Dubai, March 11:

Trade talks between the United States (US) and the United Arab Emirates (UAE) 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.

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,” 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.