EUROPEAN UNION
Last updated April 2003

Official Name:
European Union (EU)

Editor's note: The information in this article was compiled and edited from the 1996 and 1998 Background Notes and 2002 Fact Sheets made available through the Bureau of European and Eurasian Affairs of the U.S. Department of State.

U.S.-EU RELATIONS
EUROPEAN INTEGRATION
RELATIONS WITH OTHER COUNTRIES

BACKGROUND
May 26, 1998

The European Union (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 and the European Economic Community (both established in 1957). The EU has 15 members (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom) and four major institutions (the Commission, Council of Ministers, European Parliament, and Court of Justice). Member states agree to relinquish a degree of national sovereignty to EU institutions and to cooperate in the joint administration of the union.

On November 1, 1993, under the Maastricht Treaty the European Community formally became the European Union, and the Commission of the European Communities became the European Commission. Member states began intergovernmental coordination on Common Foreign and Security Policy (the "Second Pillar") and Justice and Home Affairs (the "Third Pillar"). The treaty set a timetable for the introduction of a single currency (euro) and a European Central Bank as well as the development of common economic and monetary policies.

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 in 1995. Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, and Turkey have applied for membership. In March, the EU began formal accession negotiations with Cyprus, the Czech Republic, Estonia, Hungary, Poland, and Slovenia.

The EU's Intergovernmental Conference (IGC), completed in June 1997, reviewed the Maastricht Treaty and made modest institutional changes to prepare for further enlargement. The resultant Amsterdam Treaty is now awaiting ratification by the member states, a process that could take 1-2 years. More far-reaching reforms will be revisited at a later date.

The EU is currently involved in the launch of the European Monetary Union (EMU). On May 2, 1998, an extraordinary EU Summit announced that 11 European countries qualified for and decided to join a single currency area (Denmark, Sweden, and the U.K. have opted out for now and Greece did not meet the criteria to join). Having long supported European integration, the United States applauds the economic convergence that makes the EMU possible. A successful EMU that contributes to a dynamic, strong, and stable Europe with open markets and healthy growth is clearly in the best interest of the U.S. The EU additionally decided upon the first President of the European Central Bank, Wim Duisenberg of the Netherlands, whose term of office will be 8 years. The bank is to be headquartered in Frankfurt, Germany.

The 20-member Commission, appointed by common agreement of the 15 member governments and approved by the European Parliament, has primary responsibility for initiating and implementing EU policy in areas that fall under EU communities (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. Each member state serves as President of the Council 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.

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 of Justice is the final authority on the interpretation of EU treaties and laws.

U.S.-EU RELATIONS

The United States and the European Union (EU) enjoy an exceptionally broad and deep commonality of interests and values that form the basis of a close, mutually beneficial relationship. Since the end of the Cold War, the U.S. has worked intensively with its EU partners to strengthen the partnership as part of a broader effort to build a New Atlantic Community and a New Trans atlantic Marketplace.

The U.S. and the EU share the goal of promoting a healthy, open commercial relationship and strong multilateral economic institutions. The U.S. supports greater European political and economic integration and ongoing EU efforts to enlarge to include central and east European states. We believe this process of integration and enlargement contributes to a more stable and prosperous Europe, just as NATO enlargement does. It should proceed, however, without creating new trade barriers.

The EU is the United States' largest economic partner, its largest investment partner, and second-largest trading partner. Total U.S.-EU trade was $298 billion in 1997, up from $270 billion in 1996. This two-way trade supports more than 6 million jobs on both sides of the Atlantic. By the end of 1996, the EU had more than $370 billion invested in the U.S., and the U.S. had more than $348 billion invested in the EU. Investment in Europe supports 1 out of 12 U.S. manufacturing jobs. European companies are the number-one investor in 41 U.S. states and rank second in the other nine.

The EU plays an increasingly important role in foreign affairs, especially in the area of humanitarian and development assistance. The EU's current 3-year foreign aid budget exceeds $36 billion. This assistance reinforces many important U.S. interests. For example, the EU is the largest donor of grant assistance to help promote democracy and free market reforms in the countries of central and eastern Europe. EU aid also is supporting U.S. efforts to bring stability and prosperity to troubled areas including the Middle East, the former Yugoslavia, Albania, and central Africa.

Since December 1995, the New Transatlantic Agenda (NTA) has provided the framework for enhanced political and economic cooperation between the U.S. and the EU. The President meets with the EU leadership at semiannual summits. The May 18 Summit in London highlighted recent U.S.-EU accomplishments under the United Kingdom's Presidency of the EU. Notably, the U.S. and EU:

• Began discussions on a broad, new trade liberalization initiative.
• Registered strengthened cooperation on nonproliferation, counterterrorism, and related issues, including Caspian energy resources.
• Launched a joint initiative to promote nuclear safety in northwest Russia.
• Implemented an information campaign to combat trafficking in women in Ukraine and Poland.
• Announced the first Democracy and Civil Society Awards, recognizing the democracy-promoting efforts of NGOs and individuals from 26 central and east European countries and the New Independent States (NIS).

The New Transatlantic Agenda (NTA)

The New Transatlantic Agenda (NTA), launched in December 1995, provides a framework for managing and enlarging our cooperation with the EU. It reinforces our bilateral relations with the EU member states and offers a framework for engaging the EU as a whole through a regular consultative process involving the EU Presidency country and the European Commission.

The NTA lays out an ambitious agenda for expanding U.S.-EU cooperation on promoting peace, stability, democracy, and development around the world; responding to global challenges; contributing to the expansion of world trade and closer economic relations; and "building bridges" between Americans and Europeans of the post-Cold War generation.

A key element of the U.S.-EU worldwide partnership is intensified diplomatic cooperation. The U.S. and the EU are, for example, working together to support reconstruction and reconciliation in Bosnia, promote needed reform in Ukraine, and improve nuclear safety in northwest Russia. The U.S. also is working with the EU to reinforce political and economic cooperation with Turkey, and we have encouraged dialogue among the parties in the Middle East Peace Process.

The U.S. and the EU have undertaken several new initiatives to expand cooperation on law enforcement, counternarcotics, environmental degradation, and health issues. U.S.-EU consultations have spurred development of a successful joint counternarcotics program in the Caribbean, exchanges of law enforcement officials, and an information campaign to combat trafficking in women in Poland and Ukraine. The U.S. and the EU have recently begun to discuss ways to improve counternarcotics activities in the Andean region.

Joint U.S. and EU trade efforts are helping to reduce transatlantic barriers and support the multilateral trading system. The U.S. and the EU are

Highlights of U.S.-European Union Cooperation July 2001 to June 2002

A report released by the Bureau of European and Eurasian Affairs, June 28, 2002

Building on the priorities identified in the Göteborg Statement, the U.S. and EU cooperated across the broad range of our relationship to combat terrorism, address regional conflicts, foster trade and promote sustainable development. In the fight against terrorism, we:

Mobilized the support of third countries in the international fight against terrorism in the UN and other multilateral organizations, as well as through bilateral channels.

Both took action against the financing of terrorism, aiming at the freezing of assets, the implementation of UN Security Council resolutions 1267, 1373 and 1390, and the updating of terrorist lists.

Agreed to improve and increase intelligence sharing and law enforcement cooperation, signed the Europol - U.S. agreement on 6 December 2001, began to accredit liaison officers between Europol and the U.S., and expanded our dialogue on our respective data protection systems.

Agreed to launch negotiations aimed at concluding one or more agreements on extradition and mutual legal assistance to enhance our abilities to bring suspected terrorists and other criminals to justice, and strengthened contacts between Euro-just and the U.S.

Exchanged information on travel dock-mints and migration issues to strengthen our border controls.

Worked to strengthen aviation security on the ground and in the air. At the extraordinarynary ICAO ministerial in February we worked to strengthen worldwide aviation security, including through support for the establishment and implementation of an ICAO aviation security audits program.

Cooperated within the United Nations, the G-8 and OSCE, and examined how to reinforce our respective assistance to help countries improve their security and capacity to deter terrorism.

Enhanced non-proliferation and disarmament cooperation, including by seeking ways to reinforce the multilateral instruments. We agreed on the importance of non-proliferation and disarmament efforts in Russia and Central Asia, and discussed our respective assistance programs to third countries that contribute directly or through more global institution building to better export controls.

We responded to difficult regional challenges, in particular:

On the Middle East, with our Quartet partners, we agreed on a three-part strategy to renew a political process that aims at a two-state solution; support effective efforts to restore security; and respond to economic and humanitarian needs and assist in building strong, responsible Palestinian institutions in preparation for statehood.

From the Bonn Conference to the Loya Jirga, we supported the interim Afghan Government. We mobilized substantial emergency assistance for the Afghan population and co-chaired, together with Japan and Saudi Arabia, the Tokyo Ministerial Conference on Reconstruction Assistance to Afghanistan. Together, we pledged over $1 billion in reconstruction assistance in 2002. We initiated counter-narcotics efforts and worked to strengthen key institutions, such as the army, police and judiciary, which are the building blocks of Afghan security.

We promoted implementation of the framework agreement in the Former Yugoslav Republic of Macedonia, establishment of Kosovo's new provisional self-government institutions, and agreement between Serbia and Montenegro to restructure their relationship within a federal framework.

To promote sustainable development around the globe, we:

Achieved a new consensus at the Monterrey Conference on Financing for Development on principles for successful development, recognizing that, while ODA is important, other factors are also critical to successful development and poverty reduction. We announced increases in our ODA assistance, emphasizing the importance of achieving measurable results, and will continue our technical assistance and trade capacity-building efforts.

Building on the success of Doha and Monterrey, we engaged in preparations for a successful World Summit on Sustainable Development in August-September 2002 in Johannesburg, exchanged views on the various elements being prepared for the Summit and explored opportunities to work together to develop voluntary partnerships.

Helped launch the global fund to fight AIDS, Tuberculosis and Malaria (GFATM), which approved the first grants for $616 million over two years for projects in 43 countries.

Convened the first meeting of the U.S. - EU High-Level Dialogue on Climate Change, discussed our differing approaches to climate change and agreed on the importance of working toward the achievement of the ultimate objective of the UN Framework Convention on Climate Change. We also agreed to cooperate on climate-related science and research projects.

Intensified cooperation on drugs through the high-level U.S. - EU Drug Troika and demand reduction seminar, and agreed to continue sharing information on drug use and drug dependence.

We have taken steps to strengthen our trade and economic partnership:

Following the successful Doha WTO Ministerial, we have been active in supporting the launch of new multilateral trade negotiations and will continue to work together to meet the Doha timetable leading up to the next ministerial in September 2003. We announced increased support for trade-related technical assistance both in the WTO and in our bilateral programs.

Although a number of decisions and measures which have serious effects on bilateral trade have been taken during this period, we are working together to manage our disputes cooperatively within the framework of existing bilateral and multilateral mechanisms with the objective of compliance with our international obligations.

At the U.S. - EU Summit in Washington on May 2, we agreed to a positive economic agenda intended to yield tangible benefits for businesses and consumers. We have identified potential issues for enhanced cooperation in a number of key policy areas.

Under the TEP, guidelines on regulatory co-operation have been drawn up to improve cooperation between regulators and to promote transparency for all stakeholders.

We relaunched bilateral energy consultations focusing on energy security, conservation, efficiency, renewables and deregulation.

We consulted closely as the EU moves to create a European Aviation Safety Agency (EASA) to ensure that EASA and the FAA work together to protect aviation safety.

discussing a new initiative to remove trade barriers and create a New Transatlantic Marketplace. The U.S. and the EU are working diligently to resolve important trade differences in the areas of Specified Risk Materials and Genetically Modified Organisms. Within the next few months, the U.S. and the EU will sign a Positive Comity agreement on enforcement of competition laws. Our governments are cooperating closely with the Transatlantic Business Dialogue (TABD), a U.S.-European business partnership, to address a wide range of trade barriers important to the business community.

A key part of the agenda is a fourth chapter dealing with "building bridges" between the different constituencies in the transatlantic community. At the May 18 summit, the U.S. and the EU presented the first U.S.-EU Democracy and Civil Society Awards to NGOs and individuals from some 26 central and eastern Europe and New Independent States (NIS) countries who have excelled in promoting democratic values and civil society. The U.S. and the EU are also working to launch an ongoing dialogue that will focus on consumer issues in the transatlantic marketplace.

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 to forge even closer economic, monetary, and political ties within the Union. The treaty called for the EU to establish a European Central Bank and a single currency, the euro.

The euro was adopted January 1, 1999 by eleven member-states of the EU. These states were: Austria, Belgium, Germany, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Britain, Denmark, and Sweden opted not to adopt the euro at that time. Since then, Greece has also adopted the euro. The creation of a euro zone marks the third phase of the path toward economic union among the countries of the EU. Euro notes and coins began replacing the currency of individual countries in 2002.

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.

In December 2002, the EU announced the acceptance of negotiations for membership with Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia. Thee countries are expected to become full members in May 2004.

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.

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.