It has been a very good week for cheap populism. The Democrats succeeded in hyping up an imaginary national security threat over the ports deal. As the president’s approval ratings dropped even lower, the Republicans tried to distance themselves by jumping on the protectionist bandwagon. Both parties are betting that the midterm elections are no longer a horse race, but rather a game of limbo in which the bar of good judgment in our political system can never be set too low.
What gets muddled in all the ranting is the real issue at hand: The ports exist to facilitate global trade. The despicable nativism seen lately is the opposite of the global economic perspective that the United States and the Middle East need. It demonstrates a shameful short-sightedness on the part of Congress, and could have long term consequences that reverse a decades-long trend of progress.
Until we can teleport, the oceans remain the best way to transport goods in and out of ports, as they have been for millennia. Just as in ancient times, countries with sea ports have tremendous advantages in commerce and power. A growing economy needs growing port capacity, and that requires constant investment of capital. But Congress’ fit over Dubai Ports World’s financial interest in our ports did nothing to improve the quality of our commercial infrastructure. All it did was discourage sorely needed capital that foreign parties confident in the American economy were all too eager to invest.
Several Democrats, including Senator Hillary Clinton, proposed various measures that would limit foreign stakes in our “critical infrastructure.” But in a globalized, 21st-century economy, few industries can be truly classified as non-critical infrastructure. Our economy needs thousands of systems to work flawlessly 24/7. To ban foreign stakes in every “critical” process of the economy would be tantamount to a total ban on foreign capital. Hooray for the American way.
The reality is that there is no guaranteed way to protect the economy in time of crisis. The reasonable strategy is not to ban unpopular investors, but to invest in improving the efficiency and genuine security of every aspect of the economy. Regulation should serve to encourage diversification that prevents the dangers of dependence, not to stifle innovation. Congress absolutely should not be swimming in the inherently corrupt swamp of trade controls. Rather, it should be using its constitutional power of regulating interstate commerce to knock down the barriers to transparent and open trade.
The fear of two scenarios drives nativist protectionism. First, in the event of war, an enemy country could disable its assets in the United States in order to harm the economic core of the American war effort. But every country with a significant stake in the American economy has an American stake at least as significant in its own economy. Michael Moore hyped up the threat of Saudi investment in the United States, but Saudi Arabia’s economy is greatly dependent on oil exports in the other direction. Congress threw another successful tantrum last summer when China tried to acquire the oil producer Unocal, but China’s economy would not grow if it did not export billions of dollars of goods. In a globalized economy, if the ship sinks, everyone sinks together. That is the gloomy potential of globalization. But the bright reality is that the threat of war with an economically interdependent rival is the best guarantor of world peace. And driving out investors because they pray to the wrong God or had the wrong allies before the war on terror officially existed is the wrong way to go.
The second fear motivating nativist protectionism is a legitimate one: that terrorists will smuggle weapons through our borders via the ports. But port owners have no financial incentive to sanction terrorism, and the government needs to implement the same measures for port security no matter who owns the terminals. More containers need to be checked both here and at their points of origin. Standard anti-tampering seals need to be required and monitored. Scanners to detect nuclear material need to be installed. The longshoremen working the ports need to undergo security and background checks. All of these and many more are reasonable measures that Congress should have dealt with in its appropriations years ago. That they suddenly discover the issue now – when an efficient, successful foreign corporation makes a wise investment in our growing economy – is simply shameful.
Bottom line: There is nowhere that globalization is more crucial than in the Middle East, and the United States could do nothing worse than discourage that progress by shunning Middle Eastern investors and promoting xenophobic protectionism.