Background Note: European Community (EC)

PA Source: Office of Public Communication, Bureau of Public Affairs Description: Historical, Political and Economic Overviews of the Countries of the World Date: Jan, 15 19931/15/93 Category: Country Data Region: Europe Country: Belgium, Germany, France, Italy, Luxembourg, Netherlands, Denmark, Ireland, United Kingdom, Greece, Spain, Portugal Subject: EC, Travel, History, International Organizations, Trade/Economics, Military Affairs, Cultural Exchange, State Department [TEXT]

Official Name:



Brussels, Belgium.
As three distinct European communities: On April 18, 1951, (effective July 23, 1952), when the European Coal and Steel Community (ECSC) Treaty was signed in Paris, and on March 25, 1957, (effective January 1, 1958), when the treaties for the European Atomic Energy Community (EURATOM) and the European Economic Community (EEC) were signed in Rome. The ECSC was created to integrate coal and steel production, EURATOM to develop common uses of nuclear energy among member nations, and the EEC to merge separate national markets into a single market with common economic policies. The Single European Act, signed in February 1986, (effective July 1, 1987), amends these treaties by establishing specific provisions for completion of the single market by January 1, 1993, and for intensifying cooperation among member states in the areas of economic and monetary union, promotion of research and technological development, improvement of the environment, and social policy. The act also institutionalizes cooperation in the field of foreign policy.
To build foundations for peace through economic and political cooperation and to create a federation of Europe.
The Six--Belgium, Germany, France, Italy, Luxembourg, Netherlands. The Nine--in 1973, Denmark, Ireland, and the United Kingdom joined the Six. The Ten--in 1981, Greece joined the Nine. The Twelve--Spain and Portugal joined the Ten on January 1, 1986. In 1990, the Laender (states) of the former German Democratic Republic entered the Community as part of a unified Germany.
Official Languages:
Danish, Dutch, English, French, German, Greek, Italian, Portuguese, and Spanish.
Population (1990):
345 million.
Gross Domestic Product (GDP) (1990):
$6 trillion.
Average Per Capita GDP (1990):
Principal Organs:
Council of Ministers, Commission, Parliament, Court of Justice.
Principal Areas of Community Responsibility:
Internal and external trade, agriculture, monetary coordination, common trade and commercial policies, development assistance, science and research, the environment, common social policies, European political cooperation.
Budget (1992):
$86 billion, financed by customs duties and agricultural levies, a 1.4% value-added tax collected on the goods and services consumed in member countries, and a percentage contribution based on each country's gross domestic product.
Imports (1991): From non-EC countries-- $812 billion. From US--$103 billion (24% of US exports).Exports (1991): To non-EC countries--$522 billion. To US--$86 billion (16% of EC external exports).
EC and US Officials
Commission President: Jacques Delors, France.US Representative to the EC: Ambassador James F. Dobbins, 40 Boulevard du Regent, B- 1000, Brussels, Belgium; Tel. 32-2-513-4450.EC Representative to the US: Ambassador Andreas Van Agt, 2100 M St., NW, Suite 707, Washington, DC 20037; Tel. 202-862-9500.


Since July 1967, the three communities have functioned with common institutions. The main EC institutions are: the Council of Ministers, which has final decision-making authority; the European Commission, which formulates policies and legislation and implements decisions of the Council; the European Parliament, which advises the EC on policy development and proposals emanating from the Commission; and the European Court of Justice, which interprets the EC treaties and legislation. Other EC institutions are the Court of Auditors, which oversees financial management of the Community, and the Economic and Social Committee, an advisory body. Member states have agreed to relinquish a degree of national sovereignty to EC institutions and to cooperate in the joint administration of these powers.
The European Commission
The Commission, headquartered in Brussels, is made up of 17 commissioners appointed by common agreement of the 12 governments. Each country is represented. The United Kingdom, France, Germany, and Italy each supply two commissioners. According to the treaties, members of the Commission act independently of their governments and of the Council and represent the interests of the Community as a whole. Each member has responsibility for one or more policy areas. The Commission's major responsibility is to oversee the implementation of the EC treaties and applications of decisions by Community institutions. The Commission has investigative authority and can take legal action against persons, companies, or member states that violate Community rules. The Commission initiates EC policy by making proposals to the Council of Ministers and steers its proposals through the Council. These may include measures beyond the scope of trade and commerce, such as education, public health, consumer protection, the environment, research and technology, and aid to developing countries. The collection and disbursement of EC funds is a third important Commission responsibility. The 1987 Single European Act gave the Commission authority to implement Council decisions; for example, the commissioners may negotiate trade agreements with non-member states on behalf of the Community. The Commission's independence and its "right of initiation" of policy account for much of its supranational authority. To balance that independence, the Commission is subject to censure by the Parliament, which can force the entire Commission to resign as a body by a two-thirds majority vote. (This action never has been taken.) The President of the Commission is appointed to a renewable 2-year term by the Council of Ministers. The Com-mission's administrative staff of 16,700 is divided into 23 Directorates-General. In 1995, the terms of the commissioners will be expanded to 5 years to correspond to the terms of members of the European Parliament.
Council of Ministers
The Council of Ministers is the primary decision-making body of the Community. It is composed of ministers representing national governments. Each member state serves as Council President for 6 months in rotation. The presidency country presides at all meetings of the member states and serves as spokesman in dealing with countries on inter-governmental matters, including efforts to coordinate the foreign policies of the member states. A member state's foreign minister is regarded as its principal representative in the Council. Foreign ministers deal with the most important and wide-reaching topics, while more specific decisions are made by the ministers of agriculture, finance, industry, energy, social affairs, and others, deepening on the issue to be discussed. EC members have the following votes in the Council: Germany (10), France (10), Italy (10), United Kingdom (10), Spain (8), Belgium (5), Greece (5), Netherlands (5), Portugal (5), Denmark (3), Ireland (3), and Luxembourg (2). The 1987 Single European Act created a less restrictive decision-making process by allowing most voting in the Council by qualified majority (54 out of a total of 76 votes), rather than unanimity especially in areas relating to the internal market. Exceptions include certain health and safety and taxation proposals. The various ministerial groups meet monthly. A Committee of Permanent Representatives, consisting of member country ambassadors to the Community in Brussels, and the Council Secretariat assist the Council.
European Council
The Single European Act formally established the European Council, which had met on a regular basis since 1975. The European Council includes the Heads of State and Government and the President of the Commission. It meets at the end of each member's council presidency to discuss general problems regarding the Community, the progress of political cooperation, and foreign policy issues.
European Parliament
The European Parliament is the only EC institution that directly represents European citizens. It serves as a public forum to debate issues of importance to the Community. The Commission must consult the Parliament before proposals are forwarded to the Council of Ministers for decision. The Parliament has significant power over budgetary matters and can amend or reject the budget as well as approve its adoption. Since 1987, it also has had the right to amend or reject certain legislation approved by the Council, which can overrule the Parliament only by a unanimous vote. Although it cannot veto individual ministers, the Parliament has the power to pass a vote of no-confidence in the Commission by a "motion of censure," which would require the entire Commission to resign. The Parliament also may approve or disapprove applications of non-member countries to join the Community as well as new association agreements. The European Parliament has been elected by universal suffrage since 1979. Previously, deputies had been nominated by national legislatures. The 518 deputies of the Parliament are elected to 5- year terms and are grouped by political affiliation, rather than by nationality. They include Socialists, Christian Democrats, Liberals, Conservatives, Communists, and Greens. Many of the Parliament's specialized committees have emphasized development of truly European policies in areas such as the internal market, energy, industrial restructuring, and regional development funding. Direct elections ensure full public representation in the Community, and important tasks for the deputies include promoting the Community's work within their constituencies and increasing public support for an integrated Europe. The Parliament meets monthly in week-long plenary sessions in Strasbourg. The Secretariat staff of 3,500 is located in Luxembourg; most committee and political group meetings are held in Brussels.
Court of Justice
The Court is the final authority for the interpretation of EC laws as embodied in its treaties, regulations, and directives. Complaints about member-state treaty violations may be lodged by other member states or by the Commission. Member governments, EC institutions, and individuals have the right to contest Commission and Council actions in the Court. The Court resolves conflicts between Community and national laws. EC judgments in the area of EC law overrule those of national courts. The Court's decisions are binding on all parties and are not subject to appeal. Court decisions generally have tended to strengthen EC institutions and promote integrated EC policies. Member governments appoint 13 justices, one from each member state plus a president of the Court for renewable 6-year terms. The judges are assisted by six advocates-general. Court decisions are reached by a simple majority. The Court meets in Luxembourg. The Single European Act introduced a new Court of First Instance, which essentially serves as a lower court. It has jurisdiction in matters covered by the treaty establishing the European Coal and Steel Community (ECSC), in the field of competition law, and in actions brought by EC officials.
Economic and Social Committee
This advisory body of 189 members represents various economic and social sectors, including labor, employers, and other interest groups such as consumers, agriculture, and professional associations. The Committee enables a broad spectrum of groups to be represented in EC decision-making. Through a mandatory consultation process, the Committee submits its opinions on EC policies and legislative proposals to both the Council of Ministers and the Commission.


Since 1975, the Community has been fully funded from its own resources. These are derived from customs duties levied under the Common Customs Tariff, levies on agricultural imports from non- member states, and a 1.4% value-added tax collected on the goods and services consumed in member countries. Faced with the additional costs associated with the implementation of the 1992 single market program, in 1988, the Council approved the introduction of a fourth source of revenue, based on a percentage of member countries' gross domestic product. Budget expenditures are principally for agricultural support, regional and social measures, development assistance to Third World countries and to Central and Eastern Europe, and administrative costs. The Commission prepares the preliminary draft of each year's EC budget. The Council discusses the preliminary report and then submits a draft budget to the Parliament, which can amend or reject the budget and is responsible for its final adoption. The approved EC budget for 1992 is $86 billion. The largest budget item, accounting for about two-thirds of the total, is agricultural expenditures under the Common Agricultural Policy (CAP). Other major budget items are energy and industrial programs, research, and development assistance to poorer regions of the Community, Central and Eastern Europe, and Third World nations.


Peaceful union of European countries had been a dream for centuries, but not until the period following World War II did the process of economic and political integration begin. After the economic chaos of the war, governments sought ways to rebuild their economies and avoid future conflict. The Brussels Pact of 1948 created the first post-war European intergovernmental organization. The United Kingdom, France, Belgium, Netherlands, and Luxembourg agreed to establish a common defense system and to consult on economic and cultural matters. Since governments remained reluctant to cede authority to a supranational body, the organization was based on cooperation rather than on formal integration. The military aspects of the pact were soon overshadowed by the creation in 1949 of the North Atlantic Treaty Organization (NATO), an expanded military alliance including the United States and Canada. In the political sphere, the Council of Europe--organized the same year by the five members of the Brussels Pact with Ire-land, Denmark, Norway, Italy, and Sweden--had as its goal greater European unity and the protection of human rights. However, all decisions were made by unanimous agreement, which weakened the Council. In May 1950, French Foreign Minister Robert Schuman proposed that French and German coal and steel production be managed by a common authority within an institution open to other European countries. Ratified by the Governments of France, the Federal Republic of Germany, Italy, Belgium, Netherlands, and Luxembourg (the Six), the European Coal and Steel Community began functioning in 1952. It was the first international organization with an integrated federal governing body, the ECSC High Authority. Members of the High Authority were independent of national governments, and decisions were binding on member states. A long- term objective of both Schuman and ECSC President Jean Monnet was to establish a structure for the eventual political unification of Europe through economic integration. With Europe's immediate defense problem met by NATO, efforts were concentrated on economic questions. Under the direction of Belgian Foreign Minister Paul Henri Spaak, the foreign ministers of the Six met to discuss proposals for an integrated economic system and a common structure for the development of nuclear energy. In 1957, the Six agreed to establish the European Economic Community (the EEC or Common Market) and the European Atomic Energy Community (EURATOM). The two treaties formally establishing the new communities to work with the ECSC were signed by the Six in Rome on March 25, 1957. The EEC and EURATOM began operating on January 1, 1958. The wide-reaching EEC was given less supranational authority than the ECSC, although economic union was viewed as a prerequisite for eventual political integration. In 1973, the United Kingdom, Denmark, and Ireland were admitted, creating the EC Nine. The Government of Norway also had agreed to accession, but membership was rejected in a referendum. Greece joined the Community in 1981, and Spain and Portugal became members in 1986, creating the EC Twelve. In 1990, the five states of the former German Democratic Republic entered the Community as part of a united Germany. The primary aim of the Paris and Rome treaties establishing the European Communities was to remove the economic barriers that divided the member countries as the first steps toward political unity. To accomplish this, the treaties called for members to establish a common market, a common customs tariff, and common economic, agricultural, transport, and nuclear policies. The institutions and policies established by the treaties provided a framework within which the 12 EC members agreed to integrate their economies and eventually consider forming a political union.
Customs Union
The authors of the EC treaties recognized that the economic keystone of unity would be a customs union permitting the free movement of goods, services, capital, and people within member states. In 1958, the Community began the difficult process of eliminating all trade barriers among its members. Ten years later, all member-to-member duties were abolished, and a common external tariff of the Six was established. By 1977, this union was extended to include the new EC members--the United Kingdom, Denmark, and Ireland. The common external tariff is key to the customs union. Each EC member charges the same duty on a given import from a non-member country. Agricultural imports are subject to the Common Agricultural Policy, which places variable levies on agricultural imports to raise their prices to those of EC-produced commodities. Although tariffs have been eliminated within the Community, several kinds of non-tariff barriers still exist. Some member states maintain protectionist measures that the Community has not yet been able to eliminate entirely, such as limiting public works contracts and adopting unilateral technical or safety standards that restrict trade. Numerous health and safety barriers to agricultural trade still exist. Individual firms and governments can register trade restriction complaints with the Commission, which attempts to eliminate the barriers through binding judicial action. In 1991, exports among Community members were $859 billion, while external exports were $522 billion, accounting for 17.1% of world commerce. This makes the EC the world's largest trading unit. EC imports from third countries in 1991 were $812 billion, mostly raw materials and unprocessed goods. Most EC exports are processed goods such as machinery and vehicles. As provided for in Article 113 of the Treaty of Rome, all member states adhere to a common EC commercial policy. It provides for major decisions on trade policy to be taken by the Council of Ministers by majority vote and assigns to the Commission considerable executive and negotiating authority. The Community's trade policy is based on the General Agreement on Tariffs and Trade (GATT), to which all community members are contracting parties.
Single European Act and EC '92
The establishment of a customs union among the Six resulted in an expansion of trade which grew from $7 billion in 1958 to $60 billion in 1972. The enlargement of the Community to include Denmark, Ireland, and the United Kingdom in 1973 marked the beginning of a period of limited growth, inflation, and high unemployment. By the mid-1980s, the Community recognized that, despite progress in many areas, its aim of creating a true common market (the dismantling of all barriers within the Community restricting the free movement of people and trade) had not been realized. In March 1985, Jacques Delors, President of the EC Commission, outlined to the European Parliament the "single market" program, designed to chart a course for completion of an integrated market by the end of 1992. A Commission White Paper in June 1985 listed legislative measures needed to eliminate all physical, technical, and fiscal barriers to the completion of a unified economic area with free movement of persons, goods, services, and capital. By October 31, 1992, the Commission had tabled 282 proposals. Of these, 216 have been approved by the European Council and the European Parliament. However, only 68 have been implemented in all 12 EC member states. On July 1, 1987, after ratification by member governments, the Single European Act (SEA) came into force. The act contained revisions in the treaties necessary to assure completion of the 1992 program. It extended the principle of qualified majority voting in the Council of Ministers (thus streamlining the decision-making process). It also gave the Community new responsibilities (in the areas of social policy, promotion of research and technological development, and improvement of the environment) and increased support for the least developed member states. Budgetary measures adopted in February 1988, which placed limits on the growth of agricultural spending and doubled the allocation for structural funds (resources targeted for regions that are underdeveloped or affected by industrial decline or unemployment), signaled the commitment of member states to implement these provisions. In addition to defining an action program for achieving the single market, the SEA endorsed the objective of economic and monetary union, including a single currency. Institutional decisions in this area would continue to be subject to unanimity in the Council and ratification by member states. The SEA also formalized procedures for cooperation in foreign policy among member states and renewed support for the objective of European political union.
European Monetary System
In 1970, the Werner Report (named after the Luxembourg Prime Minister) proposed a plan for economic and monetary union within the Community. As a first step in harmonizing policy, the currency "snake" (a set of upper and lower limits of exchange rates) was established in 1972. Central banks of participating countries pledged to intervene in the currency market to keep the value of their currencies within fixed limits. In 1979, the European Monetary System (EMS) replaced the snake in an effort to reduce exchange rate fluctuations. The EMS provides for frequent discussions among central bankers and for intervention in foreign exchange markets to maintain the value of each currency within a narrow range (generally 2.25%) of the European Currency Unit (ecu). All Community members belong to the EMS, though not all participate in the system's exchange rate mechanism. In addition to currency swap arrangements for defense of currency parities, the EMS includes a reserve fund. The EMS created the ecu in 1979. It is the Community's budget and accounting unit, created by member states depositing 20% of their gold and US dollar reserves with the European Monetary Cooperation Fund. It is a combination of differing proportions of 12 member currencies, reflecting the size of their economies.
Economic and Monetary Union
The concept of economic and monetary union, characterized by irrevocably fixed exchange rates, a single currency, a single monetary authority, and a common monetary and exchange rate policy, was a natural corollary to the completion of the internal market. At the December 1991 summit in Maastricht, Netherlands, EC heads of government reached agreement on a draft treaty on European economic and monetary union (EMU). The EMU treaty provides a timetable for moving to full economic and monetary union. Stage 1 (1990-93). Involves strengthening economic coordination, bringing all EC members' currencies into the exchange rate mechanism of the European Monetary System, and lifting restrictions on internal EC capital flows. Stage 2 (1994-96). A transitional period, will involve increased economic convergence ( in terms of inflation, fiscal policy, interest rates, and exchange rate stability) and creation of a transitional European monetary authority. Stage 3. In 1997, if a majority of EC members are politically willing and economically prepared for full EMU, exchange rates will be irrevocably fixed, monetary powers will be transferred from national central banks to a European central bank, and a single currency will be created. (If the move to Stage 3 does not occur in 1997, it will start definitely by January 1, 1999, for those countries which have met the treaty's economic convergence criteria.) EMU will not go into effect until the Maastricht Treaty package is ratified by all 12 member states. As of January 1993, the ratification process was still underway.


The original EC treaties give the Community wide economic powers but little political authority. As the Community has begun to consolidate economic and monetary union, it also has re-examined its political responsibilities. The Single European Act underlined the commitment of Community members to achieving "European Union." At a landmark summit held in Maastricht, Netherlands, in December 1991, the Heads of State and Government agreed to further amendments in the EC treaties to move the Community toward greater political union, including more unified foreign and defense policies. The Maastricht treaty increased the scope of the Commission's authority to include the areas of environment, consumer and health protection, education, and culture. It established a "citizenship of the union," giving an EC citizen the right to live anywhere in the Community and vote in local and European elections. It committed member states to work for common rules regarding immigration and asylum policy and to exchange information on terrorism and drug trafficking. The treaty also proposed an economic "cohesion" fund to channel re-sources to poorer countries and expanded language on protection of workers' rights. Although coordination of foreign policy was not included in the original EC treaties, it has been undertaken voluntarily since 1970, when a limited form of European political cooperation, based on regular meetings of foreign ministers, began to occur. The 12 foreign ministers now meet regularly to coordinate broad lines of members' international policies. These meetings take place in the context of European political cooperation, which also includes regular meetings of EC political directors, who oversee numerous working groups made up of officials from all EC states, responsible for geographic and functional areas of foreign policy. Under the Maastricht treaty, the Council of Ministers, after consultation with member states, the Parliament, and the Commission, would approve common foreign policy and security measures by unanimous vote. A new defense dimension will be added to the scope of the Community's activities by expanding the role of the Western European Union (WEU), an alliance of 10 EC countries (Denmark and Ireland are not members), to provide for a European defense alliance. The WEU will implement EC decisions with defense implications. The Maastricht treaty must be approved by all EC countries prior to implementation. Ratification ran into difficulties when the treaty was rejected by the Danes in a referendum in June 1992. Ratification in the United Kingdom has been delayed until Danish objections are overcome, unlikely before mid-1993. An intergovernmental conference scheduled to take place in 1996 will evaluate progress toward political union.


Improving relations with developing countries in Africa, the Caribbean, and the Pacific area has been a high priority for the Community since its creation. The Community has concluded cooperation agreements with more than 100 Third World countries. In addition to its desire to con-tribute to the economic and social advancement of less developed countries, the Community seeks reliable supplies of primary products and markets for its exports. The EC has become one of the major providers of Third World assistance with programs such as food aid, rural development, and refugee relief. In 1991, assistance was about $7.3 billion. (The EC program is separate from assistance programs provided by member states.) The Community's most notable accomplishment has been the creation of a series of conventions creating a framework for development cooperation with more than 60 African, Caribbean, and Pacific (ACP) states, most of which were former colonies of the EC states. Launched in Yaounde in 1963 and 1968 and expanded at Lome in 1975, the agreements provide aid for development projects, free access to EC markets for almost all ACP manufactured imports, and incentives to promote European investment in the developing states. The conventions were renewed in 1979, 1985, and in 1989 for a 10-year period be-ginning in 1990. The most recent agreement (Lome IV) puts greater emphasis on market-oriented economic reform in recipient countries and on human rights. About 40% of EC aid is directed to the ACP states. Since 1978, 40% of ACP ex-ports have gone to the Community, which imports about 10% of its raw materials from the Lome signatories. Community exports to ACP markets enjoy most-favored-nation treatment. One of the most important and innovative aspects of the Lome Convention is Stabex (export receipts stabilization system). A kind of insurance policy against poor trade years, Stabex provides currency transfers to countries heavily dependent on a small number of commodities for export earnings in years when export receipts drop significantly because of poor harvests or low world prices. Lome IV is designed to encourage diversification to other crops. The Lome Convention provides a similar export receipts stabilization system, Sysmin, to cover mineral export earning losses. The EC has been an active participant in the multilateral side of the Middle East peace process. It is a co-organizer of working groups on economic development, water resources, refugees, and the environment. The Community is linked with almost all the countries of the Mediterranean by a network of agreements which provide duty-free access for industrial products and some agricultural products as well as direct grants and loans from the European Investment Bank. Turkey, Cyprus, and Malta have applied for EC membership. The Community's ties to the developing countries of Asia and Latin America are less structured. These usually take the form of bilateral agreements, which allow for preferential trade treatment under the Community's Generalized System of Preferences and certain types of development aid.


Relations with the group of countries participating in the European Free Trade Association (Sweden, Norway, Finland, Iceland, Switzerland, and Austria) are strongly influenced by the progress of the single market program. Founded in 1960 as an alternative to the Community, EFTA is now the Community's largest trading partner. Free trade agreements were concluded between the Community and each of the EFTA countries in 1972-73, after two EFTA members, Denmark and the United Kingdom, joined the EC (Portugal followed in 1986). The EC and EFTA countries signed an agreement to create a European Economic Area (EEA) in February 1992. The agreement will create an enlarged single market in which goods, services, capital, and persons move freely between all member states. EC and EFTA countries also will expand cooperation in research and development, environmental issues, education, and social policy. EFTA states will have to adopt certain EC regulations relating to the single market but will not be able to participate in the EC legislative process. The treaty also contains provision for the establishment of an EEA court, council of ministers, and joint committee. Once it is ratified by all 19 national parliaments and by the European Parliament, the EEA will create a trading zone of 495 million people. It was scheduled to enter into force on January 1, 1993. However, in a December 1992 referendum, Switzerland rejected participation in the EEA, requiring the other countries to adjust the conditions of the agreement. Austria, Finland, Norway, Sweden, and Switzerland have applied for membership in the EC. Accession negotiations with all except Switzerland will start on February 1, 1993.


Between 1988 and 1990, the EC established limited economic and cooperation agreements with all the countries of Central and Eastern Europe. Since then, the Community has designed a new type of association agreement which goes beyond economic cooperation. In addition to a phased approach to free trade between the EC and each nation (whereby the Community will reduce its tariff and other import barriers more rapidly than association countries), these agreements consist of industrial, technical, and scientific cooperation; financial assistance; and political dialogue. In December 1991, association agreements were signed between the EC and Czechoslovakia, Hungary, and Poland. As a result of the dissolution of Czechoslovakia on January 1, 1993, the Czechoslovak agreement is being renegotiated with the successor states, the Czech Republic and the Slovak Republic. Agreements with Bulgaria and Romania were concluded in late 1992. Pending ratification of these agreements by the parliaments of all participants and the approval of the European Parliament, the Community's generalized system of trade preferences has been extended to these countries on an ad hoc basis. The EC also signed trade and cooperation agreements with Albania, Estonia, Latvia, and Lithuania in May 1992. These agreements provide for reduction of quantitative trade restrictions, reciprocal most-favored-nation treatment, and economic cooperation. In November 1992, the EC concluded a similar pact with Slovenia. The Commission provides substantial assistance to the countries of Central and Eastern Europe. Grant technical assistance is provided through the PHARE program (Poland and Hungary--Assistance with Restructuring the Economy), which has been extended to Albania, the Baltics, Bulgaria, the Czech Republic, the Slovak Republic, Romania, and Slovenia. Its aim is to strengthen the process of political and economic reform, with special emphasis on developing and improving the private sector. In addition to the Community's bilateral efforts, after the economic summit of industrialized countries in 1989, the EC Commission began coordinating aid to Central and Eastern Europe by the Group of 24 (G-24) countries--the EC, EFTA, US, Canada, Japan, Australia, New Zealand, and Turkey. The Community also was instrumental in the creation of the European Bank for Reconstruction and Development, a multilateral endeavor to support investment and development of market economies in these countries.


In January 1992, the Community announced its plan to negotiate partnership and cooperation agreements with the states of the former Soviet Union to replace the trade and cooperation agreement signed by the EC and the Soviet Union in 1989. This agreement had included most-favored-nation status as well as financial aid and was prompted by the introduction of efforts at political and economic reform. The new agreements would provide for close political and economic relations, including trade, economic, and financial cooperation, political dialogue, and cultural cooperation. Negotiations will begin first with Russia, Belarus, Ukraine, and Kazakhstan. EC officials have indicated that assistance to the new independent states in their transition to democratic institutions and free market economies is an important priority, and the Commission ranks among the top donors to the new states.


The United States continues to support European efforts to achieve economic and political integration. The United States and the Community maintain a continuing dialogue on political and economic issues of mutual interest and engage in direct negotiations on trade and investment issues. While the US has expressed its support for the EC's efforts to develop an integrated market, it is concerned that the economic and business opportunities offered by the single market not be offset by the introduction of new trade barriers. The US holds regular meetings with the EC to discuss aspects of the Single Market program and to resolve differences, many concerning agriculture. The "Declaration on US-EC Relations" of November 23, 1990, identifies common goals and principles of the US-EC partnership. It institutionalizes regular consultation and cooperation on economic, scientific, educational, and cultural matters and establishes a framework for regular and intensive consultation. Biannual consultations between the US President and the President of the European Council and the President of the Commission take place every 6 months. The US Secretary of State and the 12 EC Foreign Ministers also meet on a biannual basis to discuss foreign policy issues; ad hoc consultations between the foreign minister of the presidency country or the foreign ministers of the Troika (the current presidency country and its immediate predecessor and successor) and the US Secretary of State are scheduled as necessary. Delegations from the US House of Representatives and the European Parliament meet twice yearly to discuss US-EC relations. Close consultation is further maintained through the US Mission to the European Communities, headed by an ambassador in Brussels, and through the delegation of the European Communities in Washington, DC, headed by the EC ambassador. The US has an important economic relationship with the EC. As a bloc, the EC is America's largest trading partner. Total US-EC trade exceeded $190 billion in both 1990 and 1991. In 1991, US imports from the EC were $86 billion and represented 18% of total US imports. US exports to the EC were $103 billion and represented 24% of total US exports. In 1991, the US trade surplus with the EC rose to $17 billion, up from $6 billion in 1990. EC exports to the United States consist mainly of machinery, precision equipment, iron and steel, and other manufactured products. US exports to the EC include machinery and transportation equipment, agricultural products, chemicals, and mineral fuels. The US and the Community also have significant ties in the area of direct investment. By the end of 1991, the EC had invested $232 billion in the US, while the US had invested $189 billion in the EC. The United States and the Community cooperate closely in several multilateral organizations, including GATT, OECD, and the "Quadrilaterals" (periodic meetings of the EC, US, Japan, and Canada). The US is hopeful that progress will continue in the GATT multilateral trade negotiations and that both sides will succeed in resolving differences on agricultural policies. The Community's CAP has allowed the EC to become self-sufficient in many agricultural commodities and has provided stable incomes to the European farming population. However, through its complicated network of protection, price supports, and subsidies, it has created large surpluses of many agricultural products, displaced some US farm exports, and increased prices to European consumers. The global reform of agricultural policies, including the CAP, remains an important US objective. The need to provide financial and technical aid to the new emerging democracies in Eurasia led to a new phase of cooperation between the Community and the US. Through the G-24 process, the 1992 coordinating conferences on assistance to the former Soviet Union, and the international financial institutions (the International Monetary Fund, the Inter-national Bank for Reconstruction and Development, and the European Bank for Reconstruction and Development), the EC and the US assist those countries committed to achieving democracy and market reform.
Diplomatic Representation.
The United States maintains close relations with the Community through its mission in Brussels. The US Mission is directed by Ambassador James F. Dobbins and is located at 40 Boulevard du Regent, B-1000, Brussels, Belgium; Tel. 32-2-513-4450; Telex 846-21336. The EC Delegation to the United States is headed by Ambassador Andreas Van Agt. Its Press and Public Affairs Office is located at 2100 M Street, NW, 7th floor, Washington, DC, 20037; Tel. 202-862- 9500. The EC Press and Public Affairs Office in New York City is at Three Dag Hammarskjold Plaza, 245 East 47th Street, New York, NY 10017; Tel. 212-371-3804.


Since its foundation as a customs union, the EC's authority and influence have expanded greatly as its role in managing the process of integration has evolved. The possibility of a united Europe, once only an ideal, is now closer to reality than ever before. Spurred by revolutionary political change and the continued success of its efforts to achieve economic and monetary integration, the Community now faces a new agenda, quite different from the challenges it has confronted in the past. Of the measures required to complete the internal market, some of the most complicated issues--such as tax harmonization, border controls, and social policy--have not yet been reviewed by the Council of Ministers, and many have not yet been ratified by member states. Meeting the 1992 deadline and implementing the reforms outlined in the Single Act will test the commitment of EC members to the principle of true integration. Austria, Sweden, Switzerland, Finland, Malta, and Cyprus have applied for EC membership. No decision has been reached on Turkey's long-standing application for EC membership. Possible enlargement of the Community to 16 or more members may require reform of EC institutions, especially the Presidency and the Parliament. The eventual expansion of the Community to include the countries of Central and Eastern Europe and possibly some of the new independent states of the former Soviet Union also must be considered, although no decision is expected before the end of the decade. A major intergovernmental conference scheduled for 1996 will evaluate progress in economic and monetary union and consider greater coordination of foreign policy and security matters.


Published by the US Department of State Bureau of Public Affairs -- Office of Public Communication -- Washington, DC -- January 1993 - - Editor: Elaine McDevitt; Managing Editor: Peter Knecht Department of State Publication 9155 Background Notes Series -- This material is in the public domain and may be reprinted without permission; citation to this source is appreciated. For sale by the Superintendent of Documents, US Government Printing Office, Washington, DC 20402 (###)