Now for the “Talking Points Memo.”

The United Arab Emirates backs down on the port controversy. “Talking Points” suspects the White House made some kind of deal with the UAE to diffuse the situation that was rapidly getting out of control. By a vote of 62-2, the House Appropriations Committee told President Bush the Emirates should not be allowed to work in American ports. Mr. Bush, understanding that public opinion is overwhelmingly against him on this issue, has now ceded to the Arab company, which said today it would pull out of direct supervision of American ports, perhaps subcontracting to an American company.

The minutia on this is not important. What is important is that American ports are now under intense scrutiny, which is good. And that the Arab world thinks the U.S.A. is against them, which is bad. As “Talking Points” has emphasized, U.S.A. will not win the War on Terror without committed Arab allies. And the Arab world is angry. A newspaper in the UAE editorialized, “Since Islamophobia became the active currency in the hands of U.S. rightists, the symptoms of such a syndrome have begun appearing in various segments of the West whether open minded or narrow minded, liberal or fanatic.”

In Saudi Arabia, there was this editorial: “Banning Arab ownership would imply that instead of trying to be friend and help democratize Muslim countries, the United States sees them as potential adversaries.”

Now winning any war requires skill, bravery and smarts. The U.S.A. certainly has the skill and bravery, but smarts? I’m not sure. We’re making a lot of mistakes in the terror war, from underestimating resistance in the post-Saddam Iraq, to allowing the far left to undermine war strategy without much government challenge, to insulting our allies.

This is not a good picture. President Bush must get a handle on the PR problem concerning the terror war. Most Americans understand the danger. But clarification is needed from the White House especially when most of the American press is against aggressive terror action for ideological reasons. We’re living in very dangerous times, ladies and gentlemen. Clarity and intelligence must rule. And that’s "The Memo."

—You can catch Bill O'Reilly's "Talking Points Memo" and "Most Ridiculous Item" weeknights at 8 and 11 p.m. ET on the FOX News Channel. Send your comments to: oreilly@foxnews.com

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