meanwhile, Rep. Duncan Hunter, R-Calif., introduced legislation that would go beyond Dubai Ports World to ban foreign companies from owning, operating or managing infrastructure that is determined to be critical to national security.
Dubai Ports World completed its $6.8 billion merger with Peninsular and Oriental Steam Navigation Co. Tuesday, but agreed to wall off management of the nearly two dozen port facilities and services in the United States to allow the government time to conduct a lengthier investigation in the face of a public revolt whipped up by lawmakers against the sale.
The Republican strategy is to attach an amendment by House Appropriations Committee Chairman Jerry Lewis disapproving the sale to a must-pass $91 billion emergency spending bill for the wars in Iraq and Afghanistan, and Hurricane Katrina recovery. This would set up a showdown with President Bush, who has threatened to veto any legislation to stop or delay the port sale, according to wire service and newspaper accounts. The House could vote on the appropriations measure next week.
Rep. John Boehner, who recently replaced Tom DeLay, R-Texas, as Majority Leader, conceded that he is motivated to move rapidly on legislation against the deal to stem the political bleeding Republican members are suffering at the hands of Democrats who have hammered away at the Bush administration’s approval of the sale to a foreign government without a full investigation. Every day that goes by allows Democrats to create the impression that Republicans are trying to salvage an unpopular issue for Bush, the leader of their party.
The debate over homeland security and the ports “has become a very hot political potato,” the Ohio Republican said. “I would like to see it go away,” he was quoted as saying by several papers.
Opposition to the DP World takeover is also strong in the Senate, but it may be President Bush’s only hope for a last stand on the DP World investment. Majority Leader Bill Frist, R-Tenn., has so far been able to get senators to hold off filing bills to deny the sale until the Committee on Foreign Investment in the United States, a multi-agency task force led by the Treasury Department, has a chance to complete its second review.
The Washington Post reported that Sen. Mel Martinez, R-Fla., has backed off criticism of the sale after security experts and company officials eased his concerns. But many senators from both parties have criticized the deal.
Earlier in the day there was talk on Capitol Hill that congressional leaders might work out a compromise.
Sen. Susan Collins, R-Maine, chairman of the Homeland Security and Governmental Affairs Committee, briefed several reporters Monday that she had suggested to the White House that it consider requiring foreign companies that own critical assets in the United States to create an American subsidiary and that its security chief be an American citizen subject to a federal background check.
DP World has frequently stated that it will retain P&O Ports North America as a subsidiary incorporated in the United States and subject to U.S. laws.
Over in the House, Homeland Security Committee Chairman Peter King, R-N.Y., proposed that DP World subcontract operation of cargo terminals to a U.S. company, according to CNN. Under the plan, DP World would still receive profits, but would not be involved in daily operations or security controls.
But the Washington Post reported that King was already going soft on his idea by the end of the day. If DP World was guaranteed a percentage of the profits, it would be eligible to receive financial records King wants to deny the company. Instead, King said, DP World would have to receive a flat annual fee from its U.S. holdings, which could prove difficult to require in a contract, according to the Post.
Hunter, chairman of the House Armed Services Committee, and Rep. Jim Saxton, R-N.J., filed a bill to halt the DP World acquisition and require foreign companies that already own critical infrastructure such as port terminals, airports, power plants to sell off their investments to American companies.
Similar anti-foreign investment bills have cropped up in both houses of Congress as lawmakers and the public discovered that foreign companies already dominate management of waterfront operations in the United States. Democratic senators Hillary Clinton of New York and Robert Menendez of New Jersey have proposed a ban on foreign governments owning U.S. port terminals.
In a letter to House colleagues, Hunter said Americans would have to own and control 51 percent of a company that operates critical infrastructure. The Defense Department, assisted by the Department of Homeland Security, would be responsible for creating a list of facilities that are vital to national or economic security or public health and safety. Foreign companies on the list would have to divest their properties.
Companies in control of critical infrastructure would need an American chief executive officer, chairman and a couple of independent directors, as well as a security oversight committee approved by the secretary of defense, Hunter elaborated on C-SPAN’s “Washington Journal” program.
“We aren’t foreclosing these thousands of opportunities for foreigners to invest in America. We are foreclosing critical infrastructure. That doesn’t mean we are going to come in and take everything away from them and stop operations, but we are going to provide for a transition period,” Hunter said.
The government also limits foreign ownership of broadcast licenses, commercial vessels engaged in coastal shipping, nuclear power plants and offshore oil and gas leases, although in many cases foreign companies own U.S. subsidiaries engaged in those activities.
Hunter’s bill most resembles corporate citizenship laws in the aviation industry that cap the amount of voting stock owned by foreigners at 25 percent and require two-thirds of the upper management and board of directors be American. U.S. regulators have interpreted the law to mean that foreign investors cannot use their influence to exercise control of airline operations.
The uproar over DP World could threaten the administration’s recent effort to loosen those restrictions and allow foreign managers more control over daily airline operations, while leaving to Americans decisions about security, safety, Defense Department contracts and corporate legal structure. The change is considered a prerequisite for the Bush administration to achieve its goal of concluding a far-reaching agreement with the European Union to deregulate the transatlantic aviation market. Administration officials say the new control regulations are necessary to provide an incentive for foreigners to invest in the struggling U.S. airline industry,
As in the current port debate, lawmakers have raised concerns about security and what they perceive as another attempt to make a policy change without congressional approval. Opponents argue that foreign-controlled U.S. airlines could restrict the military’s access to commercial airlift in an emergency. But many experts say the real goal of unions and many lawmakers is to protect American jobs. (For more, see feature story on foreign control in the March issue of American Shipper.)
On C-SPAN, Hunter suggested that ex-military officers and enlisted personnel coming out of Iraq and Afghanistan could be placed in charge of security at U.S. ports.
“We’ve got lots of great guys getting out of the military who would be superb in a military job. In fact, they would have 10 times the experience and the insights coming out of combat security operations in the warfighting theaters against terrorism. They would have much more capability in terms of designing terrorist proof operations at our ports than folks from Dubai when Dubai’s main experience is masking your shipment, making sure the seller, who is buying heavy water from China, gets that to the buyers in India with nobody knowing what happened.
“What Dubai sells is getting your illegitimate cargo moved without anybody knowing about it. That’s their expertise,” said Hunter, a Vietnam War veteran.
“Americans can do this job. There is no particular expertise that resides in Dubai with respect to operating ports. This isn’t some particularly challenging technological problem. It’s simply that the emir of Dubai ponied up more money to buy this port operation. I think we have the capital and the management capability to handle this stuff,” he said.
The government may have to change the tax code to encourage American companies to invest in critical infrastructure, Hunter acknowledged.