Bush Worried Collapsed Ports Deal Could Send Wrong Message to Allies

President Bush on Friday said he's worried that this week's meltdown of a U.S. ports deal with a United Arab Emirates-owned company could send the wrong message to important allies in the Middle East.

"I'm concerned about a broader message this issue could send to our friends and allies around the world, particularly in the Middle East," Bush said in remarks to the National Newspaper Association. "In order to win the War on Terror, we have got to strengthen our relationships and friendships with moderate, Arab countries in the Midddle East. UAE is a committed ally in the War on terror, they are a key partner for our military in a critical region."

Although a potentially explosive showdown between and Congress over a controversial ports deal has been mostly defused, there are still some lingering concerns over the deal and even bigger concerns over the broader issue of port security in the United States.

"The problem of the political moment has passed, but the problem of adequate port security still looms large," said Sen. Lindsey Graham, R-S.C.

"There are gaping holes in cargo and port security that need to be plugged," added Sen. Patty Murray, D-Wash.

Meanwhile, free talks between the United States and the UAE were postponed Friday. The talks, which were supposed to begin Monday, were postponed because both sides need more time to prepare, according to the office of U.S. Trade Representative Rob Portman. A USTR spokeswoman would not say whether the postponement was related to the ports deal.

The United Arab Emirates-owned company Dubai Ports World said Thursday it would give up its management stake in the ports deal that has caused massive upheaval in Washington, even among the president's own party. The concession came after lawmakers from both sides of the aisle decried the Bush administration for not adequately reviewing the deal they said puts the security of the United States at risk.

"I'm sure the decision by Dubai Ports World was a difficult decision, to hand over port operations they had purchased from another company," Bush said. "My administration was satisfied that port security would not have been undermined by the agreement. Neverthless, Congress was still very much opposed to it. My administration will continue to work with the Congress to provide a greater understanding of how these transactions are approved."

Although the administration insisted that turning over some port operations to the UAE company did not amount to outsourcing port security, lawmakers argued that operations and security go hand-in-hand. The ports in question are currently operated by a British company, Peninsular & Oriental Steam Navigation Co.

Bush has consistently argued that it sends the wrong message to the world to OK deals with some foreign companies and not others. He, along with other White House and U.S. military officials, have consistently said the UAE is a solid ally in the War on Terror, particularly in a region where the United States is in desperate need of support. Plus, Dubai services more U.S. military ships than any other foreign country, the president said.

"They're sharing intelligence so we can hunt down the terrorists. ...They helped us shut down a world wide proliferation network run by A.Q. Khan," Bush said, referring to the Pakistani scientist who sold nuclear technology to Iran, North Korea and Libya.

"UAE is a valued and strategic partner," the president continued. "I'm committed to strengthening our relationship with the UAE."

Some business corners are also warning lawmakers not to take any hasty action that may put a damper on trade between the United States and the Middle East.

"While the security of the American people and our critical infrastructure must always be a top priority, implementing the laws that could harm the health of our economy in the name of national security would be a grave mistake," said Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce. "All parties involved must strive to find a balance that keeps us safe while at the same time allows our economy to continue to flourish."

Lawmakers also are faulting the process by which such foreign acquisitions are vetted. These deals normally undergo a 45-day review by the U.S. Committee on Foreign Investment in the United States.

"There were serious concerns about this transaction, particularly since the administration initially failed to conduct a thorough analysis of its national security implications," said Sen. Susan Collins, chairwoman of the Senate Homeland Security and Governmental Affairs Committee.

The Maine Republican plans to introduce legislation to revamp the process for reviewing foreign acquisitions. That's just one of many bills introduced to deal with port operations and foreign ownership of U.S. assets since the ports deal came to a boil.

"Foreign acquisitions should be scrutinized from both a national security and a homeland security perspective," Collins added. "If there is any silver lining to this issue, it is that it has highlighted the vulnerability of our ports and the need for a greater emphasis on security."

Dubai is 'Only the Beginning'

DP World announced on Thursday that it would divest itself of all American interests and transfer its operations of U.S. ports to an American company. The announcement came just hours after Republican leaders warned Bush that the House and Senate appeared ready to block the deal.

"Because of the strong relationship between the United Arab Emirates and the United States and to preserve that relationship, DP World has decided to transfer fully the U.S. operation of P&O Operations North America to a United States entity," DP World's chief operating officer, Edward H. Bilkey, said in a statement, read on the Senate floor by Sen. John Warner, R-Va.

Democrats were pushing for a Senate vote on an amendment that would halt the deal. The Senate later voted to ignore GOP requests to wait until a 45-day review of the deal is completed before they try to stop it.

A Warner spokesman told FOX News that based on conversation between his boss and DP World lawyers, "we understand this is a full divestment or sale of the U.S. operations of P&O." That would mean the Senate amendment would essentially be off the table. But some lawmakers are still not convinced.

"What is the nature of this transaction? In my mind, the only way it satisfies us is if it's a real divestiture — divestiture means no ownership, no control," Sen. Robert Menendez, D-N.J., told FOX News on Friday.

Menendez has co-sponsored legislation that says: No foreign governments can own or operate port terminal operations in the United States; security reviews of current deals involving foreign government-owned companies and U.S. courts be regularly conducted; and the process by which such foreign acquistions are currently vetted.

"Dubai is not the beginning or the end, it's only the beginning, actually, of a more comprehensive review," Menedez said. "When it comes to our national security, we can't take a second seat to commercial enterprises or the feelings of another country."

Democrats were trying to attach an amendment, sponsored by Sen. Charles Schumer, to lobbying reform legislation to ensure that no company controlled by a government that recognized the Taliban in Afghanistan has any control over U.S. port operations. The UAE recognized the iron-fisted tribal group.

"The bottom line is, security has to come first. We know that this deal would not bring security," Schumer, D-N.Y., told reporters Thursday. "We had to force this vote, it's unfortunate that we did but now the handwriting is on the wall and that is that the UAE will not operate ports in the United States of America, plain and simple."

A senior Frist aide told FOX News that the Senate majority leader and his staff informed DP World and UAE government officials Wednesday night to pull the plug on the deal. When asked what prompted this action from Frist, the aide said the House action Wednesday night created a "destabilized coalition among House and Senate GOP."

Just one night before, GOP-led House Appropriations Committee passed a bill blocking only the DP World deal, no other foreign acquisitions. Bush has vowed to veto any measure halting the deal.

'The Devil's in the Details'

With the latest DP World news, many members of Congress who thus far have been critical of the deal may be much more positive toward it.

"It resolves all of the security issues involved," Rep. Peter King, chairman of the House Homeland Security Committee and a lead critic of the deal, told FOX News. "It's a very positive step and now we can go forward on overall legislation dealing with the ports."

"DP World's agreement is a positive outcome," added Rep. Pete Hoekstra, R-Mich., the chairman of the House Select Committee on Intelligence. "I hope that it will not impact our strong relationship with the United Arab Emirates, a valuable ally in prosecuting the War on Terror."

Added Sen. Wayne Allard, R-Colo." "Dubai's decision to withdraw, and turn over management of the ports to a U.S. company, certainly relieves those concerns. Congress still has a critical roll to play in decisions that affect ports security, and national security overall."

But many lawmakers, particularly Democrats, are still cautious, arguing that DP World has to let go of all control over any firm that may take over the port operations. They also say more needs to be done to strengthen overall port security.

"The deep concerns about national security cannot be alleviated until the details of this proposal are fully understood," said House Democratic Whip Steny Hoyer of Maryland. "Moreover, we must not lose sight of the bigger issue: the failure to protect our ports. This administration ... simply have failed to do what is necessary to address the continuing vulnerabilities at our seaports or to examine and address the reasons why so few of our ports are actually managed and operated by American companies. Four years after 9/11, we are still only screening 6 percent of containers entering our ports."

Frist on Thursday ended debate on the lobby reform bill — Democrats' self-proclaimed "signature issue" — and moved on to a budget bill. An aide to Collins said that although Frist said he would attempt to bring back up lobby reform next week, "my boss thinks this will become victim to some must-pass bills."

FOX News' Major Garrett, Molly Hooper and Trish Turner and The Associated Press contributed to this story.