EUROPEAN UNION



What started off in 1957 as the European Economic Community (EEC, popularly called the Common Market) evolved into the European Community (EC) by 1967, a change that implied a social as well as an economic order. In 1993 the European Community gave way to the European Union under the Maastricht Treaty, which brought together 370 million people under a common economic and quasi-political entity that constitutes the world's largest trading power.

The European Union (EU) is an organization of 15 western European nations that joined together to promote economic, political, and social cooperation, including varying degrees of integration. Notable successes of the EU include the creation of a single economic market free of internal constraints of trade; stabilization of currency exchange rates through the European Monetary System (EMS); and a single currency unit of exchange known as the euro, which replaced the European Currency Unit (ECU). In the realm of political integration, the EU is evolving toward the abrogation of frontiers between member states, harmonized defense and foreign policy, the unimpeded movement of labor and capital, and European citizenship. Members in 1999 included Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.

ORGANIZATION

The EU is governed by four major administrative bodies which are responsible for the organization's executive, judicial, and legislative operations. Essentially, policy is set by the European Commission and the Council of the European Union. Decisions made by these institutions are sent to the European Parliament. Once parliament has been consulted and has given its advice, the decision returns to the commission for execution. When the Common Market consisted of only six members, decisions had to be unanimous. After 1986, when the EC had enlarged to 12 members, this was changed to majority voting on most matters, except for decisions on revenues. The Court of Justice, finally, enforces legislation and arbitrates disputes. The various institutions of the EU are based in several different European cities, particularly in Brussels, Belgium; Strasbourg, France; Frankfurt, Germany; and Luxembourg.

EUROPEAN COMMISSION.

Headquartered in Brussels, the European Commission is made up of two representatives from each large state and one from each small state. Commissioners serve four-year terms. These commissioners, in a sense, represent Europe and owe their loyalty strictly to the European Union. The European Commission is responsible for the application of treaty provisions and for formulating recommendations for the implementation of treaty provisions. The commission also initiates proposals for legislation and manages EU policies and international trade relationships.

COUNCIL OF THE EUROPEAN UNION.

Often called the Council of Ministers, this body represents the individual states and usually is composed of their foreign ministers. Because ministers come and go, another entity, the Committee of Permanent Representatives (COREPER), supports and advises the council and is made up of permanent civil servants of the European Union. The council meets twice a year to adopt or reject major policy decisions concerned with the future of the EU. The Council of Ministers is where the member states set the union's political objectives and coordinate their national policies.

EUROPEAN PARLIAMENT.

Members of the European Parliament (MEPs) are democratically elected by the electorate of each member state. They represent Europe's citizens proportionally (hence, Germany has more MEPs than Luxembourg). The parliament originally served only a consultative function, and could neither make laws nor raise taxes. Far from being a rubber stamp, however, it was an important forum for discussion and debate (the commissioners appeared regularly before the parliament) and had the ultimate power to dismiss the commission or to veto the EC's budget. In recent years, parliament's powers have been significantly expanded in order to bring policy decisions closer to Europe's citizenry. MEPs now enjoy "codecision" privileges along with the European Commission, moving them closer to the decision-making process. The European Parliament's 600-plus members also maintain certain veto powers, and by a two-thirds vote can expel the commission.

COURT OF JUSTICE.

The permanent European Court of Justice in Luxembourg is the arbiter of disputes between institutions as well as the enforcer of EU laws. These laws are based on decisions of the commission and council, on the major treaties signed among the member states, on international conventions and treaties, and the special agreements made when a new member is accepted into the ranks of the EU. The European Court of Justice decides under the treaty on the legality of actions taken by the commission, the council, actions taken by member states relating to the EU, and private organizations dealing with the EU.

OTHER BODIES.

In addition to Parliament, the Economic and Social Committee advises Parliament as well as the Commission and Council. It is one third the size of Parliament and consists of representatives of unions, employers, and others in the workforce. The Court of Auditors acts as the "taxpayers' representative," monitoring the allocation of EU money to ensure it accords with budgetary rules. The Committee of the Regions acts to safeguard regional and local identities in the development and implementation of EU policies. Any EU citizen who feels his or her fundamental rights as a citizen have been infringed by EU policies or institutions may appeal to the European Ombudsman.

HISTORY

While the dream of a united Europe is an ancient one, few early in the 20th century would have imagined that it could be realized in their century. However, never were there more compelling reasons for Europeans to establish a permanent peace as there were after World War II. Torn to shreds by the ugliest forms of ethnic and national hatred, and geographically situated in the middle of a global power system in which the failing of peace could mean global annihilation, Europeans established a framework in which regional cooperation and peace could be fostered. However, even after the establishment of the "Common Market," which did not take place until 1957, few could have foreseen the dizzying pace of European integration thereafter.

With western Europe battered at the end of World War II, the United States stepped forward with its multibillion-dollar Marshall Plan aid and reconstruction package. The U.S. government imposed one condition on this plan; namely, that it was to be administered by Europeans in some form of joint organization. In due course the Organization for European Economic Cooperation (OEEC) was formed, in which Europeans formulated a common economic policy and sowed the seeds of the much more elaborate Common Market.

The philosophical father of the EU was the French businessman and statesman Jean Monnet (1888-1979). Monnet advocated a gradual political, social, and economic unification of the countries of Western Europe. Monnet believed, to paraphrase one of his ideas, in the uniting of men, not the merging of states. The first step toward this unification was the 1951 signing of the Treaty of Paris by Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany, which established the European Coal and Steel Community (ECSC). This gave birth to a single common market covering iron ore, coal, scrap metal, and steel produced by the six countries. The treaty broke down trade barriers for these products and allowed the free movement of labor, regardless of nationality, working in these industries.

The success of the ECSC led to the birth of the European Economic Community, or Common Market, when the respective prime ministers and foreign ministers of the six members of the ECSC signed the Treaty of Rome in 1957. The Common Market derived its name from the pre-war French statesman Aristide Briand (1862-1932), who in 1929 introduced a scheme for a European "common market" before the League of Nations, the predecessor to the United Nations. While nothing came of it, his plan was resurrected and formed the basis of the later EEC. Two notable features of the Treaty of Rome was its tacit acceptance of the idea of eventual political union and the irrevocable commitment by states to the Common Market—no nation had a right to secede. In addition, the European Atomic Energy Community (EAEC) was established, and the institutions of the ECSC were adopted by the new EEC. In 1967 the governing agencies of these three organizations (ECSC, EAEC, and EEC) merged to form the European Community (EC). Headquarters were located mainly in Brussels, but also in Luxembourg, as well as in Strasbourg, France. The French insisted that a condition of French membership would be the location of at least some EEC institutions in France.

In a move that signaled the seriousness with which the EC nations envisioned a united Europe, the member states yielded some of their sovereignty to a collective leadership for the sake of harmony in Europe and greater prosperity. The EC's goals were to eliminate trade barriers among its members, to endow their citizens with equal rights, which included the elimination of internal tariffs and complete freedom of movement, and to provide free transfer of their goods and funds. The EC quickly moved to implement these goals; tariffs were eliminated on goods traded amongst its members, and a common tariff was established on goods imported from other countries. In 1979 the EC established the European Monetary System (EMS) in response to the economic and inflationary woes of the 1970s. In a major step toward monetary integration, the EMS regulated exchange rates and established a common unit of currency, the ECU, which was not a currency in the normal sense, but served in the financial markets as a breadbasket of member currencies.

Italian statesman Altiero Spinelli worked out a plan in the 1970s for a single European Community that served as the model for the one eventually adopted in 1986. The Single Market Act became law that year after government leaders of the majority of Common Market states had sent the European Commission a proposal to speed up the attainment of a single internal market. The plan, which called for the completion of a single internal market by January 1, 1993, would make tiny western Europe the largest and richest free trade zone in the world. In 1987 the EC ratified the Single European Act which expedited the ending of customs regulations and other barriers to the unimpeded movement of goods, services, labor, and capital amongst EC members. Implementation of the act, however, was gradual.

EXPANSION

While only one-third of the nations of western Europe were included initially in the Common Market, there was a procedure in place for voting in new members. The criteria for acceptance of a prospective member were (and still are): that its government be democratic (a condition historically intended to exclude any communist or fascist state), and that it have a viable economy that would not constitute a strain on the economies of the other member states.

A crack in the Common Market's outward harmony appeared in the early 1960s when the British government decided to apply for membership. Surprisingly, the application took years to approve, even though five of the six member states were eager to strengthen the Common Market by the addition of this valuable neighbor. Great Britain's admission was stalled by President Charles de Gaulle of France (1890-1970), who was convinced that British membership would pave the way for overwhelming American influence in Europe. Only in 1973 did the French government come to regard the British as a counterweight to the economic clout of the West Germans, and thus the United Kingdom was accepted that year, along with Ireland and Denmark. Within a decade, Greece joined, followed in 1986 by Spain and Portugal. Within 30 years of the signing of the Treaty of Rome, the Common Market had doubled in size.

By the early 1990s, communism had fallen in eastern Europe and Russia, and eastern Germany had begun to reunite with its western sibling. This opened the possibility of broadening the EC beyond its 12 members: Finland no longer would be compelled to abstain from membership because of Soviet objections, while Austria did not have to adhere to its Soviet-imposed policy of official neutrality. It also raised the prospect—almost unimaginable to many—that eastern Europe might join a free-market community as well.

In fact, the most stable of the eastern European states—the Czech Republic, Slovakia, Poland, and Hungary—lost little time in signaling to the EC that they would begin to transform themselves into a free-trade zone as a first step toward their eventual goal of inclusion in the EC. Consequently, in December 1992, they signed the Central European Free Trade Agreement (CEFIA), which created a semblance of a common market in eastern Europe.

EUROPE UNITED

With the goal of a free internal market just two years from being realized, Chancellor Helmut Kohl of Germany and President François Mitterand of France took the initiative to propose the groundwork for a union that would go far beyond full economic integration. In 1992 the 12 member states of the EC signed the Treaty on European Union in Maastricht, the Netherlands, creating the European Union effective I November 1993. The Maastricht Treaty was the single greatest step in European history toward unification of its western countries. It went beyond the Treaty of Rome in that it contained provisions for not only further economic integration but also political and social integration. The Maastricht accord called for the EC to expand its activities and responsibilities to eventually include health care, consumer protection, common industrial planning, and environmental protection.

The central purpose of the Maastricht Treaty, however, was to continue and accelerate the economic integration process begun with the signing of the Treaty of Rome. The Maastricht accord called for the establishment of the European System of Central Banks and a European Central Bank. The European Central Bank's function is to oversee a single monetary policy for the EU. Another important provision of the treaty was the establishment of the European Monetary Union charged with implementing plans for a single European currency (the euro) by 1999.

The European Union that the Maastricht Treaty envisaged was not yet a political union, but only the framework for one. At the heart of the treaty was an article making "subsidiarity" a principle of the new Union; namely, member states would voluntarily yield to a central authority those functions which they could not perform as well on their own. This entailed, in addition to a uniform monetary policy and common currency, a common foreign policy, as well as common policies on many police and justice matters.

These radical changes required getting used to the idea of a central bank and to an enhanced central authority, although this authority would reside in the collective entities of the European Commission and the Council. To calm fears of some menacing new government gaining control over sovereign states, the Maastricht Treaty also extended the powers of the European Parliament.

Although all of these changes were foreseen as far back as the 1957 Rome Treaty, they were so radical that the Maastricht Treaty would engender much rancorous debate and friction each time it was put before the voters of an EC state. Denmark rejected it the first time around but relented the second time after special concessions were made; and Switzerland soundly defeated it. Eventually, however, the whole of the European Community ratified the treaty.

In 1994 the European Union joined with three of the four members of the European Free Trade Association (EFTA) to form the European Economic Area (EEA). The EEA is a cooperative trade agreement which removed barriers to the free movement of capital, people, services, and nonagricultural products between Iceland, Norway, Liechtenstein, and EU members. Switzerland, the fourth EFTA member, did not sign the accord. In 1995 Austria, Finland, and Sweden became EU members, bringing the total to 15.

TREATY OF AMSTERDAM

With monetary union around the corner and further expansion on the horizon, the European Union met in the Netherlands to write the Treaty of Amsterdam, which was signed on 1 February 1997. All member states had completed ratification by 30 March 1999, and the treaty went into effect on 1 May 1999.

The primary function of the Treaty of Amsterdam was to provide for a more cooperative, integrated Europe that would be able to meet the challenging planned expansion over the following decade. The treaty focused on increasing "flexibility," which was included a streamlined financial plan that would account for the various stages of economic development and prosperity among its member states. Specifically, it would allow those countries moving at a slower pace to catch up.

In the political sphere, Amsterdam established a formal mechanism for revising treaties, for safeguarding against all violations of citizens' fundamental rights, and for the redress of breaches thereof. It was instrumental in expanding the political powers of the European Parliament. More broadly, Amsterdam revitalized the EU's structure with an eye toward expansion. Furthermore, the Conference of European Affairs Committees (COSAC)—the organization that brings together all the member states' national policies for discussion—was authorized to comment on all EU decisions and legislation before final decisions are passed. Finally, the number of MEPs was limited to 700, regardless of the number of member states.

In the social realm, Amsterdam set as a major EU objective a high level of employment throughout its domain. Social justice issues were further addressed by the inclusion of nondiscrimination clauses, including provisions for gender equality in employment. In an effort to bridge what many saw as too great a gap in research and education, the treaty called for greater exchange of information and research, establishing research centers throughout Europe that would bring together scientists and researchers from various countries for the purpose of exchanging and discussing of information. Without specifically implementing any provisions, the treaty also established a legislative framework to implement broader, more uniform environmental regulation.

To coincide with its conditions for greater internal movement of goods and people, Amsterdam also recognized the need for greater cooperation between member states on crime prevention, including knowledge-sharing, especially relating to international crime and organized criminal activities. Each member state, however, remained responsible for its own internal security policy.

Finally, Amsterdam streamlined and expanded the European Union's Common Foreign and Security Policy (CFSP) with calls for greater cooperation of military and diplomatic policy and strategy between member states. The treaty allows the EU to carry out humanitarian aid and peacekeeping tasks, both inside its borders and globally. Moreover, the signers inserted an abstention clause to allow individual members to refrain from a foreign operation or policy without nullifying it for the whole union.

THE EURO

On 1 January 1999 Europe's monetary union officially began, by which countries who have signed on (called the "ins") saw their currencies subsumed under the euro. These national currencies are to coexist with the euro until July 2002, when they will be phased out entirely, at which time the euro will become the sole legal tender. Until then, participating members' currencies function as denominations of the euro and have fixed relations to one another. The euro's physical bills and coins were scheduled to be introduced in January 2002. Meanwhile, financial regulation, including the setting of interest rates, was removed from the jurisdiction of the national governments and placed in the hands of the European Central Bank.

The United Kingdom, Sweden, and Denmark are the sole EU countries who presently have opted to remain outside the monetary union. They are joined on the list of "pre-ins" by Greece, which has agreed to join the monetary union in 2001. U.K. Prime Minister Tony Blair, however, has made subtle hints to the effect that the United Kingdom may embrace the euro in coming years.

FUTURE GROWTH

Nowadays, no one is surprised that a nation such as economically depressed Bulgaria is planning to apply for membership one day. It is taken for granted that CEFTA countries will join. Indeed, the majority of EU administrators assume that the bulk of eastern Europe will become part of the union over the first decade and a half of the 21st century. Even the prospect of Russia becoming a member, however long that may take, is not even so remote. Many of these countries have already expressed interest; applicant countries include Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. Turkey has long courted the idea of joining, though their accession remains particularly problematic due to reported human rights abuses and the country's illegal occupation of much of Cyprus since 1974.

The specific time frame for these nations' admission remains contentious both within those countries and in the existing EU. Many eastern European nations face the choice of (1) waiting until their economies reach a greater stage of development, so as to gain leverage within the EU and not see their domestic industries crumble under foreign competition; or (2) jumping in earlier so as to take advantage of increased market access and the other advantages of aligning with the union.

Furthermore, the issue of farm subsidies is expected to account for a great deal of debate within the EU as these countries move closer to accession. Most of the applicant countries maintain large farm industries, and thus their accession could necessitate a significantly higher tax burden on the economically advanced countries of western Europe. This could cause some friction; Germany, for example, which supplies a far greater sum to the EU budget than it receives in return, has already expressed interest in redressing this imbalance.

The smooth pace of the transition to the European Union was disrupted on 15 March 1999 by the sudden resignation of entire 20-member European Commission amid charges of fraud and gross mismanagement. This was the first such administrative shake-up of the EU's history. In response, the EU called for an inter-governmental conference to overhaul the commission's operating structure to ensure tighter auditing procedures, tighter disciplinary procedures for improved accountability, and, perhaps, a new financial management system.

In 1999 talks began within the EU on its Agenda 2000 program to try to settle these and other issues before they get out of hand. The plan is primarily intended to pave the way for the admission of up to a dozen new members from central and eastern Europe, many in the first decade of the 21st century. The agreement reached in March 1999 established a framework to strengthen and reform EU policies so they can deal with enlargement and deliver sustainable growth, higher employment, and better living conditions to all new and existing citizens.

FURTHER READING:

Duina, Francesco G., and John A. Hall. Harmonizing Europe: Nation-States within the Common Market. New York: State University of New York Press, 1999.

Eichengreen, Barry, and Jeffrey Frieder, eds. Forging an Integrated Europe. Ann Arbor, MI: University of Michigan Press, 1998.

European Commission. Welcome to Europa. Brussels, 1999. Available from europa.eu.int/index-en.htm .

Hoeller, Peter. The European Union's Trade Policies and Their Economic Effects. Paris: OECO Economics Department, 1998.

Journal of Common Market Studies, monthly.

Kauffman, Mark A. The European Community: An Essential Guide Toward Knowing and Understanding the EC. Mansfield, OH: Stone & Quill, 1993.

McNamara, Kathleen R. The Currency of Ideas: Monetary Politics in the European Union. Ithaca, NY: Cornell University Press, 1998.

Neal, Larry. The Economics of the European Union and the Economics of Europe. New York: Oxford University Press, 1998.

Ungerer, Horst. A Concise History of European Monetary Integration. London: Quorum Books, 1997.

Urwin, Derek W. The Community of Europe: A History of European Integration Since 1945. 2nd ed. Reading, MA: Addison Wesley Longman, 1995.



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