America-UAE Trade Talks Cancelled After Dubai Ports Row

Trade talks between the United States and the United Arab Emirates have been called off just a day after a Dubai firm gave in to demands to sell its operations running six American ports because of Washington’s security fears.

Relations between the two countries have become increasingly strained by the political firestorm in Washington, sparked when the company Dubai Ports World bought Britain’s P&O, which includes the US businesses. In an address yesterday, George Bush warned the furore over the deal had "sent the wrong message" to allies in the Middle East.

Analysts pointed to a possible backlash among Arab countries and oil-rich investors potentially pulling their money from the US.

Mr. Bush had approved the Dubai Ports deal and faced a full-scale revolt among his own party. Democrats including New York senator Hillary Clinton had also voiced fierce opposition, surprising many liberals. Critics have accused politicians of pandering to voters’ fears in a congressional election year.

"I’m concerned about a broader message this issue could send to our friends and allies around the world, particularly the Middle East," Mr. Bush told a conference. "In order to win the war on terror we have got to strengthen our friendships and relationships with moderate Arab countries in the Middle East."

The two countries had been due to begin free trade talks on Monday. A spokeswoman for the US trade representative played down the ports row and said the negotiations had simply been postponed because both sides needed more time to prepare. The countries traded $10bn (£5.7bn) of goods and services last year.

US treasury secretary John Snow said yesterday that Dubai Ports was an isolated incident and that America remained "open for business".

Dubai Ports agreed on Thursday to transfer operations at the six American ports to a US entity to defuse the escalating controversy in Washington. The move spared the White House from a showdown with Congress, which had appeared certain to block the deal.

US companies have been watching the controversy closely, among them Boeing. Spokesman Tim Neale said the aircraft maker had not so far witnessed any adverse impact. The firm signed a near-$10bn deal to sell 42 planes to Emirates Airways in November. "We have a pretty solid relationship. They have been very good customers for many years and like the airplanes we have delivered to them."

But analysts said the poisonous atmosphere in Washington could cause lasting damage. "It’s a sobering moment," said Eddie O’Sullivan, editorial director of the Middle East Economic Digest. "People are going to have to be much more careful. There’s a fear [Congress] may move on to other targets in the Arab world. If it happened once it can happen again."

A senior official at the state-owned Dubai Ports told the Reuters news agency: "Do you think we are happy this morning? The mood is black, very, very black."

Dubai Ports has asked for time to allow a sale of the US operations so it does not "suffer economic loss". The operations are in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.