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Another Dubai Purchase On Hold Due To Security Issues

By March 24, 2006

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Foreign media are reporting that state-owned Dubai International Capital's acquisition of a British engineering company is on hold due to a second investigation by the US Treasury Department's Committee on Foreign Investment (CFI). Doncasters is "a privately-held British aerospace manufacturer that works on sensitive US weapons programmes, including the Joint Strike Fighter."

The $1.24 billion purchase is not unlike the United Arab Emirates (UAE) DP World purchase of P&O, another British firm; P&O had operations in 22 US ports (although major media continue to understate US holdings). Doncasters has operations in nine US locations, primarily along the Southeastern seaboard. Two locations deal with medical equipment.

Analysts report that UAE firms -- like other oil-rich nations -- are seeking a home for record oil revenue. For example, Reuters notes that Dubai International Capital has purchased "Britain's Tussauds Group, owner of Madame Tussauds waxworks, and [has] a stake in car maker DaimlerChrysler."

The sums involved, in the aggregate, are not insignificant. According to zFacts, in today's dollars, we are spending "more than four times as much per year to import fossil fuel as we were back in 1974, when we first set out to become energy independent."

According to Monsters and Critics, annual US exports to the United Arab Emirates are valued at about $8.4 billion. In return, UAE has ordered "80 F16 e/f combat aircrafts from the United States at a cost of some $6.4 billion," and a national carrier, Emirates Airlines, has a $20 billion order with Boeing. According to census data, the US runs a significant trade surplus with UAE.

This is in interesting circular game: we buy their oil (a disposable product), and they then use our money to buy our (fixed) assets as well as disposable ones. This zFacts counter shows cumulative dollars paid for oil and gas imports since we became a net importer in 1958.

Reportedly, the Bush Administration approved the Doncasters deal in February, but due to the backlash of the Dubai Ports deal, decided to conduct a new 45-day review.

Given that the development of US weapons is subsidized by taxpayers, is it reasonable to restrict components to US-owned firms and equipment? If so, would it, for example, give Pratt and Whitney engines a leg up over Rolls-Royce? Take our poll or comment on this blog.

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gada.be tags: CFI, Homeland Security Outsourcing, Politics, UAE


March 25, 2006 at 11:55 am
(1) Tim Ethridge says:

Reading US media coverage of the Dubai economy’s strategic acquisition of quality world-class assets makes me cast a wry smile. Seeing the early champions of Free Trade shift so fast into apologists for a Protectionist, fear-ridden economy smacks of retreat borne of insecurity. Be brave America and see how one small city state is leveraging its relatively small oil heritage into economic security. Only some 15-20% of the Dubai revenue base comes from oi, the majority comes from human services; shipping, tourism, banking, property development etc. Using this approach, you guys will only end up like other ‘walled’ economies, such as we have seen either pulled down in recent times or their leadership discredited.
Dubai is the paragon of good governance and smart economic management in the Arab world. Learn from how they do it, rather than throw rocks!

March 25, 2006 at 2:28 pm
(2) uspolitics says:

Hi, Tim:

Thanks for your comment. I’m assuming you at least live abroad, given your perspective.

There has always been a tension between “free trade” in a theoretical sense and “free trade” as it relates to national security: whether that is food supply, weapons supply, or how taxpayer dollars are spent.

I believe one cannot argue “for free trade” if those “doing” the trade are governments, not businesses — and if the businesses doing the trade receive much (most?) of their business from taxpayer dollars. That’s not classical free trade.

“Free trade” is as much a myth/theory as “free markets.”

Adam Smith’s invisible hand has few examples in today’s economy. IMO, that is _why_ issues like this become politicized.

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