U.S. State Department Geographic Bureaus: Europe and Canada Bureau

95/05/20 Fact Sheet: The European Union
Bureau of Public Affairs

Fact Sheet: The European Union

The European Union (EU; formerly the European Community) is comprised of three separate communities: the European Coal and Steel Community (established in 1951); and the European Atomic Energy Community (EURATOM) and the European Economic Community (EEC), both established in 1957. The EU currently has 15 members: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom.

The Union had by the beginning of 1993 the elements of a true "single" or common market, with free movement of persons, goods, services, and capital, although portions remain to be fully implemented. In December 1991, at Maastricht, Netherlands, EU members agreed to amendments of the EU treaties which would move the Union in the direction of greater economic, monetary, and political union, including more unified foreign and security policies. The Maastricht treaty went into effect November 1, 1993. On that date, the European Community formally became the European Union, and the Commission of the European Communities became the European Commission. Under the Maastricht treaty, member states have formally begun intergovernmental coordination on Common Foreign and Security Policy (the "Second Pillar") and Justice and Home Affairs (the "Third Pillar").

U.S.-EU Relations

The United States and the European Union maintain a continuing dialogue on political and economic issues of mutual interest, and engage in direct negotiations on trade and investment issues. The Union is the United States' largest trading partner. Total U.S.-EU trade was $195 billion in 1993, up from $190 billion in 1991 and 1992. In 1993, U.S. imports from the EU were $98 billion and represented 17% of total U.S. imports. U.S. exports that year to the EU were $97 billion, representing 21% of total U.S. exports.

Due largely to the continued recession in Europe, the U.S. had a $1 billion trade deficit with the EU in 1993, down from a $9 billion trade surplus in 1992. The United States and the Union are each other's most significant source of direct investment. By the end of 1992, the Union had more than $219 billion invested in the United States, and the United States had about $201 billion invested in the EU.

The United States continues to support the EU's implementation of the single market program. It is in the interest of both sides that this integration be implemented in an open fashion without creating new trade barriers. The United States holds regular meetings with the Union to discuss a range of economic and political issues and to resolve trade differences, many concerning agriculture. In its negotiations with the Union on trade and investment issues, the U.S. Government works to ensure that American interests are fully represented. The global reform of agricultural policies was an important U.S. objective and a major goal of the Uruguay Round of multilateral trade negotiations.

The United States long has discussed foreign and trade policy issues on an ad hoc basis with the Union. These arrangements were formalized by the Declaration on U.S.-EU Relations of November 23, 1990, which institutionalized regular consultation and cooperation on political, economic, scientific, educational, and cultural matters. As agreed in the declaration, the U.S. President meets twice annually with the head of state or government of the presidency country and the President of the European Commission. The Secretary of State meets twice annually with the EU foreign ministers and as necessary with the foreign ministers of the "troika" countries (the EU presidency country, its predecessor, and its successor). Discussions include a broad range of issues: maintenance of international peace and security in areas such as the Gulf, the Middle East, and former Yugoslavia; international trade issues; support for the emerging democracies of Eurasia; and cooperation in science and technology.

EU Institutions and Presidency

Since July 1967, the three communities have functioned with common institutions. Major EU institutions are the Commission, the Council of Ministers, the European Parliament, and the Court of Justice. Member states agree to relinquish a degree of national sovereignty to EU institutions and to cooperate in the joint administration of these powers.

The 20-member Commission, appointed by common agreement of the 15 governments and approved by the European Parliament, has primary responsibility for initiating and implementing EU policy in areas that fall under EU treaties (for example, the internal market, external trade, and agricultural policy). The Council of Ministers, representing the member states, occupies the preeminent position in the current institutional power balance and decides on the Commission's proposals. The Parliament, the only EU institution that directly represents European citizens, has significant power over budgetary matters and can amend or reject certain legislation approved by the Council. The Court, which has a role similar to that of the U.S. Supreme Court, is the final authority on the interpretation of EU treaties and laws.

Each member state serves as President of the Council for six months in rotation. The presidency country presides at all meetings of the member states and serves as spokesman in dealing with countries on intergovernmental matters, including efforts to coordinate the foreign policies of the member states. This foreign policy coordination process, known as Common Foreign and Security Policy, is one of seeking consensus for joint action by the 15 members on international political issues, such as the Gulf crisis and refugee aid, the former Yugoslavia, the Middle East peace process, South Africa, Central America, and the Organization on Security and Cooperation in Europe. Since ratification of the Maastricht treaty, the presidency country now also presides over intergovernmental cooperation and consultation on justice and home affairs.

European Integration

The process of European integration was strengthened by the implementation, in July 1987, of the Single European Act (SEA), which increased the scope of the Union's legislative and executive authority. The SEA endorsed the objective of economic and monetary union and outlined a series of directives necessary to eliminate all physical, technical, and fiscal barriers to completion of an internal "single" market by January 1, 1993. It also formalized procedures for cooperation in the area of foreign policy.

At the landmark Maastricht summit in December 1991, EU members approved additional proposals which will forge even closer economic, monetary, and political ties within the Union. The treaty calls for the EU to establish a European Central Bank (the European Monetary Institute is located in Frankfurt, Germany) and a single currency by the end of the decade, although all 15 member countries may not enter the new arrangements at once. The treaty also sets in motion a further acceleration of political integration, including elements of a common foreign and security policy and cooperation in justice and home affairs.

The question of how fast to proceed with enlargement of the Union while strengthening EU institutions (the "widening" versus "deepening" issue) continues to be a major topic for discussion among member states. In the most recent enlargement, Austria, Finland, and Sweden joined the EU on January 1, 1995. Cyprus, Malta, Turkey, Switzerland, Poland, and Hungary have applied for membership, and several Central European states have indicated their desire to join the EU. Poland and Hungary both formally applied for membership in April 1994.

An intergovernmental conference is scheduled to be held in 1996 to evaluate the progress of economic and monetary integration and to consider greater coordination of foreign policy and security matters.

EU Economy

With the accession of Austria, Finland, and Sweden, the population of the EU is now roughly 368 million; the EU's gross domestic product at the beginning of 1995 was about $6.7 trillion, with a per capita GDP of $18,000. An important aspect of the EU's economy is its Common Agricultural Policy, a complicated system of price supports, subsidies, and protection to European farmers that consumes more than half of the EU budget. EU member states agreed to an important reform of that policy in May 1992.

Relations With Other Countries

The EU is the largest trading entity in the world. In April 1992, the EU and the seven-member European Free Trade Association (Austria, Finland, and Sweden were EFTA members before joining the EU) signed an agreement to broaden their existing free trade agreement and create a European Economic Area (EEA). The EEA establishes free movement of goods, services, capital, and labor throughout the combined territory. In a December 1992 referendum, Switzerland rejected participation in the EEA.

The EU and its member states have long-standing political and economic ties with the formerly communist countries of Central Europe and the New Independent States (former Soviet republics). The EU has provided significant economic assistance to these new emerging democracies and has eased access to its markets for them. The EU created a new kind of association agreement for the countries of Central Europe. These agreements, also known as Europe agreements, cover industrial, technical, and scientific cooperation, financial assistance, and political dialogue. Most importantly, these agreements envision eventual EU membership for these Central European states. The EU signed association agreements with Poland, Hungary, and Czechoslovakia in December 1991; after Czechoslovakia's dissolution, the EU signed new, separate agreements with the Czech Republic and Slovakia in 1993. Association agreements were signed with Romania in February 1993, and with Bulgaria in March 1993. The EU reached agreement on separate association agreements with Estonia, Latvia, and Lithuania in April 1995; they were to be signed in late May 1995. The EU is discussing an association agreement with Slovenia. In December 1994, the EU approved a pre-accession strategy designed to help the associated Central European states to move toward joining the EU. The EU is also expected to adopt a white paper in June 1995 describing some of the steps associated Central European states will need to take before joining the EU.

In 1989, the European Commission began coordinating aid from the then-24 countries (including the U.S.) of the Organization for Economic Cooperation and Development to Central and Eastern Europe; this process is known as the Group of 24. The objective is to strengthen the process of political and economic reform, with emphasis on improving the private sector. The European Bank for Reconstruction and Development (of which the United States is an active member) was established in 1990 to support investment and the development of market economies in these countries.

In January 1992, the commission announced that it would negotiate new agreements with the former Soviet republics to replace the 1989 EU- U.S.S.R. trade and cooperation agreement. In June 1994, the EU signed a partnership and cooperation agreement (PCA) with Russia, which provides for political dialogue at all levels, possible talks in 1998 on a free trade area, EU support for eventual Russian accession to the World Trade Organization (WTO), and EU assistance on nuclear safety, restructuring state-run enterprises, and economic reforms. The EU also signed a similar PCA with Ukraine in June 1994. The EU has initialed less- extensive PCAs with Kyrgyzstan, Kazakhstan, Belarus, and Moldova.

The Union has placed priority on improving relations with developing countries. The Lome Convention provides a framework for EU development cooperation with 70 African, Caribbean, and Pacific (ACP) countries. In 1989, a new 10-year agreement was signed with the ACP states to provide aid to development projects, free access to EU markets for almost all manufactured imports from those countries, and incentives to promote European investment.

The Union is linked with a number of countries in the Mediterranean by either association or preferential trade agreements that provide duty- free access for industrial products and direct grants and loans. EU economic ties to Asia and Latin America usually take the form of bilateral agreements that allow preferential access and certain types of development aid.

May 20, 1995


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