REPUBLICANS VS. FREE TRADE:

The Dangers of Ports (and Politicians) (Robert J. Samuelson, March 14, 2006, Washington Post)

As political theater, the posturing may be harmless. But all the grandstanding -- precisely because the criticisms were overblown -- damages American interests. It's a public relations disaster in the Middle East. The United Arab Emirates -- of which Dubai is a part -- has been a strong American ally, permitting the use of its ports and airfields for U.S. ships and military aircraft. Dubai's ruler, Sheik Mohammad bin Rashid al-Maktoum, is trying to integrate his city-state into the world economy. There's been a building boom of offices, malls and luxury hotels. Dubai has also gone on a global investment binge, buying the Essex House in New York, Madame Tussauds wax museum in London and (of course) the port operations of Britain's Peninsular & Oriental Steam Navigation Co.

If this isn't what we want from Arab countries, what do we want? Much bitterness is reported in Dubai, especially among those who are pro-Western. They blame racism. That's understandable and perhaps correct. A Post poll last week found that 46 percent of Americans had a negative view of Islam -- a crude proxy for Arabs. (Yes, not all Arabs are Muslim, and not all Muslims are Arabs. But the poll is still suggestive of American opinion about Arabs.) The ports furor also hurts the United States in another way. It weakens confidence in the dollar as the major global currency. The U.S. trade deficit now spews more than $700 billion into the world annually. To some extent, global economic stability depends on foreigners' keeping most of those dollars. Mass dollar sales could trigger turmoil on the world's currency, stock and bond markets.

People outside the United States hold dollars because they believe the currency maintains its value and offers a wide menu of investment choices. The message from Congress is that the menu is shorter than people thought. Once any investment is stigmatized -- rightly or wrongly -- as a "security problem," Congress may act against foreigners.

Every country has the right to protect its security interests. But those interests must be defined coherently and not simply as the random expression of political expediency. That's what happened here, as it did last year when Congress pressured a Chinese oil company (China National Offshore Oil Corp.) to withdraw its bid for a U.S. firm (Unocal Corp.). The more this process continues, the more it corrodes confidence in the dollar.

It will be said that other countries are equally nationalistic and political, so their currencies aren't realistic alternatives to the dollar. Not true. If we imitate the French or Malaysians, the dollar will have compromised its special status. The irony is that the people who are creating all these risks are the very same members of Congress who claim to be protecting us.