European Union

THE EUROPEAN UNION (EU), with 25 member states in 2004, had its initial organization created after World War II for the purpose of rebuilding Europe after the turmoil and devastation of the war. It was thought that economic and political cooperation would greatly reduce the risks of repeating such a conflict and would be the first step toward unifying European interests.

The idea was to create an internal market in order to enhance economic growth. Created as a predecessor organization in 1951 with six countries, what became the European Union has added countries to the consortium four times, and in 2004 was preparing for its fifth expansion. The EU benefits consumers (lower prices, greater choice of goods and services, work conditions within the EU) and businesses (fair competition, economies of scale, expansion to global markets).

The European Union comprises countries in the continent of Europe, bordered on the west, north, and south by the ATLANTIC, ARCTIC, and MEDITERRANEAN oceans and seas. The eastern border of the continent, however, is to some extent vague. Some people believe that the URAL MOUNTAINS of RUSSIA, the Ural River and the CASPIAN SEA are the eastern border of Europe. Others believe that the border with Russia is Europe's eastern boundary, while some others separate Europe from Asia by the Bosporus Strait.

As a continent, Europe is relatively small. Its physical landscapes, however, are varied and complex. The countries in Europe differ in climate, vegetation, and elevations: From the warm and dry Mediterranean climates in southern Europe, to the frigid climates of northern Scandinavia; from the moist woodlands of Western Europe, to the dry STEPPEs in the eastern extremities of Europe; and from the flat coastlines of the NORTH SEA, to the majestic ALPS.

The formation of the European Union began with six countries: BELGIUM, GERMANY, FRANCE, ITALY, LUXEMBOURG, and the NETHERLANDS. After nearly 50 years, four different expansions included: 1973: DENMARK, IRELAND, and the UNITED KINGDOM; 1981: GREECE; 1986: SPAIN and PORTUGAL; 1995: AUSTRIA, FINLAND, and SWEDEN; 2004: CYPRUS, CZECH REPUBLIC, ESTONIA, HUNGARY, LATVIA, LITHUANIA, MALTA, POLAND, SLOVENIA, and SLOVAKIA. The next expansion is scheduled to occur in 2007, with BULGARIA and ROMANIA joining the EU. The countries of CROATIA and TURKEY have also applied for membership but have not been accepted for the 2007 expansion.

Other milestones of the enlargement of the European Union include the following:

• 1952: The European Coal and Steel Community (ECSC) was founded by Germany, France, Italy, the Netherlands, Luxembourg, and Belgium.
• 1958: The European Economic Community (EEC) and Euratom were founded. The EEC was a community in which free trade for all products was established. Euratom dealt with research, production, and safety in the nuclear energy sector.
• 1967: The three organizations (ECSC, EEG, and Euratom) were merged into the European Community (EC).
• 1991: Maastricht Treaty (the Treaty of the EU) goes beyond the internal market program and includes additional areas in the integration process.
• 1993: The EC was renamed European Union.
• 1997: The Amsterdam Treaty was signed.

The total geographic area of the EU is 2,419,064 square mi (6,265,347 square km), and if it were a country, it would be the seventh-largest in the world by geographic area. The number of EU citizens (all member state citizens or subjects, under the terms of the Maastricht Treaty) is about 453 million (March 2004). The population of the EU, considered as one country, would be the third-largest in the world after INDIA and CHINA. Germany has the largest population, with 82.5 million inhabitants and Malta is the smallest, with 387,000 people. Many countries, such as MONACO and ANDORRA, while not being member states, have special agreements with the EU. Other areas have connections or associations with EU member states through a colonial past, cultural links, or geographic placement: GREENLAND, the Isle of Man and the CANARY ISLANDS.

The addition of countries to the EU raises issues about how the member countries are affected. Specifically, economists consider the implications for southern European countries (Spain, Italy, Portugal, and Greece) which are major beneficiaries of EU's redistribution programs. The enlargement of the EU not only effects change in economic geography, it creates change in the political landscape (national sovereignty and political governance) and cultural geography.

LARGEST ECONOMY

In 2004, the EU had the largest economy in the world. The EU continues to have an import surplus, contrasting the widening trade deficit that affects the United States. However, in 2004 the EU had stagnant economic growth with low employment. It is anticipated that the gross domestic product per capita of the whole EU will fall over the short-term. In the long-term, the EU's economy will suffer from significant demographic challenges.

The EU has no designated capital city, but Brussels is the de facto administrative center, as it is the home of the European Commission, the Council of Ministers and the European parliamentary commissions. The European Parliament sits in the French city of Strasbourg while Luxembourg is the seat of the European Court of Justice and parliamentary offices.

As the changing name of the EU (from European Economic Community to European Community to European Union) suggests, the EU has evolved over time from a primarily economic union to an increasingly political one. This trend is highlighted by the increasing number of policy areas that fall within the EU areas of interest. Political power has tended to shift from the member states to the EU.

This picture of increasing political focus can be illustrated by two points. First, some member states have a domestic tradition of strong regional government. This has led to an increased focus on regional policy in the European regions. A Committee of the Regions was established as part of the Treaty of Maastricht. It led to the formal creation of the EU and was the result of separate negotiations on the Monetary Union and on the Political Union.

THE EURO

The Treaty of Maastricht led to the creation of the euro (the European currency) and introduced a three-pillar structure (the Community pillar, the Common Foreign and Security Policy, or CFSP, pillar, and the Justice and Home Affairs pillar). There was a desire to focus the EU on the areas of foreign policy, security and defense policy, asylum and immigration policy, police cooperation, and judicial cooperation. Within each pillar, a different balance is struck between the supranational and intergovernmental principles.

Originally, the European Community was essentially concerned with economic and trade matters. The European Commission and the European Court of Justice were both independent from the EC governments and had a lot of power within the system. The European Parliament, which was directly elected by the citizens of the EC member states, also had some limited power.

Additionally, EU policy areas covers a number of different forms of cooperation: 1) autonomous decision making; 2) member states laws are harmonized through the EU legislative process, which has resulted in EU laws becoming increasingly present in the systems of the member states; and 3) member states agree to coordinate their domestic policies.

The tension between EU and national (or sub-national states) is an enduring one in the development of the organization. All prospective members must adopt, implement, and enforce legislation in order to bring themselves into line with the common European legal framework. The entire body of European laws is known as the “Acquis Communautaire.” This includes all the treaties, regulations, and directives passed by the European institutions as well as judgments issued by the Court of Justice. The EU is characterized by sharing a broad number of issues and covering specific issues in the internal market and its external relations. With respect to the single market internal aspects, the main principles are the free movement of goods, services, persons and capital (a goal further extended to some countries by the European Economic Area, EEA); a common EU competition policy controlling anticompetitive activities of enterprises (antitrust, abuse of dominant market position, merger controls) and member states; and freedom for citizens of its member states to move, live, and work anywhere within the territory of the member states, provided they can support themselves (also extended to other EEA states).

The last has resulted in the elimination of checks on individuals at the borders between EU member states. The Schengen Treaty authorized the elimination of internal border controls and coordination of external controls between its member states. This excludes the United Kingdom and Ireland, which have continued to check all persons entering their borders. In addition, two non-EU countries—ICELAND and NORWAY—participate through special agreements.

The EU seeks policy coordination in a changing regulatory environment. This effects government regulation, corporate law, and trademark registrations by lowering administrative costs, stimulating cross-border business cooperation, and creating greater attractiveness for outside investors. The single currency, the euro, has been adopted by all member states except the United Kingdom, Denmark, Sweden, and the last 10 countries that entered the EU in 2004. The adoption of a single currency is the final part of the Economic and Monetary Union (EMU). The first stage was to remove barriers to free-up the movement of capital, and the second stage was to set up the European Central Bank. Stage three consisted in the introduction of the euro currency and its adoption by most part of member states at the start of 2002.

The EU promotes common agricultural policies (CAPs). The CAP was established in the late 1950s as a response of food shortages in Europe. Today, CAP addresses other problems (overproduction, sustainability of agriculture and food). CAP expenditure accounts for approximately 45 percent of the EU budget.

The EU also establishes a common system of indirect taxation, the VAT (value added tax), as well as common customs duties and excises on various products. It provides resources for the development of disadvantaged regions (structural and cohesion funds). With regard to the external issues to the internal market, the EU forms a customs union with a common commercial policy vis-a-vis countries outside the EU. This policy is pursued within the World Trade Organization regulations. Further, the EU provides resources for programs in candidate countries and other astern European nations, as well as aid to several developing nations.

For the future, the EU is considering the possibilities of EU citizens voting on local government and European Parliament suffrages in any member state; collaboration in criminal issues, comprising intelligence issues through the European Police Office (Europol) and the Schengen Treaty; a unique foreign policy for all EU member states; and a common security policy, including the creation of 60,000-member European Rapid Reaction Force (ERRF) for peacekeeping and conflict prevention purposes.

The EU is in many ways a unique phenomenon. The EU institutions do not exclusively reflect the characteristics of supranational institutions, but rather a combination of both intergovernmentalism and supranationalism. An essential tension exists within the EU between intergovernmentalism and supranationalism. The final goal of intergovernmentalism is the protection of sovereignty (power is possessed by memberstates and decisions are made by unanimity). An alternative method of decision making in international organizations is supranationalism. This denotes a framework in which supranational factors possess a significant impact on the member states (member states still have power, but they must share this power with the other member states).

This institutional challenge is probably the greatest of all challenges facing the EU. Intergovernmentalism has historically been preferred by France, and by more Euro-skeptic countries such as the United Kingdom and Denmark, while more integrationist nations such as Belgium, Germany, and Italy have tended to favor the supranational framework.