South-Westerns' Economic News Summaries
WHO Is In Charge Here???
Topic International Trade
Key Words Free Trade

News Story

According to the theory of comparative advantage, every nation prospers from free trade that allows each country to specialize, producing those goods and services that each has a relative production advantage. In the post-911 world, U.S. businesses, government officials, and citizens are more closely scrutinizing one particular free trade activity. For many, security issues trump gains from free trade-thus, the recent proposal to allow a Dubai company to operate America's ports has caused much concern.

Both sides of the political spectrum have criticized the deal. For example, Representative Duncan Hunter, R-- California, said that "Dubai cannot be trusted" to manage the ports. While calling for additional review of the deal, Senator Robert Menendex, D--New Jersey, called the transfer of the ports to Dubai control "an unacceptable risk that we cannot tolerate."

On the other side of the issue: American companies that have operated in the United Arab Emirates for years, often with American employees. These companies seek better relations with the UAE as a source of new customers, who could lead the way into the Middle East and huge potential growth. Much of the uproar is coming from "people in Washington who have never been here or worked here," said Kim Childs, executive vice president of the American Business Group of Abu Dhabi. Ms. Child's company has been in the United Arab Emirates for 11 years. "Most of us have raised our children here and have our businesses here," she said. Some of the criticism of the emirates has been like "slapping your best friend in the face," she said.

Exports from the United States to the U.A.E. grew rapidly last year, more than doubling to $8.48 billion, according to the U.S.Census Bureau. Some of America's largest companies, including Boeing, General Electric and several large banks, have forged strong ties to the Emirates. Indeed, Dubai is "a customer you do not want to alienate," said Richard Aboulafia, an analyst with the Teal Group, an aviation and military information company located in Fairfax, Va. "There is a good chance that there will be Dubai-bashing and xenophobia in Congress. That could help poison commercial relations, and I would hope that calmer heads will prevail."

Representatives of the U.S. and U.A.E. will meet for trade talks aimed at the creation of a free trade agreement. The U.S. opposition to the ports deal "will influence the ongoing discussions between the U.A.E. and the U.S. negatively," said Sultan bin Nasser al-Suwaidi, a central bank governor of the Emirates. The economic elements of free trade and the political elements of national security are sure to be ongoing and conflicting issues when the good or service being provided by a foreign company raises concerns for American security.

Questions
1.

Discuss how the political response to the Dubai deal could hinder the free trade negotiations between the U.S. and U.A.E.

2. Write a short paragraph explaining your own position on the issue of a foreign company operating American ports, giving your reasons for the position you take.
Source Heather Timmons and Leslie Wayne, "U.S. Businesses Are Lining Up Behind Dubai", The New York Times Online, March 8, 2006.
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