Foreign Owners Overboard?

In Blocking Dubai Ports World, America Ignores Its Debtor Status

Being American means not giving a damn about what the rest of the world thinks about us.

That less-than-endearing national character trait was on display this week as members of Congress, reflecting the fears and prejudices of their constituents, succeeded in blocking a Dubai-owned company from taking over management of terminals at six American ports. The global message it sends -- and, in particular, to friendly Arab and other Muslim countries -- is that we don't really need your money, and in this post-9/11 world we're going to be very picky about whom we do business with.

That's the same message we broadcast last year when an oil company controlled by the Chinese government was hounded out of town for having the temerity to bid on Unocal, that red-blooded American oil firm. Never mind that it has most of its remaining assets in Asia.

And it certainly was implicit in yesterday's vote by the House Appropriations Committee -- the same committee that on Wednesday voted 62 to 2 to block the port deal -- to block implementation of a new "open skies" treaty that would allow foreign airlines or investors to own more than

25 percent of the voting stock of a U.S. airline. After all, you wouldn't want Swiss pilots or Swedish flight attendants on that next flight to Atlanta, or some Japanese investor raking in all those obscene airline profits.

Maybe it was possible to get away with this noxious blend of arrogance and ignorance when the United States was the world's only economic superpower. But now that we've become the biggest debtor nation in the history of civilization, we might want to give a bit more thought to whom we tell to buzz off.

It was more than a bit ironic that on the very day that Dubai Ports World threw in the towel and agreed to sell off its U.S. operations, the Commerce Department announced yet another record monthly trade deficit for January, putting us on course to exceed last year's record deficit of $724 billion. At this rate, we are adding to our debt to the rest of the world at the rate of $2,500 a year for every man, woman and child in America.

Where do you think that $724 billion comes from? Let me tell you: It comes from the people who have the dollars. And in case you hadn't noticed, tops on that list are the Japanese who are selling us all those cars, Arabs selling us all that expensive oil, and the Chinese selling us the shirts on our backs, the athletic shoes on our feet and all those computers and flat-screen TVs in front of our noses.

If these folks suddenly get the idea that we don't really trust them enough to do business with them, and begin acting the way human beings do when they get poked in the eye, you could be looking at 8 percent mortgage rates, 6 percent unemployment, $4 gasoline, a $1.50 euro and a 9000 Dow.

Global financial markets got another jolt yesterday when the Bank of Japan announced that it was turning off the press that's been printing yen almost nonstop for the past five years. Those freshly minted yen were lent out at zero percent to investors who mostly converted them into dollars and lent them, risk free, to the U.S. Treasury at 4 percent. It's called the "carry trade," and we can only guess how the bond market will react when it dries up.

With protectionist winds now blowing through Washington, there will be even more pressure for the Bush administration to finally blow the whistle on China's currency manipulation in a report due out after President Hu Jintao's U.S. visit next month. There are two possible outcomes:

· One, China lets its currency begin to float more freely against the dollar, which means the central bank in Beijing lightens up on its purchase of Treasurys, raising U.S rates.

· Two, China tells us to stuff it, Congress imposes tariffs on Chinese imports, and a trade war begins with a country sitting on $800 billion in foreign reserves, most of it in U.S. Treasury bonds. Think of it as the financial equivalent of going to war without body armor.

And then there is Dubai, the tiny but oh-so-dangerous desert emirate that desperately wants to be just like Minnesota (indoor skiing is the hot new thing). Did you know that the United Arab Emirates, of which Dubai is one, is actually one of the few trading partners with whom we run a surplus? Last year it was about $7 billion. They import American cars, watch American TV shows, hire lots of American engineers and architects, put their money in American banks. They've also been buying lots of Boeing airplanes with General Electric engines for the state-owned airline they hope will become the Lufthansa of the Persian Gulf.

I can tell you this, though. The happiest guy in Dubai this week is the local Airbus representative.

Steven Pearlstein

can be reached atpearlsteins@washpost.com.