(from
www.cnn.com)
What will the Dubai debacle cost us?
Now the deal is done, it's time for American companies to face the economic consequences of politicians' public statements.
By Nelson D. Schwartz, FORTUNE Europe editor
March 10, 2006: 10:50 AM EST
NEW YORK (FORTUNE) - So the Dubai ports deal is done, a United Arab Emirates-owned company has backed down, and CNN anchor (and deal opponent) Lou Dobbs is going to have to find something else to talk about. But the after-effects are likely to be felt in boardrooms across America as well as on Capitol Hill and in Arab capitals from Riyadh to Bahrain and Cairo.
That's because while the decision Thursday by Dubai-based DP World to complete its takeover of the U.K.'s P&O while transferring or selling the U.S. operations may placate opponents on Capitol Hill, it's likely to worry major American exporters such as Boeing (Research), GE (Research) and other companies that see growing opportunity in the oil and money-rich Gulf.
"Our members are very concerned about what the failure of this deal means," says Bill Reinsch, president of the National Foreign Trade Council, a Washington trade association that represents large U.S. multi-nationals. "They haven't wanted to be visible but they're very concerned about the signals the U.S. is sending out."
Indeed, The Hill, a Washington newspaper that covers Congress, reported that Dubai's royal family is "furious at the hostility both Republicans and Democrats on Capitol Hill have shown toward the deal."
And with Boeing hoping to land a major order for its new 787 Dreamliner with Dubai-based airline Emirates down the road, the stakes are high. Elsewhere in the region, the UAE's Etihad Airways has already ordered more than $1 billion worth of 777s, and Egyptair and Royal Jordanian are longtime Boeing buyers.
"These are important customers for us in an important, growing market," says Boeing spokesman John Dern. "We are with these customers all the time. We haven't seen any impact at this point, and have no indication there will be an impact." Dern wouldn't say whether Boeing execs have specifically discussed the ports controversy with potential customers, but he notes that "we're certainly monitoring the situation."
Don't expect news of any public threats or cancelled orders to come from the Gulf in the coming days or weeks. "That's out of character for the Gulf states," says Reinsch. "It's more likely they'll just act, and suddenly a deal is off."
Reinsch adds he that the doesn't think opponents of the deal on Capitol Hill gave much thought to the possibility that blocking the deal could boomerang and end up hurting U.S. companies. "It's the law of unintended consequences," he says.
The biggest loser in the short-term, according to Reinsch, is the Bush administration, which has been trying to create a Middle East free trade zone modeled on NAFTA that would extend trade privileges with the United States to countries from North Africa all the way to Iraq by 2013.
Jordan and Morocco have already signed deals with the United States, and Bahrain and Oman are in the final stages of negotiations. "These countries are not without resources and they can't help but react negatively when they're thrust into this."
Now that DP World has given up, the action will likely move behind closed doors, far away from the media attention that made the controversy such a hot topic, especially on the cable gab-fests (including those on CNN, the parent of CNNMoney.com).
Companies like Boeing are likely to work their contacts in the region, and try to patch things up. And former Bush administration economist and American Enterprise Institute Fellow Phillip Swagel says the Gulf states should send emissaries to meet with outspoken port deal opponents like New York Senators Chuck Schumer and Hillary Clinton and explain to them the economic power of the Gulf region.
Not a bad idea but whether Schumer, Clinton and other politicians understand the economic consequences of their public statements, rather than the political benefits, is another matter.
.
There are too many Republicans on their side.
