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Dubai or Not Dubai?

By Clifford F. Lynch

DC Velocity, April 2006

As much as we cherish the notion of a United States that opens its arms to immigrants ("give us your tired, your poor…"), many Americans remain wary of foreigners, particularly those of Middle Eastern origin. For evidence, you need look no further than the political and media firestorm that erupted over Dubai Ports World’s recent purchase of P&O Steam Navigation of London – which operates ports in New York/New Jersey, Philadelphia, Baltimore and New Orleans.

On the day this column was written, Dubai Ports World (DPW) announced it would sell the P&O U.S. operations to American interests to keep the deal from collapsing under congressional opposition. If nothing else, the furor demonstrates how little many of our politicians and media people know about the U.S. supply chain. It couldn’t have been more clear that most have yet to grasp what DC Velocity’s readers and other logisticians already know: We don’t have control of our own supply chain and haven’t for some time.

To be sure, we must do all we can to protect our ports. Other than railroads, the ports are probably the most vulnerable node in the global logistics network. Containers from around the world flow daily into our ports, where only about 5 percent of them are inspected. If I had concerns about security and Dubai Ports World (and I really don’t), it would be more about containers originating at DPW-operated ports like Manila, Hong Kong, Sydney, or Shanghai than those containers received at Philadelphia or New Orleans.

In December, I wrote about the increasing foreign ownership of companies that provide warehousing service in the United States – who would have thought Schenker would be running a distribution center in West Branch, Iowa? – but warehousing is hardly an isolated case. The truth is, other than FedEx, UPS, and one or two smaller firms, no U.S.-owned company has emerged as a major global service provider, particularly when it comes to port operations. (CSX, which did have some foreign port operations, sold them to Dubai Ports World in 2004.)

We have embraced the global economy. Millions of Americans flock to Wal-Mart every day to load up on Chinese-made goods. We’re falling all over one another in the race to establish manufacturing and logistics relationships in China, a country with a dubious human rights record and a government that hasn’t proved overly friendly when one of our ships or planes strays into its territory.

Whether we realize it or not, we have also embraced the global supply chain. In my hometown of Memphis, it’s not uncommon to see a foreign container being hauled from the intermodal hub by a Chinese-owned drayage company to a distribution center owned by Kuehne & Nagel or Exel. No American company ever touches the product until it comes time to load it onto a truck for distribution.

Having said that, it’s also important to note that most of the people who would have worked at U.S. ports in the employ of DPW are Americans – the folks next door. Even the COO of Dubai Ports is a guy from New Jersey.

We can’t have it both ways. If the United States wants to participate in the global supply chain, we must learn to play well with others. We must accept that the emirate of Dubai will also participate, as will other foreign countries. We must acknowledge that we may be required to stray from our comfort zone now and then. If we were to limit our dealings to our closest allies, it would be a pretty truncated supply chain. And to be fair, most or our problems have less to do with our trading partners than with our own inability to secure our borders.

By the way, Dubai owns several nursing homes in the United States. I hope our grandmothers are OK.

 

 

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