[Mb-civic] Bush's Response To the Ports Deal Faulted as Tardy - Washington Post

[William Swiggard]

Bush's Response To the Ports Deal Faulted as Tardy
By the Time President's Political Team Took Notice, Controversy Was an 
Uproar

By Jim VandeHei and Paul Blustein
Washington Post Staff Writers
Sunday, February 26, 2006; A05

Sen. Charles E. Schumer, an outspoken liberal Democrat from New York, 
two weeks ago began publicly denouncing a deal to let a Middle Eastern 
firm take over terminal operations at six U.S. seaports. From the other 
end of the political spectrum, even more outspoken conservative radio 
host Michael Savage was doing the same -- and recruiting Republican 
lawmakers to his cause.

To anyone listening, it was clear that President Bush had a problem on 
his hands. But Bush was not listening. And his political team had its 
attention elsewhere. By the time they noticed, Bush's problem had grown 
a lot bigger.

A behind-the-scenes reconstruction of the ports deal's rapid evolution 
from obscurity to uproar shows how Bush was blindsided by the same 
emotion-laden politics of terrorism that he used to win elections in 
2002 and 2004. It also raises anew questions of why the White House 
message machine, so sharply effective in the first term, seemingly has 
gone dull in the second.

It was on Feb. 13 that the Dubai Ports World deal -- after simmering 
unnoticed for months in the federal bureaucracy and the transportation 
trade press -- started to boil, as a result of Savage's blustery on-air 
alarms and an event by Schumer at the New York harbor with families who 
lost loved ones on Sept. 11, 2001.

It was not until Feb. 16 that Bush was informed by aides of the 
controversy -- and that his own administration had approved the port 
deal a month earlier. It was not until five days after that, on Feb. 21, 
that Bush spoke up in support of the port deal. By then, dozens of 
prominent lawmakers in both parties had joined Savage and Schumer in 
questioning the president's commitment to national security.

The consequences go well beyond political damage to Bush. Relations with 
the moderate Arab world may suffer as suspicions raised by lawmakers 
about a Middle Eastern company are now making headlines around the 
world. Congress is poised to rewrite the rules governing foreign 
investment, and possibly scuttle the deal altogether.

For a while, the effort by a major port operator based in the United 
Arab Emirates to take over U.S. operations of a British firm moved 
through government in a familiar manner. Investments that raise security 
concerns face scrutiny by a secretive interagency panel, the Committee 
on Foreign Investment in the United States (CFIUS), consisting of 12 
departments and agencies, which can either approve or reject 
transactions or insist on changes in the terms. People familiar with the 
process say the committee's deliberations rarely involve top White House 
officials or command the president's attention, and they did not in this 
case.

At the same time, White House officials well know that potentially 
explosive issues are regularly churning through the federal bureaucracy. 
An effective operation seeks to identify and respond to such matters 
before they become political problems. That plainly did not happen here, 
as even White House officials acknowledge.

The political breakdown was partly a matter of timing. The controversy 
started to build when Bush's top aides were consumed with the fallout of 
Vice President Cheney's recent hunting accident.

Some Republicans, however, think the episode highlights a structural 
problem: Without Bush's own reelection to worry about, White House aides 
are less alert to the political implications of fast-moving issues or 
unexpected events. Compounding problems, White House staffers have 
seemed exhausted in general for much of the year, according to people in 
close contact with them.

"My sense is the people who are over there now are working with a very 
pronounced double-edged sword: they have been there from the beginning, 
they are experienced, knowledgeable and they know how things work and to 
get things done -- but they are tired," said former Bush spokesman Ari 
Fleischer.

Senior White House aides concede their tardy response but faulted 
Cabinet officials for failing to alert the White House to the potential 
controversy.

Still most mystifying to some Republicans on Capitol Hill is why Bush 
waited five days after learning of growing concern about the deal to 
address it publicly, even as GOP governors and usually friendly 
commentators were speaking out in opposition. The White House has always 
lived by the adage that a president is either defining the issue, or 
risks being defined by opponents.

"It would have helped in a very extraordinary way for Bush to" share his 
side of the story, said Rep. Mark Foley (R-Fla.), who appeared on 
Savage's show early on and became a vocal critic of the plan. "He could 
have stymied the issue or at least clarified it."

The process that approved the Dubai Ports World transaction is designed 
to be politically insulated. The rules are based on the idea that the 
United States should be generally welcoming to capital from abroad, 
except for transactions that pose a genuine security risk.

"It's not at all equipped to handle the political or emotional issues. 
That's the main flaw," said Edward M. Graham, a fellow at the Institute 
for International Economics who is co-author of a forthcoming book on 
the panel.

The depth of that flaw is evident from the relatively low level of 
officialdom that participated in the CFIUS review of the ports 
transaction. At the Treasury Department, which chairs the panel, the 
highest-ranking official to know about the deal before the furor began 
to erupt over the weekend of Feb. 11-12 was Clay Lowery, the recently 
appointed assistant secretary for international affairs, a former career 
staffer at the Treasury and at the National Security Council.

At the Department of Homeland Security, it was Stewart A. Baker, the 
assistant secretary for policy, who acknowledged that he was caught 
flat-footed by the controversy: "I concluded, once we had the assurances 
we needed [about the security issues], that this was a relatively 
noncontroversial decision," he said in an interview. "So I didn't brief" 
either DHS Secretary Michael Chertoff or Deputy Secretary Michael P. 
Jackson.

The process began on Oct. 17, when representatives of the Dubai company 
informally approached the Treasury Department to disclose that they were 
planning to purchase the British firm, Peninsular and Oriental Steam 
Navigation Co., according to testimony by administration officials at a 
Senate hearing last week. Treasury officials directed them to consult 
with Homeland Security because of the port security question.

The executives of Dubai Ports World -- several of whom are American -- 
well understood that they might face extensive scrutiny.

"You don't have to do this, but I brought a small team here [from Dubai] 
to meet with the CFIUS agencies in early December," said Edward H. "Ted" 
Bilkey, the company's chief operating officer and former U.S. Navy 
officer. The idea was to give the panel plenty of time even before the 
company formally filed to start a standard 30-day review.

Homeland Security officials, especially in Customs and Border 
Protection, had high regard for the company, which is owned by the 
government of Dubai and operates terminals in 19 ports in Asia, Europe 
and South America. It was the first in the Middle East to participate in 
a post-Sept. 11 program in which Customs agents are posted overseas to 
screen containers before they are loaded onto U.S.-bound ships. U.S. 
intelligence agencies -- who were asked on Nov. 2 for any information 
they had on the company -- produced nothing "derogatory" about it, Baker 
said.

Even so, the department had enough qualms to insist on a number of 
legally binding conditions for approving the deal -- a frequent CFIUS 
practice. The company pledged to maintain its participation in the 
Customs program, "and they agreed to open their books, and give us 
access to records, without any formal legal process," Baker said.

The department also wanted to ensure that the personnel at the U.S. 
terminals to be taken over by the company would remain almost entirely 
American. So it extracted a pledge that the company intended to keep the 
current management of U.S. operations in place.

At the Pentagon, meanwhile, officials were well aware of the United Arab 
Emirates' checkered history in combating terrorism; it was the home of 
two of the Sept. 11 hijackers and home of the banking system through 
which some of the hijackers' money flowed. But far overshadowing those 
concerns were the country's current role as a key U.S. ally in the 
Persian Gulf region, said Deputy Defense Secretary Gordon R. England, 
who noted at last week's hearing that more U.S. Navy ships dock at UAE 
ports than any port outside the United States.

Accordingly, once Dubai Ports World had agreed to the conditions 
required by Homeland Security, none of the agencies on CFIUS objected to 
the transaction when the 30-day review was completed on Jan. 17. If even 
one agency had objected, the matter would have gone to a 45-day 
investigation -- which would have required a presidential decision at 
the end. Moreover, a single dissent would have meant bringing the matter 
before higher-ranking officials in each department.

But instead, the matter stayed with assistant secretary-level officials, 
who told the company the transaction could go forward. Treasury 
officials planned to inform congressional leaders at a regularly 
scheduled quarterly meeting on Feb. 17. By then, however, the Associated 
Press had already reported a statement from the firm trumpeting its 
approval.

Schumer said he sensed the public would be outraged if they knew about 
the deal and heard bipartisan objections. His Feb. 13 press event was 
sparsely attended because New York was consumed by a snowstorm and 
Washington by the Cheney accident. But two days later, after a flurry of 
private discussions between Schumer and key Republicans, Foley and Rep. 
John E. Sweeney (R-N.Y.) were pressing Treasury Secretary John W. Snow 
and Chertoff in public hearings for details on the deal.

The next morning, White House Chief of Staff Andrew H. Card Jr., alerted 
to the controversy by a lower-level aide in his office, briefed Bush, 
but there was a general feeling inside the White House that the 
political storm would blow over. Now, officials are ruing that judgment, 
and the failure to consult more broadly.

"We've learned from this that we have to make a more affirmative effort 
to give Congress the input they need to exercise their oversight 
function," said Deputy Treasury Secretary Robert M. Kimmitt. "Even in 
cases where security work is done diligently and professionally, we need 
to make sure broader considerations are taken into account."

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/25/AR2006022501579.html
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