Order Code RS21372
Updated June 10July 11, 2005
CRS Report for Congress
.Received through the CRS Web
The European Union: Questions and Answers
Kristin Archick
Specialist in European Affairs
Foreign Affairs, Defense, and Trade Division
Summary
This report provides answers to key questions related to the European Union (EU).
It describes the EU’s evolution, its governing institutions, trade policy, and efforts to
forge common foreign and defense policies. The report also addresses the EU-U.S. and
EU-NATO relationships. It will be updated as events warrant. For more information,
see CRS Report RS21344, European Union Enlargement, and CRS Issue Brief
IB10087, U.S.-European Union Trade Relations: Issues and Policy Challenges.
What Is the EU?
The EU is a treaty-based, institutional framework that defines and manages
economic and political cooperation among its 25 member states (Austria, Belgium,
Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland,
Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom). The Union is the
latest stage in a process of European integration begun after World War II to promote
peace and economic prosperity in Europe. Its founders hoped that by creating
communities of shared sovereignty — initially in areas of coal and steel production, trade,
and nuclear energy — another war in Europe would be unthinkable. Since the 1950s, this
European integration project has expanded to encompass other economic sectors, a
customs union, a single market in which goods, people, and capital move freely, a
common agricultural policy, and a common currency (the euro). Over the last decade, EU
member states have taken significant steps toward political integration as well, with
decisions to develop a common foreign policy and closer police and judicial cooperation.
How Does the EU Work?
The EU represents a unique form of cooperation among sovereign states; it has been
built through a series of binding treaties. EU members work together through common
institutions (see next question). The EU is divided into three “pillars;” subjects and
decision-making processes differ in each. Pillar One is the European Community, which
encompasses economic, trade, and social policies ranging from agriculture to education.
In Pillar One areas, by far the most developed and far-reaching, members have largely
pooled their national sovereignty and work together in EU institutions to set policy and
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promote their collective interests. Decisions in Pillar One often have a supranational
character because most are made by a majority voting system. Pillar Two aims to
establish a Common Foreign and Security Policy (CFSP) to permit joint action in foreign
and security affairs. Pillar Three seeks to create a Justice and Home Affairs (JHA) policy
to foster common internal security measures and closer police and judicial coordination.
Under Pillars Two and Three, members have agreed to cooperate but decision-making is
intergovernmental and by consensus. Thus, members retain more discretion and the right
to veto certain measures.
How Is the EU Governed?
The EU is governed by several institutions. They do not correspond exactly to the
traditional division of power in democratic governments. Rather, they embody the EU’s
dual supranational and intergovernmental character:
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The European Commission is essentially the EU’s executive and has the
sole right of legislative initiative. It upholds the interests of the Union as
a whole and ensures that the provisions of the EU treaties are carried out
properly. The 25 Commissioners are appointed by the member states for
five-year terms. Each Commissioner holds a distinct portfolio (e.g.,
agriculture). The Commission represents the EU internationally and
negotiates with third countries primarily in areas falling under Pillar
One. However, the Commission is primarily an administrative entity that
serves the Council of Ministers.
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The Council of the European Union (Council of Ministers) is comprised
of ministers from the national governments. As the main decisionmaking body, the Council enacts legislation based on proposals put
forward by the Commission. Different ministers participate depending
on the subject under consideration (e.g., economics ministers could
convene to discuss unemployment policy). Most decisions are made by
majority vote, but some areas — such as CFSP and taxation — require
unanimity. The Presidency of the Council rotates among the member
states for a period of six months.
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The European Council brings together the Heads of State or Government
of the member states and the Commission President at least twice a year.
It acts principally as a strategic guide and driving force for EU policy.
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The European Parliament consists of 732 members. Since 1979, they
have been directly elected in each member state for five-year terms under
a system of proportional representation based on population. The
Parliament cannot initiate legislation like national parliaments, but it
shares “co-decision” power with the Council of Ministers in a number of
areas, and can amend or reject the EU’s budget.
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The Court of Justice interprets EU law and its rulings are binding; a
Court of Auditors monitors the EU’s financial management. A number
of advisory bodies represent economic, social, and regional interests.
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Why and How Is the EU Enlarging?
The EU sees enlargement as crucial to promoting stability and prosperity in Europe,
and furthering the peaceful integration of the continent. The EU began as the European
Coal and Steel Community in 1952 with six members (Belgium, France, Germany, Italy,
Luxembourg, and the Netherlands). Denmark, Ireland, and the U.K. joined in 1973,
Greece in 1981, Spain and Portugal in 1986, and Austria, Finland, and Sweden in 1995.
With the end of the Cold War, the EU saw an historic opportunity to extend the political
and economic benefits of membership to central and eastern Europe. On May 1, 2004,
the EU welcomed 10 states (Cyprus, the Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Malta, Poland, Slovakia, and Slovenia) as new members. Bulgaria and
Romania completed accession negotiations in December 2004 and hope to join the EU
in 2007. Accession negotiations establish the terms under which applicants will meet and
enforce EU rules and regulations. Turkey was recognized as an EU candidate in 1999 but
remained in a separate category for several years as it sought to comply with the EU’s
political and economic criteria for membership. In December 2004, the EU agreed to
open accession talks with Turkey in October 2005, provided that Turkey continues to
make progress on reforms and extends its customs union to the EU’s 10 new members,
including Cyprus. Turkey’s membership talks are expected to take at least a decade to
complete, and the EU has cautioned that the negotiations are an “open-ended process, the
outcome of which cannot be guaranteed.” In June 2004, the EU named Croatia as another
candidate, and Macedonia has also applied for EU membership.
What Is the EU Constitution?
In June 2004, the EU concluded work on a constitutional treaty that contains changes
to the EU’s governing institutions and decision-making processes. Commonly referred
to as the “constitution,” this new treaty grew out of the 2002-2003 Convention on the
Future of Europe and previous EU efforts to institute internal reforms to enable an
enlarged EU to function more effectively. The constitution also contains measures to
boost the EU’s visibility on the world stage. Major innovations include abolishing the
EU’s rotating presidency and appointing a single individual to serve as president of the
European Council for up to five years, creating a new foreign minister, increasing the
powers of the European Parliament, and simplifying EU voting procedures.
In order to come into effect, the EU’s constitutional treaty must be ratified by all 25
member states through either parliamentary approval or public referenda. TenTwelve states have
have completed ratification, but the constitution’s future has been thrown into doubt following
following its rejection by French and Dutch voters in separate referenda in May and June 2005. It
is now unclear whether other EU member states will proceed with their ratification plans
in light of the French and Dutch “no” votes. Proponents of moving forward hope that if
most members approve the constitution, this would help force a second vote in those
states that rejected it. Regardless, it is unlikely that the constitutional treaty will enter into
force by the target date of November 2006.
2005. At their June 16-17, 2005 summit, EU leaders took the French and Dutch
rejections into consideration. They reaffirmed their commitment to the constitution but
announced that decisions about the timing of ratification were for each member state to
determine. They acknowledged that the initial ratification deadline of November 2006
was no longer tenable and did not set a new target date. Experts say this decision
effectively puts the constitution on hold until at least mid-2007.
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Does the EU Have a Foreign Policy?
The EU is seeking to build a Common Foreign and Security Policy (CFSP). Past
attempts to further EU political integration foundered on national sovereignty concerns
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and different foreign policy prerogatives. But in 1993, EU members concluded that the
Union must increase its weight in world affairs to match its growing economic clout.
CFSP decision-making is dominated by member states; they develop common policies
in areas in which they can reach consensus, and ensure that national policies are in line
with agreed EU strategies and positions (e.g., imposing sanctions on Serbia). In 1997, EU
leaders proposed creating a High Representative for CFSP; in 1999, they appointed Javier
Solana, NATO’s former Secretary General, to the position, which is often referred to as
“Mr. CFSP”. Many analysts credit Solana with boosting the EU’s visibility on the world
stage, and with forging EU consensus on issues such as the Balkans and the Middle East
peace process. Skeptics argue, however, that the EU is still far from speaking with one
voice on other key foreign policy challenges, such as Iraq.
The European Commission also plays a role internationally, but should not be
confused with CFSP or its High Representative. Benita Ferrero-Waldner, the External
Relations Commissioner, coordinates the Commission’s diplomatic activities and
manages its aid to non-member states. The EU constitution, if approved, would combine
the Ferrero-Waldner and Solana posts into a single EU foreign minister position.
Does the EU Have a Defense Policy?
The EU is also attempting to forge a European Security and Defense Policy (ESDP)
to give CFSP a military backbone. Momentum for this project picked up speed in 1998,
when U.K. Prime Minister Tony Blair reversed Britain’s traditional opposition to a
European defense identity outside NATO; it intensified after NATO’s 1999 Kosovo air
campaign exposed serious European military deficiencies. In December 1999, the EU
decided to establish an institutional decision-making framework for ESDP, and a 60,000strong rapid reaction force by 2003 — able to deploy within 60 days for at least a year —
to undertake the “Petersberg tasks” (humanitarian assistance, search and rescue,
peacekeeping, and peace enforcement). In June 2004, the EU agreed to enhance ESDP
further through the creation of several “battlegroups” of 1,500 troops each that will be
able to reach trouble spots, especially in Africa, within 15 days. Some members believe
that the EU should develop a combat capability equivalent, for example, to NATO’s role
in the 1999 Kosovo conflict. But EU forces will not form a standing “EU army”; rather,
troops and assets at appropriate readiness levels will be drawn from existing national
forces in the event of an EU operation. The EU has created three defense decisionmaking bodies, but improving military capabilities has been difficult, especially given flat
or declining European defense budgets. Serious capability gaps exist in strategic airlift,
command and control systems, intelligence, and other force multipliers.
What is the Relationship between NATO and the EU?
The EU asserts that ESDP is intended to allow the EU to make decisions and
conduct military operations “where NATO as a whole is not engaged;” ESDP is not aimed
at usurping NATO’s collective defense role. Most EU NATO members, led by the U.K.,
insist that EU efforts to forge a defense arm be tied to NATO, as do U.S. policymakers.
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Advocates argue that building more robust European military capabilities for ESDP will
also benefit the alliance. France, the other key driver of ESDP, would prefer a more
autonomous EU defense arm. The EU and NATO hold regular meetings at ambassadorial
and ministerial level. In December 2002, the EU and NATO resolved a long-running
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dispute between Greece and Turkey that had been holding up final agreement on “Berlin
Plus”: an arrangement permitting the EU “assured access” to NATO operational planning
capabilities and “presumed access” to NATO common assets. “Berlin Plus” was designed
to help ensure close NATO-EU links, and prevent a wasteful duplication of resources.
With “Berlin Plus” in place, the EU took over a small NATO peacekeeping operation in
Macedonia from March to December 2003. In December 2004, the EU took over the
NATO-led force in Bosnia. The EU is working to establish an EU planning cell at NATO
headquarters and to finalize arrangements for NATO liaison officers at the EU.
Does the EU Have a Trade Policy?
Yes. EU member states have a common external trade policy in which the European
Commission negotiates trade deals with other countries and trading blocs on behalf of the
Union as a whole. The EU’s trade policy is one of its most well-developed and integrated
policies. It evolved along with the common market, which provides for the free
movement of goods within the EU, to prevent one member state from importing foreign
goods at cheaper prices due to lower tariffs and then re-exporting the items to another
member with higher tariffs. The scope of the common trade policy has been extended to
include negotiations on services and intellectual property in some cases. The Council of
Ministers has the power to establish objectives for trade negotiations and can approve or
reject agreements reached by the Commission. EU rules allow the Council to make trade
decisions with a weighted voting system, but in practice, the Council tends to employ
consensus. The Commission and the Council work together to set the common customs
tariff, guide export policy, and decide on trade protection or retaliation measures where
necessary. The EU also plays a leading role in the World Trade Organization (WTO).
How Are U.S.-EU Trade Relations Doing?
The United States and the EU share the largest trade and investment relationship in
the world, with annual two-way flows of goods, services, and foreign investment
transactions exceeding $1.3 trillion, and total stock of two-way direct investment reaching
over $1.6 trillion. Most of this economic relationship is harmonious, but trade tensions
persist. One key dispute relates to government subsidies that the United States and the
EU allegedly provide to their respective civil aircraft manufacturers, Boeing and Airbus;
in late May 2005, U.S.-EU talks to diffuse confrontation over this issue failed, and both
sides have revived their complaints in the WTO. The EU has also begun imposing WTOsanctioned tariffs on 18 U.S. exports following the U.S. failure to repeal the Byrd
Amendment, which disburses anti-dumping duties to affected domestic producers. U.S.
exports may face further EU retaliation should the WTO rule against the U.S. law that
repeals the U.S. export tax subsidy but leaves tax breaks in place for contracts already
signed on aircraft and other heavy goods. Meanwhile, Washington has lodged a WTO
case against the EU’s ban on approvals of genetically-modified products, and a U.S.-EU
trade dispute over beef hormones also remains. Many analysts note that resolving U.S.EU trade disputes has become increasingly difficult, perhaps partly because both sides are
of roughly equal economic strength and neither has the ability to impose concessions on
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the other. Another factor may be that many disputes involve clashes in different domestic
values, political priorities, and regulatory systems.
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Does the United States Have a Formal Relationship with the EU?
Yes. For decades, the United States and the EU (and its progenitors) have
maintained diplomatic and economic ties. Washington has strongly supported European
integration, and U.S.-EU trade and investment relations are extensive. The 1990 U.S.-EU
Transatlantic Declaration set out principles for greater consultation, and established
regular summit and ministerial meetings. In 1995, the New Transatlantic Agenda (NTA)
and the EU-U.S. Joint Action Plan provided a framework for promoting stability and
democracy together, responding to global changes, and expanding world trade. The NTA
also sought to strengthen individual ties across the Atlantic, and launched a number of
dialogues, including ones for business leaders and legislators.
Who Are U.S. Officials’ Counterparts in the EU?
At least once a year, the U.S. president meets with the president of the European
Commission and the EU’s rotating presidency, represented by the head of government
whose country holds it at the time of the meeting. For example, at the regular U.S.-EU
summit in June 2004, President Bush met with then-Commission President Romano Prodi
and Prime Minister Bertie Ahern of Ireland, the presidency country during the first half
of 2004. The U.S. Secretary of State’s most frequent interlocutors are the High
Representative for CFSP, the External Relations Commissioner, and the foreign minister
of the EU presidency country. The U.S. Trade Representative’s key interlocutor is the
European Commissioner for Trade, who directs the EU’s common external trade policy.
Other U.S. cabinet-level officials interact with Commission counterparts or member state
ministers in Council formation as issues arise. Numerous working-level relationships
between U.S. and EU officials also exist. A Delegation in Washington, DC represents the
European Commission in its dealings with the U.S. government, while the U.S. Mission
to the European Union represents Washington’s interests in Brussels.
How Do European Countries View the EU?
All EU member states believe that the Union magnifies their political and economic
clout, i.e., the sum is greater than the parts. Nevertheless, the EU has always been divided
between those members, such as Germany, that seek an “ever closer union” through
greater integration, and those that prefer to keep the Union on an intergovernmental
footing. For example, the U.K. has more frequently sought to guard its national
sovereignty and, along with Denmark and Sweden, does not participate in the single
European currency (the euro). Another classic divide in the EU falls along big versus
small state lines. Small states are often cautious of initiatives that they fear could allow
EU heavyweights to dominate the Union. For instance, smaller states initially resisted
abolishing the EU’s rotating presidency in favor of an appointed individual because they
worried it could mean a loss of influence and equal standing for them. Another key
difference relates to security postures; Austria, Finland, Ireland, and Sweden practice nonaligned foreign and defense policies, which sometimes complicates the formulation of
common European positions in these areas.