FOREIGN OWNERSHIP OF U.S. AIRLINES & PORTS DEEMED TROUBLING

By Diane M. Grassi

The United States Department of Transportation (DOT) on February 8, 2005, presented its decision before the U.S. House of Representatives House Aviation Sub-Committee, to change a rule which would clear the way for foreign corporations to own and control U.S. airlines. But members of the House Aviation Sub-Committee were all in agreement that the DOT may lack the legal authority to unilaterally make such a change. Yet it does not begin to reveal all of the implications of such a historic shift in policy in bypassing the U.S. Congress in order to do so.

Trade negotiations with the European Union to loosen up regulations in ownership of U.S. airlines is seen as a tradeoff by the DOT in order for the U.S. to gain greater access to landing at London’s Heathrow Airport, where presently only American Airlines and United Airlines have limited service there. Known as the Open Skies Agreement, lawmakers in both parties believe that this proposition transcends ‘free trade’ or globalization as it becomes an issue which directly impacts labor and national security.

Currently, U.S. law requires that U.S. airlines must be under the “actual control” of U.S. citizens in order to be licensed for operation. And for corporations, 75% of the voting interest must be held by U.S. citizens and 66% of its board of directors and officers must also be U.S. citizens. But Secretary of Transportation, Norman Mineta, in a statement in November 2005 said that the rule change would be an “historic opportunity to increase travel, reduce fares, expand commerce and bring two continents closer together than ever before. It provides new opportunities for U.S. and European airlines, healthier competition for a growing travel market and greater connection between cities and towns of all sizes on both sides of the Atlantic.”

But the President of the Air Line Pilots Association, Intl. has a much different opinion. Captain Duane Woerth testified before the House Aviation Sub-Committee claiming, “Changes of this magnitude should be undertaken not be an administering agency but by the legislative branch. Pilots spend their entire careers accumulating the seniority required to gain access to international flying opportunities. In an era when the career expectations of pilots and other airline workers already have been repeatedly frustrated by airline bankruptcies, furloughs, wage concessions, pension plan terminations, and the like, it would be a crowning blow for the U.S. government now to adopt a policy that would tend to eliminate international flying by U.S. carriers.”

Should the new rule be adopted, with exception of few areas, all airline operations, including prices, scheduling markets, fleet structure, marketing and alliances have the option of being controlled by foreign investors. Additionally, U.S. labor law protections could be compromised and employees forced into losing out by being replaced by foreign employees. Aviation safety could be jeopardized as foreign-controlled management need meet only minimum FAA standards, far short of the present programs and practices U.S. airlines presently accord.

Surprisingly, the Department of Defense as well as the State Department have agreed with the DOT on this issue. But for several Congressmen, it does not pass muster and especially as concerns the Civilian Reserve Air Fleet (CRAF) which is used to transport U.S. troops including in times of war. The Open Skies Agreement would have to be redrafted to accommodate such. According to Rep. Peter DeFazio (D-OR), “During the Gulf War a European Union member didn’t supply us with a type of carrier we needed when we ran out because they didn’t support the war.”

Should the Congress fail to create legislation to block the proposed rule it would take effect, even though most U.S. airlines with the exception of cargo carriers, FEDEX and UPS as well as United Airlines, having recently reemerged from bankruptcy, are opposed to it. John Byerly, Deputy Assistant Secretary of State has maintained that in order for the EU to approve the Open Skies Agreement it is conditional on easing foreign ownership rules. But according to the Government Accountability Office, airport capacity limitations such as at Heaththrow would not be corrected by a deregulated agreement.

Rep. James Oberstar (D-MN), ranking Democrat on the House Transportation and Infrastructure Sub-Committee, in order to counter the proposed rule change introduced legislation that would require the rule be put on hold for one year, allowing the Congress to review its ramifications on national defense and homeland security, which are primary issues which must initially be addressed.

And while possible ownership of U.S. airlines may be permitted within a year, control of operations and security of six U.S. ports will be given to the United Arab Emirates and based in Dubai. The London-based Peninsular and Oriental Steam Navigation Co. was purchased on February 13, 2006 by Dubai Ports World. The deal is expected to be finalized on March 2, 2006. Peninsular and Oriental Steam Co. is the world’s fourth largest ports company and the sale affects the commercial U.S. ports of New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

The Committee on Foreign Investment in the U.S. (CFIUS) is a secretive government panel comprised of designees from the Department of Treasury, the Department of Defense, the Department of Justice, the Department of Commerce, the Department of State and the Department of Homeland Security. In January 2006, the Bush administration appointed a former Director of Operations for Europe and Latin America for Dubai Ports World as the new Maritime Administrator within the Department of Transportation, raising more than a few eyebrows.

But most puzzling to lawmakers is how Dubai, which provided most of the financing for the 19 hijackers on 9/11/2001, will now be overseeing the very port where nearly 3,000 lives were claimed that day. And Dubai was the base for much of the terrorist planning and operations for the attacks in New York and Washington, according to the FBI.

Since the Bush administration considers Dubai and the UAE a vital ally in the war against terrorism, it approves of the sale. However, it raises vital questions of U.S. national security and homeland security policies at ports where presently less than 5% of all cargo is inspected. And having an Islamist nation in charge of U.S. ports arguably makes little sense in allowing it to dictate port operations, given that U.S. ports remain top terrorist targets.

With the Department of Homeland Security still struggling to implement systems and operations to secure U.S. ports, allowing Dubai to run the ports could be a gateway for contraband, weapons of mass destruction and arsenals, as well as hiring practices without proper scrutiny, including the quality of security which would have to conform to U.S. law. Steve Coleman, Port Authority of New York/New Jersey spokesman stated, “We need to take a real close look at security before we approve such a company.”

James Lewis, a former State and Commerce Department contractor, sums it up by saying, “It’s in Dubai’s interest to make sure this runs well.” And unfortunately, it will take an act of Congress to prevent the finality of the sale in what will become the world’s second largest port operator. Hopefully, cooler heads in the Congress will prevail in the best interests of the U.S. in order to supercede those of foreign interests, all in the name of globalization. For the greatest asset to the U.S. is the American people, who not only deserve the protection of their government but one which vows to do its best to prevent terrorism on its shores ever again. Anything less is just unacceptable.

ERODING U.S. INDUSTRIAL BASE COMES WITH PRICE

By Diane M. Grassi

The United States of America has historically enjoyed self-sufficiency in times of both war and peace but in order to better assess its present place in the world as concerns its military and economic strength, it is important to reflect on its foundation. There is daily talk from Wall Street to Capitol Hill with respect to spread sheets and global policy, but it perhaps falls short when it comes down to addressing the average U.S. wage earner, and how both will ultimately affect jobs and the country’s national security and defense.

It is important to note, that as our forefathers were fighting for independence from England during the Revolutionary War, seldom do we hear about the underlying and overwhelming task they endured in order to supply an army without an industrial base. In order for success, the Colonies depended upon France and the Netherlands for everything from blankets and clothing to gunpowder, muskets, munitions, and food. Benjamin Franklin bartered a deal with France to ship across the Atlantic Ocean by way of the Netherlands’ St. Eustatius Island, in order for George Washington and his troops to have the means to defend themselves.

In light of the French Revolution at the turn of the 18th century, when the Netherlands were seized by Napoleon and President John Adams came close to war with France, a primary U.S. ally just years earlier, self –sufficiency was the order of the day. In 1791, Alexander Hamilton, the first U.S. Secretary of the Treasury, was asked by President George Washington and the U.S. Congress to officially document U.S. policy on industrial and military self-sufficiency. It read, “Not only have the wealth, but the independence and security of a country, appear to be materially connected with the prosperity of manufactures. Every nation, with a view to those great objects, ought to endeavour to possess within itself all the essentials of national supply. These comprise the means of subsistence, habitation, clothing and defense. The possession of these is necessary to the perfection of the body politic: to the safety as well as to the welfare of the society.”

The Industrial Revolution of the 19th century secured the U.S.policy of self-sufficiency, transforming it into a global power. Due to the strength of its industrialization the U.S. was able to defeat its enemies in World War I. With the advent of the automobile, which Henry Ford learned to mass-produce, weaponry and machinery produced for World War II benefited from the automobile factory. Production of Sherman tanks, Army jeeps, airplanes and PT boats evolved from such civilian U.S. factories. And in the 1950’s the industrial base was modernized for the Korean War effort.

The industrial base and manufacturing for the U.S. military were necessarily intertwined. But following the end of the Cold War there has been a deliberate decomposition of U.S. industry, unprecedented in American history. There are a number of factors which have contributed to U.S. dependence on foreign trade, primarily with India and China, which has not only led to millions of U.S. manufacturing and engineering jobs permanently lost, but paints a grim picture for the long term stability of the U.S. military supply line.

The dependence on foreign oil and the subsequent OPEC oil embargo in the 1970’s, the U.S. policy of deregulation of corporations of the 1980’s, the passage of the North American Free Trade Agreement (NAFTA) in 1994, and the World Trade Organization (WTO) in 2001 allowing China to become a member, collectively accelerated U.S. dependence on cheap labor offshore. Thus, dependency and reliance on suppliers from all over the world for military equipment and machinery components and parts, required for their manufacture, leaves the U.S. vulnerable.

The Defense Department runs a program called the Diminishing Manufacturing Sources and Materials Shortage (DMSMS) at the Tank Automotive and Armaments Command (TACOM). Its purpose is to identify shortages of parts, processes and materials necessary to procure for military buyers. A problem for military acquisitions has been procuring weapon system metal castings as a direct result of plant closings. The majority of castings now come from China and other third-world countries. Along with the foreign dependence on metal castings manufacture, its research and development also followed the foundry industry offshore.

DMSMS program managers are aware that there are problems in finding sub-parts and components. Not only have replacement parts started to rapidly diminish, but the chemicals needed in their manufacture have as well. Without specific chemicals certain processes cannot be done. For example, there is only one company left in the U.S. that produces a roller cutter for armored plate or heavy steel which was an indirect consequence of supplying armor kits for U.S. Humvees for the War in Iraq. When the Pentagon learned there was an immediate need at the end of 2004, it called for expediency in their manufacture. Sadly, it took almost a year due to the limited facilities producing such.

Another issue arose when a foreign corporation purchased the only U.S. company which produced a chemical used for a common binder which secures windows and aluminum panels in aircraft. The company eventually folded when it could not meet Occupational Safety and Health Administration (OSHA) and Environmental Protection Agency (EPA) standards. Now the U.S. must depend on the company’s offshore subsidiaries.

Similarly, the bearing industry which produces ball-bearings, roller-bearings and anti-friction bearings is an endangered U.S. industry, key to the production of military gear and plays a part in homeland security. They are components necessary to produce electric motors for conveyor belts such as in factories, steel mills, in airports, in mining, and with the equipment used to manufacture automobiles. And bearings are critical to the mechanical components of major weapons systems. Losing bearings manufacturing to foreign shores directly impacts the capabilities of weapons manufacturing should there be a change in the geopolitical landscape and a cut-off from U.S. suppliers, whether through war, terrorism, or Mother Nature.

With the military build-up of China over the past decade by benefit of applying commercial technologies to military weaponry and its having become the largest offshore manufacturing base for U.S. corporations, the U.S. continues a delicate balancing act with a Communist nation as its biggest trade partner. With a U.S. trade deficit with China reaching over $200 billion in 2005, multi-national corporations, once U.S. companies operating in the U.S., are now just based in the U.S.

And with a demand by China for foreign direct investment as its incentive to buy U.S. products, companies like Boeing are acquiescing by not only building major portions of airplanes in China, but also creating Research and Development opportunities for Chinese engineers, in order to show its commitment. Intel and Microsoft have also followed suit with major investment in directly hiring engineers in China.

Endless conflicts of interest abound when it comes to foreign dependence in order for the U.S. to maintain its infrastructure, electrical grid, military weaponry and supplies, air travel and homeland security, to name a few. When smaller U.S. specialty industries vital to the industrial base become extinct on our shores, they now appear huge in a world where alliances are tenuous at best. A global economy at the expense of U.S. sovereignty, security and standard of living is something that the Colonists would not have stood for. They would have found another way. Maybe America still has time to do the same. iane M. Grassi

DISPARITY OF KATRINA FUNDS SHORTCHANGES BAYOU

By Diane M. Grassi

Division and disagreement over funding and methods of appropriations, for recovery in the communities along the U.S. Gulf Coast, is knee deep in bureaucratic paper shuffling and politics the expanse of Hurricane Katrina herself. The challenge of disentangling the mistakes made before, during and after the storm has started by way of Congressional hearings, such as the one being held by the U.S. Senate’s Homeland Security and Governmental Affairs Committee. Thus far, more and more layers of dysfunction in the bowels of multiple bureaucracies are being revealed.

Unfortunately, for residents of Louisiana, Mississippi, Alabama, Texas and Florida who were victims of not only Hurricane Katrina but subsequent storms, Hurricane Rita and Hurricane Wilma, during the 2005 hurricane season, as well intentioned as lawmakers may be, politics has become an integral part of getting future help for hundreds of thousands still trying to rebuild their lives.

Senator Joseph Lieberman (D-CT), ranking member of the Senate Homeland Security and Governmental Affairs Committee, perhaps summed it up best when referring to missteps made by the federal government prior to Katrina’s coming ashore, stating, “An outrage on top of an outrage.” But his phraseology could apply to almost everything government and how it is choking on its own red tape. Hopefully, the hearings and the investigations will not derail the efforts of the responsible agencies on all levels of government, playing a game of catch-up, in expediting the housing and rebuilding needs of the displaced.

While the federal government approved $67 billion dollars for emergency relief and long-term recovery in the Gulf Coast region over five months ago, the time frame in which it is to be disbursed and the breakdown for individual states has been met with both angst and approval depending upon the state. The necessary housing for homeowners as well as renters who no longer have inhabitable dwellings, has been a nightmare for Louisiana with thousands of people still living in hotels, motels and even retired merchant marine ships, with less than 2,000 living in trailers, as originally promised.

According to the Federal Emergency Management Agency (FEMA), there is a need for 85,000 trailers just in Louisiana in order to accommodate residents who have temporarily been living in hotels. But there remain discrepancies about how many evacuees actually are residing in over 6,000 hotels in several different states. FEMA admittedly does not know which Katrina victims are occupying over 25,000 subsidized hotel rooms or whether they have sought or have been denied FEMA aid. Due to the American Red Cross initially handling the hotel program, coordinating both housing and aid programs have become unwieldy.

About 20,000 trailers are held in staging areas collectively in Louisiana, Texas, Alabama and Mississippi, However, due to non-repaired infrastructure, there are utilities which remain down and necessary for trailers to be inhabited. With 6,000 trailers allocated for New Orleans parishes, 3,000 have now been delivered, but only 1,950 currently are hooked up. In contrast, Mississippi has over 30,000 trailers distributed and functioning and well ahead of Louisiana in terms of infrastructure repair and the removal of debris, also lagging well behind that of Mississippi. In fairness, the amount of people displaced in New Orleans and Louisiana vastly outnumber the amount of victims of Mississippi.

But politics has been a benefactor for Mississippi as well, evidenced by the rewards they have reaped and in the smoothness in which they have been carried out through the efforts of Governor Haley Barbour and Senator Trent Lott (R-MS). For instance, in Mississippi, 33,378 occupied and hooked up trailers are meeting the housing needs of approximately 89% of the displaced. Unfortunately, there have been 34,000 maintenance requests, according to U.S. Representative Gene Taylor (D-MS), for trailers which were to have cost $19,000.00 each and have now escalated to nearly $75,000.00 since FEMA acquired them. Pro-rated over an 18-month period, FEMA will be paying $3,200.00 monthly per trailer, arriving at that figure.

Yet, this endless bad dream for so many shows no sign of ending for 90,000 displaced families of New Orleans, as the housing assistance allowance for those lucky enough to be in apartments outside of southern Louisiana as well as those in hotels, is set to end shortly. The housing aid will only be extended beyond February 7, 2006, for those getting the run around for five months, on a case-by-case basis, with the 2006 hurricane season but four months away.

But the most difficult pill to swallow for many has been what many federal, state and local officials from Louisiana say is a gross miscalculation of its share of the $67 billion approved by the U.S. Congress in 2005. Out of the $67 billion, $11.5 billion has been approved for hurricane relief through the Community Development Block Grants (CDBG) program from which Louisiana will receive $6.2 billion. Mississippi will receive $5.3 billion and Florida will receive $83 million, with Alabama and Texas to receive $74 million each. The maximum allowed any one state under the relief law passed by Congress at the end of 2005 is 54% of the allocated amount which Louisiana was given.

That now leaves Louisiana with $6.2 billion which it must specifically pass on to the 20,000 homes destroyed outside of federally insured flood zones, essentially giving up on 185,000 home owners with destroyed homes, many of whom have been denied their insurance claims by either their provider or the federal flood insurance program, or those who did not have adequate insurance. Louisiana will now be required to find alternative funding for the state and its parishes for debris removal, barely begun, infrastructure repair, law enforcement, re-opening hospitals and schools, in addition to helping businesses rebuild.

Andy Kopplin, Executive Director of the Louisiana Recovery Authority, called it an “inadequate distribution.” “No one believes that Louisiana had only 54% of the damages,” he said. The department of Housing and Urban Development (HUD) oversees the CDBG program. U.S. Representative Bobby Jindal (R-LA) said, “I certainly think we will need more. The key to getting more is spending the money well.” However, how the money is spent must be approved by HUD. And the U.S. Stafford Act mandates how federal dollars will be spent for any additional appropriations to be made.
The announcement in late January 2006 of the $11.5 billion being approved for the disbursement of funds will follow a payment schedule, the bulk of which is not expected to come through until 2008, according to lawmakers. Prior to the announcement, U.S. Representative Richard Baker (R-LA) submitted a redevelopment plan to the White House which was outright rejected. It had the bi-partisan approval of federal and state lawmakers which calls for creating a federal supported Louisiana Recovery Corporation. It requires purchase of large tracts of storm-damaged homes in Louisiana, borrowing up to $30 billion in U.S. Treasury bonds. The corporation would absorb the costs of home repair and resell the homes to either developers or to their original owners.

Baker believes those homeowners who lived in flood plains should be accorded an out, as it was the federal government’s responsibility to maintain the levees, through the Army Corps of Engineers, which breached and thus flooded New Orleans. Under the present funding, the most damaged areas of New Orleans would be unavailable for homeowners’ relief. And given that the federal flood insurance program is near bankruptcy, the Baker proposal would offer quick buyouts to homeowners in rebuilding efforts. But in another Catch-22 scenario, rebuilding must meet the approval of new advisory flood maps which FEMA officials said will not be available until mid-March 2006. Therefore, commitments to invest in rebuilding are on shaky ground without as of yet fully repaired levees, and not knowing whether they will be additionally funded in order to sustain more than a Category 3 hurricane.

With so many agencies, at this point primarily federal, without their own proverbial maps on how to proceed in un-chartered waters, it necessitates new ways of doing business in order to meet the imminent needs from the Gulf Coast disaster. Creative and critical thinking, something in short supply in bureaucratic management, is essential. Mechanisms to encourage better communications and oversight between the federal and state levels must be implemented in order to be prepared for future disasters, whether they be Acts of God or acts of terror. Only then will those people in the Delta who have sacrificed and suffered so much feel redeemed. And only then will lawmakers, and the agencies they are responsible to hold accountable, recover from the breached trust of the American people.