With the Bush administration and Treasury Secretary Henry Paulson pushing to pass the $700 billion bailout through congress this week, the rest of the world sat seemingly unwilling to help in any way.

Roger Cohen, a respected US commentator on foreign affairs with the International Herald Tribune writes, “The world has changed in the past decade. There has been a steady transfer of wealth away from the United States in a shift most Americans have not yet grasped. But there has been no accompanying transfer of responsibility. New powers are free-riding as if it were still the American century.”

Why isn’t the US getting the help they think they deserve from the European Central Bank and other nations? Well, for one, Mr. Paulson and Mr. Bernanke are too macho to ask. Representative Barney Frank, Democrat from Massachusetts and chairman of the House Financial Services Committee was asked about the situation by Mr. Cohen and had this to say: “I think it’s a perverse pride thing. We don’t ask for help. We’re the big strong father figure. But let’s be realistic: We’re no longer the dominant superpower.”

Whatever the reason there is no real excuse for the European Central Bank to not even hint at some responsibility, or other countries for that matter. But this is truly an “American mess” as Cohen writes, “The responsibility for undoing the mess is chiefly American too.” However no one believes that any nation is going to voluntarily offer aid to the US, definitely not with this administration.

But Mr. Cohen continues to inquire in his article why the European Central Bank is not coming forward, when they did have plenty of their own subprime mortgage mess. “With this shift of wealth there needs to be a shift of responsibility”, writes Cohen. The G-7 held a conference call earlier today to discuss global financial markets and to reaffirm their commitment to protect the integrity of international finance system, according to the European Central Bank website. Their continued monitoring of the situation will undoubtedly lead to further discussion between EU finance ministers and US leaders.

ESA (European Space Agency) faces the threat of having no way to get its cargo and astronauts to the international space station (ISS) because NASA has decided to cut off the U.S. space shuttle early - in 2010 - five years before a new generation of space craft take over the transport duties.

A planned temporary arrangement for Europeans and Americans to use Russia’s Soyuz shuttles in the interim now seems in jeopardy because of tensions in the wake of Russian actions in Georgia.

NASA and ESA had collaborated on designing a station crew-return vehicle based on an earlier experimental craft, the X-38, but the project has been dropped on the U.S. side even though the European parts were being delivered.

As reported by the BBC, ESA was caught short by NASA’s action. “The decision to cancel the order was delivered by the U.S. government after the components were ready, according to Mario Caporicci, head of ESA’s future space transport infrastructure division, the BBC said on September 12, 2008.

Already, there were question marks about the continuing U.S. role in the ISS after the current shuttle program is discontinued in 2010. The U.S. “constellation” space program has slowed its development pace because of technical and funding problems, and the NASA announcement left a 5-year gap (at least) of no U.S. transportation to and from the station.

An embarrassing aspect of this decision is that the U.S. had promised transportation services to its European, Japanese, and Canadian partners, who all provided their own laboratory materials and equipment to the station.

So what can the grounded Europeans do? A proposal is currently underway to evolve their existing cargo vessel (ATV) into having the capability to transport astronauts, which is considered a necessary second step by Mr. Caporicci and ESA. “To achieve this second step, it will be necessary to analyze in detail the implications of adapting the Arianne 5 launcher and its ground segment to human spaceflight,” Caporicci said.

The longstanding alternative had involved leasing Russian space-craft to ferry freight and people, but that appears unacceptable in Washington under the current circumstances. “The Russians are not going to back out of Georgia anytime soon, certainly not prior to the U.S. presidential election,” NASA chief Michael Griffin told the BBC.

In practice, he predicted, the next U.S. administration will have no choice but to extend the life of the U.S. shuttle. So Europeans will have to wait until the November election and January inauguration before having a clue about the fate of the international program centered on the space station.

The difficulties of maintaining a common transatlantic front against Iran were on display last week when European officials suddenly voiced concern about Barack Obama’s public pledge to open talks with Tehran. A U.S. initiative of this sort, the officials said, could undercut the work they have done to make the Iranians suspend nuclear enrichment as a precondition for a full dialogue.

In the past, the so-called “EU-3″ - Britain, France and Germany - had chafed at the Bush administration’s refusal to envision direct talks with Tehran, complaining that Washington needed to be more directly involved in supporting the EU trio in trying to negotiate with Tehran. Last year, a common front emerged behind a Western demand that Tehran suspend nuclear enrichment as a precondition for the EU to move forward with its “carrots” and for Washington to lay down its “stick” to the degree of exploring direct high-level contacts with Tehran.

Now European governments worry that the position taken by Obama in the presidential primary campaign - in which he advocated sitting down with adversaries without preconditions - goes far past the negotiating position that Europe has been taking in tandem with Washington.

The transatlantic split came to light in an article by Glenn Kessler that appeared in the Washington Post on June 22 reporting the unease felt by Europeans in regard to Obama’s promise to open diplomatic talks with Iran without any preconditions. François Heisbourg, a Paris-based strategic analyst, was quoted saying: “Dropping a unanimous Security Council condition would simply be interpreted by Iran and America’s allies as unconditional surrender, and America’s friends would view this as confirmation of America’s basic unreliability.”

The EU has adopted a dual approach - a carrot-and-stick policy, if you will - for dealing with Iran. On the “carrot” side, they recently joined Russia, China, and the US in offering Iran an incentive package that included the promise of diplomatic talks, trade agreements and aid in developing a civilian nuclear program in exchange for the suspension of its uranium enrichment. However, after Tehran failed to give an answer on the incentive offer, the European states came together and issued a set of new sanctions on Monday, June 23.

Based on measures previously agreed upon by the U.N. Security Council, the sanctions target businesses and individuals believed to be connected to Iran’s nuclear programs. Iranian senior experts and officials such as Defense Minister Mostafa Mohammad Najjar and Gholamreza Aghazadeh, head of Iran’s Atomic Energy Organization, will be denied visas to the EU and the assets of Iran’s largest bank - Bank Melli, which has branches in Paris, Hamburg and London - will be frozen. The US imposed similar sanctions on Bank Melli’s activity in America last year.

Despite the EU’s hard line, officials maintain that the incentive package is still on the table if Iran agrees to halt its enrichment.

Iran has repeatedly refused to suspend its uranium enrichment, arguing that it is intended for civilian uses such as electricity generation. Western capitals suspect that Iran’s nuclear-energy program is merely a cover for making nuclear weapons.

Foreign Ministry spokesman Mohammad Ali Hosseini condemned the new EU sanctions as “illegal” and warned that they could hurt future diplomatic efforts. It remains to be seen whether these latest sanctions will affect Iran enough to push them to halt the enrichment. Past sanctions by the U.N. Security Council and the United States have failed to do so thus far, and skyrocketing oil prices may cushion the economic impact of the latest sanctions in Iran, the world’s fourth-largest oil exporter. Some also predict that the sanctions will merely continue to push Iran’s focus away from the West and closer to China and other areas of Asia. After the EU announced the new economic sanctions, Iran’s new parliamentary speaker - Ali Larijani, the former Iranian nuclear negotiator, who seems to be a political moderate — warned that the sanctions could push Iran away from diplomacy.

Updates:

“US considers sending envoys to Iran,” Financial Times, 25 June 2008

“The Europeans Step Up,” New York Times, 28 June 2008

“New US Nuclear Sanctions on Iran,” BBC News, 8 July 2008

The European Chemicals Agency, which started operations in June in its Helsinki headquarters, marks the latest chapter in the European Union’s efforts to address consumer needs and concerns though market and business regulations. (Similar programs already in place have included antitrust regulation in the computer industry and rules imposing greater consumer privacy.) With its corresponding regulatory legislation, known as REACH (Registration, Evaluation, Authorization and Restriction of Chemicals), the new EU program requires companies to prove that a chemical is safe before they put it on the market.

This approach is the exact opposite of current US policy in which regulators have to prove that a chemical is harmful in order for it to be pulled from the market.

The EU initiative has aroused transatlantic controversy. But now that it has been pushed through in Europe, it is causing American companies with markets in Europe to take into account the new requirements, often across their whole production, in everything from processed food to household furnishings and beauty products.

Supporters defend the step as helping the environment and protecting the health of individuals, Daryl Ditz, senior policy adviser at the Center for International Environmental Law, believes that the new regulations will “compel companies to be more responsible for their products…they’ll have to know more about the chemicals they make, what their products are and where they go.”

For example, any chemical suspected of causing cancer or other health problems will be placed on a new list of “substances of very high concern” and all of this data will be made accessible to the public for the first time via the internet. Supporters hope that by making information - such as the “high concern list” - available to the public, consumers will shirk from certain products and the subsequent decline in demand will pressure manufacturers to halt production of dangerous chemicals.

American chemical manufacturers and the Bush administration have strongly opposed the new EU measures because they believe that they will hurt manufacturers and offer minimal benefits to the consumer. In order to continue selling to the EU market of nearly 500 million people, US manufacturers like DuPont Chemicals will have to spend “tens of millions” of dollars to register chemicals and also pull major products that contain chemicals placed on the list of “substances of very high concern.”

In the absence of similar strong federal regulations for chemicals in the US, individual states have taken it upon themselves to address consumer concerns. Last month, Senator Frank Lautenberg (D-NJ) reintroduced the Kid Safe Chemical Bill to Congress. The bill proposes that all chemicals used in baby bottles, children’s toys and other products are proven to be safe before they are put on the market - a philosophy that echoes the EU approach invoking the “precautionary principle” favored in Europe and gaining ground in some quarters in the US.

See Also:
“Chemical Law Has Global Impact,” Washington Post, 12 June 2008
“European Chemicals Agency: Turning REACH into Reality,” Speech by José Manuel Durão Barroso, President of the European Commission, 3 June 2008
“Lautenberg, Solis, Waxman Introduce Legislation To Protect Americans From Hazardous Chemicals In Consumer Products,” 20 May 2008

Yesterday’s announcement that the U.S. has reached an agreement with Abu Dhabi and Singapore on a set of principles for investment by sovereign wealth funds (SWFs) is being hailed as an important first by Treasury officials in Washington. In the wake of highly-publicized concerns about the transparency of such funds earlier this year, officials hope that this agreement will put those concerns to rest and encourage wealthy foreign governments to keep investing. There is also a hope that yesterday’s agreement will serve as a blueprint for similar arrangements with other funds and for similar voluntary arrangements set out by the IMF and OECD.

From today’s Financial Times:

“It’s the first time to my knowledge that there’s been a set of principles on this type of issue that include both sovereign wealth funds and a recipient country,” Clay Lowery, US Treasury Assistant Secretary for International Affairs, told the Financial Times.

“In terms of transparency and disclosure what you saw today was two funds that are basically willing to step up and say: ‘We believe there should be greater information and disclosure,’” he said. He emphasised the two countries’ commitments in areas such as institutional arrangements and decision-making structures and financial information, notably asset allocation and benchmarks.

In the midst of financial difficulties at home and a possible recession, the Bush administration recognizes the crucial importance of continued foreign investment, much of which comes from SWFs. Abu Dhabi and Singapore have the world’s largest two funds, each worth hundreds of billions of dollars.

There has been a growing concern among U.S. politicians and analysts that foreign governments with large SWFs could wield the power of their investments in the U.S. in ways that could prove harmful to American national interest. Yesterday’s agreement seeks to address those concerns, stipulating that SWFs should make investments “solely on commercial grounds, rather than to advance directly or indirectly the geopolitical goals of the controlling government.”

In the upcoming issue of European Affairs, economist J. Paul Horne takes a look at the long-term outlook for the falling dollar. Citing a lack of willingness on the part of U.S. authorities to reverse the current downward trend, Horne speculates that their negligence may be part of a plan to pay off massive American debt in less-worthy dollars– a bleak forecast for foreign investors, to be sure. Along the way, Horne also offers a deft analysis of the current market situation and the extent to which subprime mortgages are to blame.
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