A Chequer-Board of Nights and Days

Let us be clear: In our modern world--as opposed to the world we used to inhabit (and some still do in their own minds)--foreign investment is not only the ordinary course of business, it is a necessity to a thriving and prosperous economy. So when debacles like the Dubai Ports World deal occur, this is the result:

Gulf investors, feeling scorched by what they see as an anti-Arab backlash in the U.S. Congress, will likely be wary of high-profile investments in the United States after the ports controversy with a Dubai firm.

Analysts said Friday, however, that with Gulf nations awash in cash from oil profits, the United States remains a tempting market to invest. So instead of retreating, over the longer term, Arab investors and governments may campaign to shore up their image among Americans to ensure their money is welcome.

President Bush said Friday he was worried over the message the fallout of the ports controversy will send to the Arab world. On Thursday, Dubai Ports announced that it would give up management of six U.S. ports after an outcry in Congress over security.

In Dubai and elsewhere in the Gulf, the controversy was largely seen as reflecting an anti-Arab bias. Dubai Ports' concession was likely to solidify that belief.

"It's a sobering moment," said Eddie O'Sullivan, Dubai-based editorial director of the Middle East Economic Digest. "People are going to have to be much more careful. There's a fear they (members of Congress) may move on to other targets in the Arab world. If it happened once it can happen again."

Investors and businesses in UAE, Kuwait, Qatar and Saudi Arabia reviewing portfolios for U.S. holdings that could spark a similar uproar in Congress, O'Sullivan said.

"I'm sure they will be reviewing their portfolios. Most of them are in dollar-denominated assets. They'll want to see how vulnerable it is to the U.S. Congress," O'Sullivan said. "It'll be more difficult to finalize an investment proposal that involves an American bank or an American asset."

Of course, no one in the long term should be pleased with this. And we should realize that this concern over nativism will spread beyond the Arab world to other countries who might fear that at some point, they will be used as whipping posts for demagogues concerned chiefly with short term political gain over long term national interests. So we haven't even begun to reap the whirlwind when it comes to this issue.

I do hope the demagogues are proud of themselves. No one else should share that pride, and in time, we will have occasion to rue their handiwork.

UPDATE: See also Ignatius.