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Saturday, March 11, 2006 - Page updated at 12:00 AM

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Business leaders decry Dubai decision

Seattle Times aerospace reporter

Local free-trade advocates had harsh words Friday for the political tempest that led a Dubai company to back off its bid to manage cargo terminals at six U.S. ports.

"It is a victory for the bad guys," said Bill Center, president of the Washington Council on International Trade. "I can't imagine anything Osama (bin Laden) would be happier about."

He and others said the outcry over Dubai Ports World's acquisition plans could cause damage to the U.S. position in the Middle East, without doing anything to improve port security.

And while Boeing claims that no airplane orders are at risk, its close and lucrative relationships in the Arab world could suffer if the controversy spurs further moves to restrict foreign investment here.

The Bush administration last month approved Dubai Ports World's (DP World) $6.8 billion acquisition of London-based Peninsular and Oriental Steam Navigation (P&O), which manages operations at some terminals in six U.S. ports. But the deal caused a bipartisan backlash in Congress over a supposed security risk in handing management of the terminals to a company owned by the government of Dubai, one of the United Arab Emirates (UAE).

DP World was forced to back off, announcing Thursday that it will either sell or spin off the U.S. holdings in its new acquisition.

On Thursday, The Hill, a newspaper that closely covers Congress, quoted "a source close to the deal" who described members of Dubai's royal family as furious — "They're saying, 'All we've done for you guys, all our purchases, we'll stop it, we'll just yank it,' " the source said.

The UAE's main trading relationship with the United States is the purchase of Boeing airplanes.

Last year Emirates Airlines of Dubai ordered 42 long-range 777 wide-body jets, worth $9.7 billion. Boeing is pitching Emirates to order 50 of its new 787s and also its enlarged 747-8 jumbo. Etihad Airways of neighboring emirate Abu Dhabi ordered five 777s the previous year.

Boeing said its orders aren't threatened. "Nothing has been done or said since the ports controversy erupted that would indicate to us that our relationships with customers in the UAE have been damaged," said Boeing spokesman Tim Neale.

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And in an interview Thursday in Berlin, Emirates Chief Executive Tim Clark offered reassurance.

"They can be relaxed because the government of Dubai does not have a record of being vindictive," Clark said. "If I go to the sheiks and say I want to buy Boeing, they would never say, "No, you can't buy American because of this.' "

Indeed, Clark asserted the controversy would raise Americans' name recognition of his airline, which flies only to New York.

"We have a major push into the U.S. coming up," Clark said. "I said to myself before that once the 'Bible Belt' starts talking about Dubai, we've won. And now, from coast to coast, everyone is talking about it. Is there such a thing as bad publicity?"

Boeing's Neale said the airplane manufacturer must constantly deal with political issues affecting sales abroad.

"An airline, like us, is a business — with business objectives," he said. "I'd like to think that solid relationship is going to endure."

A more subtle impact could come if the ports controversy expands into other transportation areas, as it already threatens to do.

Boeing supports a proposal before Congress to allow increased foreign control of U.S. airlines, on the grounds that continued liberalization of the world's air-transport system encourages growth and lets it sell more airplanes.

But Wednesday the House Appropriations Committee passed a resolution to put the proposal on hold for 120 days.

"The committee believes that the U.S. aviation industry is part of our critical infrastructure, as are the ports," the resolution said.

Ned Laird, managing director of Air Cargo Management Group, a Seattle air-freight consulting company, blamed the outcry against DP World on xenophobia.

"How do we as a country continue to champion globalization and openness in transport and business when we restrict foreign companies' ability to compete in the U.S. market?" he asked.

He said the U.S. political reaction was "emotional," fueled less by security concerns than by resistance to globalization and job outsourcing.

"There are foreign companies involved in air, land and ocean transport in the U.S.," he said. "To try to use security as a basis to exclude foreign companies and protect American jobs is very shortsighted."

Center, a retired admiral in the U.S. Navy who was Colin Powell's deputy for international negotiations when Powell headed the Joint Chiefs of Staff, also thinks the security issue is a red herring.

The port standoff, he said, will damage America's standing in the world by bolstering Islamic fundamentalists who claim that the United States is simply anti-Arab.

"This pours more gas on the fires of division between the West and the Muslim world," Center said.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Bloomberg and Associated Press contributed to this story.

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