49th Parallel: Canada's Dubai Problem

When Dubai Ports World won shareholder approval to acquire one of Vancouver's busiest port facilities last month, nobody in Canada blinked. In fact, the proposed acquisition of the Centerm container terminal seemed to some Canadians like a match made in maritime heaven. "DP World is one of the globe's major port operators," says Anne McMullin of the Vancouver Port Authority, where the 28-hectare terminal is located. "It's a real vote of confidence in our port."

The Americans, of course, have a somewhat rougher take on the Arab conglomerate's $6.8 billion bid to purchase Britain-based P&O Steam Navigation, which operates in five U.S. ports as well as the Vancouver terminal. Washington's approval of the U.S. takeovers was "reckless, outrageous and irresponsible," Baltimore Mayor Martin O'Malley said last month. His counterparts in other U.S. cities with prospective Dubai- owned ports have been similarly venomous. And in the U.S. Congress, a bipartisan coalition has vowed to block the deal on the grounds that Dubai has been a way station for terrorists and nuclear smugglers.

The firestorm could end up hurting Canadian pocketbooks. If DP is forced to back away from its U.S. commitments, the Vancouver deal could be lost in the shuffle, says Darcy Clarkson, ceo of P&O Ports Canada Inc., which would prefer to continue operating the Vancouver terminal under Dubai's ownership. Notes Clarkson: "It shouldn't happen, but it's a source of anxiety." And that's not the only reason for worry. "We need to be concerned if the U.S. Congress decides, as a result of this, to review port security across North America," says Colin Robertson, an official at Canada's embassy in Washington. That could affect the large amount of container traffic at Canadian ports that ends up in the U.S. Transport Canada officials insist security at Canadian ports is as good as, if not better than, at American ports. Even so, Americans may get even more zealous about inspecting cargo arriving from Canada--underlining a growing divergence of views about how to vet port security.

In the U.S., the Dubai deal was checked out by a 12-member board headed by the Treasury Secretary, which is mandated under U.S. law governing foreign investments. U.S. critics say the oversight process paid insufficient attention to the security implications of the transaction and failed to keep Congress informed. But the Canadian process was even lower key. Transport Canada officials met with executives of P&O Ports Canada Inc. after being notified of the deal last month, but only to check whether the new owners would honor the company's existing security plan. Under Canadian regulations, a new port-terminal owner is not required to submit to security checks unless there are operational changes, such as the hiring of a new staff. If the Dubai episode prods Americans into a more active role in investigating commercial-port operations (one proposed law would ban foreign-government ownership of key port facilities), Canada's comparatively laid-back approach toward ownership could lead to new tension across the border.