Well it’s good to be reminded that populist pandering is not dead and definitely not in the United States. A severe case of it was identified in the US Congress and spread rapidly to Republicans and Democrats alike in Washington and in the country over the question of DP World’s acquistion of port’s management for US terminals including some of the biggest – New York, Newark, Baltimore and Miami . The issue may well have been defanged for now by the decision of the Emir of Dubai to sell or transfer control to an American-owned entity.
The real question is – what is the critical question over the terminal lease acquisitions. There certainly is a security issue for US ports. But the fact that DP World was acquiring the leases was a red herring. The fragile security protection is US problem – Homeland Secuirty and the Administration primarily – but not a question of Dubai ownership of the leases for the ports. The fact that DP World is a Dubai owned corporation – and two of the September 11th hijackers were from Dubai deserves no discussion although the wiff of anti-Arab Congressional opinion was, and remains, disturbing.
No, it is none of these issues. It is, however, a multilateral and global governance question – hence why this contribution has made it’s way to the New Multilateralism blog. The debate that should have occurred but didn’t – I do note that Vice Presidential candidate and former Senator John Edwards – not one of my favorite Democartic politicians (unfortunately the category may be quite small) – did reference it is appearance on the Sunday talk shows- that is the fact that DP World is a state-owned enterprise.
The identification of the state-owned enterprise as a problem should alert us to the fact that we’ve seen this debate before and not that long ago – this over possible acquistions by Chinese state-owned enterprises of US and other companies. This may ring a bell – hopefully it does. Among the many limitations and failures in the GATT/WTO liberalization process one of the obvious ones was the treatment of State trading enterpries by the GATT agreement. While the GATT contract included Article XVII on state trading enterprises, the trade negotiatiors assumed that members of the GATT were free market-oriented economies. While largely true, the fact was, and is, that even the most developed economies include sectors that are not including state trading agencies or monopolies, government-owned industries and the like. The founders no doubt saw this but presumed that trade liberalization would ameliorate this condition and meanwhile member countries would only achieve membership status once they had reached a high level of market orientation in their economic structures. I more than suspect that founders never anticipated that new members would include such transitional economies such as those in Central and Eastern Europe, possibly Russia and most pointedly would not include a China.
Indeed in the debate on China’s accesssion that dragged on for 15 plus years some critics were so brazen as to raise the question of the state enterprise structure of China’s economy and even more brazenly to suggest that China not be admitted until the economic structure had been liberalized. But that did not occur and now we witness acquistion instances like the aborted bid for Unocol by CNOOC where the state-owned enterprise looked seriously at buying US corporate oil enterprsie asset.
On the multilateral side the rules such as Article XVII of GATT are incapable, at least to date, of dealing with the the problem of state corporate ownership in a global liberalized market. Instead countries have leaned or fallen back on national security legislation. And as the few instances we’ve seen invoked the national security exception GATT XXI and the corresponding national security laws and regulations such as the US Exon-Florio rules we see that they are blunt political instruments that fail to tackle the problem of state behavior in the global economy. The Chinese economic structure and possible corporate behavior is a problem that cannot be solved through national corporate governance rules. And we haven’t yet faced full force the prospects of petro dollars being an instrument of corporate acquistion behavior by potentially friendly but more dangeroulsy unfriendly state behavior.
We have work to do in the multilateral realm to abort a growing threat to market orientation from a series of governments the product of which would be a serious impairment of global investment. Yet the WTO appears to be wholly incapable of tackling this or any other threats to global economy.