President Bush says it was never a question of security with Dubai Ports World, that his administration would never have approved the deal, if it made the nation more vulnerable to terrorist attack.
But the White House failed to convince Democrats and Republicans in Congress that the deal should go through, and the state-owned firm announced Thursday that it would transfer operations at U.S. terminals to an American entity.
President Bush warned Congress that blocking the move could hurt America's broader security interests in the Middle East. He says it may now be more difficult to continue close cooperation with Middle East allies.
"I'm concerned about a broader message this issue could send to our friends and allies around the world, particularly in the Middle East. In order to win the war on terror, we have got to strengthen our relationships and friendships with moderate Arab countries in the Middle East."
U.S. public opinion polls showed overwhelming opposition to allowing the firm to manage operations at six U.S. ports. Despite threats of a presidential veto, Republican leaders in Congress told Mr. Bush the deal would not go through.
Speaking to officials from American newspapers Friday, President Bush said the United Arab Emirates is a committed ally in the fight against terrorism - servicing U.S. ships, sharing intelligence, and helping shut down the nuclear trading network of Pakistani scientist A.Q. Khan.
"UAE is a valued and strategic partner. I am committed to strengthening our relationship with UAE and explaining why it is important to Congress and the American people."
The U.S. Chamber of Commerce says it would be a grave mistake for Congress to take actions that could harm the U.S. economy in the name of national security. Chamber Executive Vice President Bruce Josten says security should always be a top priority. But he cautions that the controversy over the ports deal could seriously damage U.S. relations with friendly countries in the Middle East, and hamper America's ability to promote international trade and investment.
Talks between the United States and the United Arab Emirates over a free trade agreement have stalled. U.S. trade representative spokeswoman Neena Moorjani would not comment on any link to the ports controversy, saying delays are common.
White House spokesman Scott McClellan said the decision by Dubai Ports World was made on its own, and shows the UAE's understanding of the broader importance of its relationship with the United States.
Pollsters say the controversy has contributed to an overall decline in the president's approval ratings. McClellan says the decision does resolve the matter, so the administration can move forward on other important issues.
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