WASHINGTON — The presidents of seven U.S. business trade and lobbying groups are worried about a backlash against U.S. investment abroad because of attempts by Congress to block, or have final approval over, a proposed takeover of operations at major U.S. ports by an Arab-owned company.

The business representatives, in a letter to Republican and Democratic Congressional leaders on Thursday, for the first time publicly weighed in on the debate over the $6.8 billion transaction that would give Dubai Ports World control of some terminal operations in New York/New Jersey, Miami, Houston, New Orleans, Philadelphia and Baltimore.

“We are…very concerned by the legislative proposals that would effectively undermine the current objective process and divert attention from the strict national security criteria established by existing legislation,” the executives stated in the letter. “Altering the basic structure [of the review process] will encourage other countries to impose barriers to U.S. investments abroad in the name of ‘national security’ or ‘national interest.'”

Critics in Congress and the public sector maintain the deal is a potential security risk because Dubai Ports World is owned by the government of Dubai, part of the United Arab Emirates, which at one time recognized the Taliban’s government in Afghanistan and allegedly allowed terrorist organizations to operate in the UAE.

Lawmakers have proposed several bills to block or halt the deal, or to keep all companies owned by a foreign-government-controlled entity from operating terminals. Several members of Congress are also seeking a change in the law that gives the President the right to block port takeovers when national security is endangered so that Congress would have the power to override such deals.

The High Court in Britain on Thursday approved the sale to Dubai of U.K.-based Peninsular & Oriental Steamship Navigation Co., which has operated terminals in six major U.S. ports for years. The next step is a 45-day review of the transaction and its national security implications by the Committee on Foreign Invest­ment in the U.S. Dubai Ports World agreed to submit to the investigation as a compromise.

Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, who signed the letter, said: “Say, for example, [the takeover by Dubai Ports] doesn’t happen because of internal pressures. That would send the wrong message to the world that the U.S. is open to investing abroad, but it is not open to foreign investment here. If we are going to advocate a freer trade stance, it has to have a balance.”

This story first appeared in the March 3, 2006 issue of WWD. Subscribe Today.

Burke stressed the importance of secure ports and a more open review process.

Erik Autor, vice president and international trade counsel of the National Retail Federa­tion, did not sign the letter, but he said, “Our primary concern is that Congress is going to pass legislation, for instance, that prohibits foreign-company or foreign-government-owned companies from owning terminal operations in the U.S. The fact is that [nearly] every single terminal in the U.S. is owned by a foreign company.”

He cited two giant foreign-owned companies operating terminals in the U.S. — American President Lines, based in Singapore, and Cosco, based in China.

“Our concern is that Congress will pass legislation like this that will create chaos in the ports,” Autor said.

The dispute among members of Congress and the Bush administration, and the proposed legislation, if enacted, might complicate free trade talks with the UAE, he said. The U.S. is negotiating a free-trade agreement with the UAE.

“If we insist upon restrictions [in terms of port operations], we would be scaling back market access for free-trade area partners and these demands would not come without a cost,” Autor said. “The cost is, we will be giving up benefits and market access we are seeking from other countries.”

There has also been criticism of the UAE’s boycott of trade with Israel, which is a key U.S. trading partner, as well as an ally.

Rep. Sherrod Brown (D., Ohio) has introduced legislation calling for future trade agreements to include a national security waiver allowing the President to suspend all or part of an agreement if he determines it weakens homeland security. It also would establish a trade security commission to monitor homeland security threats in connection with U.S. trade policies and enable Congress to force action if the administration fails to respond to commission warnings.

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