Background

I. What is the European Union (EU)?

The EU is a supranational and intergovernmental union of nation-states established to start a new stage in the process of European integration. It was established on February 7, 1992 when the Maastricht Treaty (formally, the Treaty of the European Union, TEU) was signed in Netherlandsand it entered into force on November 1, 1993 during the Delors Commission.

The desire to establish institutions that would promote European integration and cooperation became more evident after the Second World War when the process of rebuilding the continent proved to be difficult for most nations acting on their own.

While a discussion of the European Union seems to invite the issue of Winston Churchill’s idea of a United States of Europe, its supporters point out that the EU remains to be a free association of sovereign states. Unlike the federalism of the United States of America, Europe, even with the EU, does not have a single government, a single foreign policy set by that government, a single taxation system contributing to a single exchequer, or a European Army.

As an expression of the expanding concept of European Federalism, today, the EU not only covers policies on trade and the economy but also includes new policy areas such as foreign policy, security and defense, asylum, immigration, and police and judicial co-operation in criminal matters.

II. EU’s Predecessors

The EU is not the first entity to promote European cooperation and integration. In 1951 and by virtue of the Treaty of Paris, 6 nations in the continent agreed to establish mutual regulations for their steel and coal resources. The European Steel and Coal Community (ECSC) was created by France,West Germany,Italy,Belgium,Luxembourg, and the Netherlands.

The ECSC had a simple agenda: to unite the member-nations by controlling two resources that proved to be fundamental during and after the war. With this goal, the ECSC introduced a common free steel and coal market, with freely set market prices, and without import/export duties and subsidies.

In 1958, theEuropean Economic Communitywas established by the Treaty of Rome. Article 2 of the said Treaty provides that the European “Community shall have as it task, by establishing a common market and an economic and monetary union and by implementing common policies or activities referred to in Article 3 and 4, to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member-States.

When the Maastricht Treaty was ratified in 1993, the EEC came to be referred to as the European Community.

Today, under the European Union, the European Community is the collective name for the European Economic Community and the European Atomic Energy Community (Euratom) which was established also by virtue of the Treaty of Rome in 1957. Together with these bodies, the European Union also includes institutions for the Justice and Home Affairs and the Police an Judicial Cooperation in Criminal Matters, and for the Common Foreign and Security Policy.

III. From ECSC to the EU: A Diagram

IV. Members of the European Union

Membership in the European Union is evaluated according to the Copenhagen criteria established during the 1993 European Council in Denmark.

Membership criteria require that the candidate country must have achieved

  • stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;
  • the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union;
  • the ability to take on the obligations of membership including adherence to the aims of political, economic & monetary union.

V. Features of the European Union

A. Single Market

The 1957 Treaty of Rome expressed the ultimate need for a single market in Europe. Since then, the concept of the single market has evolved. During the 1950s, cooperating nations in Europe worked within the changing framework of a customs union with a free trade area and common external tariffs.

After the 1957 Treaty of Rome, the customs union concept was modified in several pacts until the Single European Act of 1986 recognized a broader concept of a European Single Market.

Jacques Delors summarized the objectives of the Single European Act of 1986 in the following manner:

“The Single Act means, in a few words, the commitment of implementing simultaneously the great market without frontiers, more economic and social cohesion, a European research and technology policy, the strengthening of the European Monetary System, the beginning of an European social area and significant actions in environment”

Today’s concept of the European Single Market has, among others, the following features:

  • common external tariff
  • the abolition of internal customs duties
  • the removal of distortions to competition
  • the harmonization of relevant laws
  • the adoption of a common agricultural policy
  • removal of passport controls
  • the introduction of a single currency
  • police co-operation
  • ‘social action’ and tax harmonization
  • establishment and recognition of the four freedoms: goods, people, capital, and services
    • Goods: companies can sell their products anywhere in the member states and consumers can buy where they want with no penalty.
    • People: citizens of the member states can live and work in any other country and their professional qualifications should be recognized.
    • Capital: currencies and capital can flow freely between the member states and European citizens can use financial services in any member state.
    • Services: professional services such as banking, insurance, architecture and advertising can be offered in any member state.

B. Single currency: Euro

The Euro is the official currency of the Eurozone. As of January 1, 2007, 13 members of the European Union have agreed to adopt the euro as their official currency. These countries are:

  • Austria
  • Belgium
  • Finland
  • France
  • Germany
  • Greece
  • Ireland
  • Italy
  • Luxembourg
  • TheNetherlands
  • Portugal
  • Slovenia
  • Spain

Note: The most popular mnemonic for these countries is BAFFLING PIGSS.

** Three non-EU members are also part of the Eurozone: Andora, Kosovo, and Montenegro adopted the euro unilaterally.

Contrary to popular belief, membership in the EU does not require the automatic adoption of the euro as the country’s currency. Heated debates continue among the members of the EU as regards the costs and benefits of having a single monetary policy.

Perceived Benefits of Adopting the Euro:

  1. Practicality: Citizens can travel more easily within the euro area without the hassle of changing currencies every time they cross a border, and are better able to compare prices since they can use their own currency anywhere in the euro area. Travelling outside the euro area is also easier since the euro is an international currency and therefore widely accepted in many places outside the euro area, particularly in tourist destinations.
  1. Greater price transparency: The law of one price will eliminate the prejudicial practice of arbitrage, i.e. speculative trade in a commodity between countries purely to exploit the price differential. With a single currency in a single market, consumers can find the cheapest prices for goods and services.
  1. Elimination of foreign exchange transaction costs and elimination of exchange rate uncertainty. With this, businesses can now explore previously unprofitable ventures. Without exchange rate uncertainty, trade in the Eurozone will become more flexible and aggressive; covering a wider range of goods and services.
  1. Participation in integrated market-based European financial markets as the result of the elimination of currency risk. Leads to more efficient European finance.

Perceived Costs of Adopting the Euro

  1. Loss of a domestic monetary policy: A single monetary policy among nations with very different economic conditions will not work. To illustrate, one can explore the existence of a single interest rate. Because of differing conditions, the interest rate could work for or against a particular country. For example, if Britain was in a recession and the interest rate was set at 8 per cent throughout ‘euroland’ this would further worsen the recession for Britain. If the UK was in a boom and the interest rate was set too low, hyperinflation could take place and lead to economic melt down.
  1. Inability to respond market flexibility: The UK has the most flexible market in Europe. If the UK joined the euro it would be difficult to sort out large unemployment problems because the government would be unable to change interest rates and it would not be allowed to ask for money from the EU and cannot borrow to fund the problem.
  1. Elimination of cushions to asymmetric economic shocks: The exchange rate is no longer available to cushion “asymmetric shocks.” For example, a decline in the demand for the country’s exports, which is specific to the country, would lead to an automatic depreciation of the currency if the exchange rate is floating. This would cushion the effect on the economy. On the other hand, if the country is part of the euro-zone, there is no longer a British pound, for example, to depreciate against other currencies, so the cushioning mechanism would be lost.
  1. The country may have to substantially limit its use of expansionary fiscal policy under the Stability and Growth Pact. The SGP has been criticized for removing the ability of national governments to stimulate their own economies, in the only way left to them now that monetary policy is determined supranationally.

C. Intergovernmental and Supranational

The debate as regards the characterization of the European Union as an international organization seeks to answer this question: Is the EU an intergovernmental body or is it a supranational body?

While many would like to choose only one of the two major characterizations, some would like to believe that the EU is both an intergovernmental body and a supranational institution.

As a supranational body, power is held by independent appointed officials or by representatives elected by the legislatures or people of the member states. Member-state governments still have power, but they must share this power with other actors. Because decisions are taken by majority votes, it is possible for a member-state to be forced by the other member-states to implement a decision. Unlike a federal state, member states fully retain their sovereignty and participate voluntarily, being subject to the supranational government only while remaining members.

As a supranational organization, the EU can craft policies which can overturn national policies of member-states.

The European Union can also be perceived to adopt intergovernmentalism: a theory of decision-making in international organizations, where power is possessed by the member states and decisions are made by unanimity. Independent appointees of the governments or elected representatives have solely advisory or implementation functions. Intergovernmentalism is used by most international organizations today. Member-states are believed to possess direct decision-making powers vis-à-vis the international organization, the European Union.

D. Common and Shared Policies

The policies of the European Union are divided into 3 pillars.

VI. Institutions of the European Union

The European Union has 4 major classifications of its lead institutions: the decision-makers, the advisory bodies, the financial bodies, and the audit bodies.

The decision-making bodies are the:

  1. European Parliament: directly elected legislative arm of the EU
  2. Council of the European Union: legislative arm of the EU representing the member-states. Composed on the ministers (akin to cabinet secretaries) of each member-state
  3. European Commission: executive arm of the EU and initiator of legislative proposals. Composed of 20 appointed representatives from different member-states.

The advisory bodies are the:

  1. a. Economic and Social Committee: Represents organized civil society and acts as vital consultative body for economic and social policies in the EU
  2. b. Committee of the Regions: represents regional and local authorities on matters of common concern.

The financial bodies are the:

  1. a. European Central Bank: manages the euro and implement the EU monetary policy
  2. b. European Investment Bank: finances and invests in EU projects

The audit bodies are the:

  1. a. European Court of Auditors: Composed of 1 auditor from each member of the EU. Checks the utilization of EU funds
  2. Court of Justice: Composed on one judge from each EU member and 8 advocates-general
  3. c. European Ombudsman: investigates maladministration in the EU that leads to discrimination, unfairness, abuse of power, lack or refusal to furnish information, unnecessary delays, and incorrect procedures.

VII. Procedures for Enacting New EU Laws[1]

1. Consultation

Basic Process:

a. Commission sends its proposal to both the Council and Parliament but it is the Council that officially consults Parliament and other bodies such as the European Economic and Social Committee and the Committee of the Regions, whose opinions are an integral part of the EU’s decision-making process.

b. Parliament can:

  • approve the Commission proposal,
  • reject it,
  • or ask for amendments.

c. If Parliament asks for amendments, the Commission will consider all the changes Parliament suggests. If it accepts any of these suggestions it will send the Council an amended proposal.

d. The Council examines the amended proposal and either adopts it as it is or amends it further. In this procedure, as in all others, if the Council amends a Commission proposal it must do so unanimously.

Areas Covered:

– police and judicial cooperation in criminal matters – discrimination on grounds of sex, race or ethnic origin, religion or political conviction, disability, age or sexual orientation; – agriculture
– revision of the treaties – EU citizenship – visas, asylum, immigration and other policies associated with the free movement of

– persons

– transport (where it is likely to have a significant impact on certain regions) – competition rules – tax arrangements
– economic policy – ‘enhanced co-operation’ — i.e. the arrangement allowing a group of member states to work together in a particular field even if the others do not wish to join in yet.

2. Assent

Basic Process:

The assent procedure means that the Council has to obtain the European Parliament’s assent before certain very important decisions are taken.

The procedure is the same as in the case of consultation, except that Parliament cannot amend a proposal: it must either accept or reject it. Acceptance (‘assent’) requires an absolute majority of the vote cast.

Areas Covered:

– specific tasks of the European Central Bank – the uniform electoral procedure for the European Parliament – the accession of new member states
– amending the statutes of the European System of Central Banks/ European Central Bank – certain international agreements – the Structural Funds and Cohesion Funds

3. Co-decision

Basic Process:

In the co-decision procedure, Parliament and the Council share legislative power. The Commission sends its proposal to both institutions. They each read and discuss it twice in succession. If they cannot agree on it, it is put before a ‘conciliation committee’, composed of equal numbers of Council and Parliament representatives. Commission representatives also attend the committee meetings and contribute to the discussion.

Once the committee has reached an agreement, the agreed text is then sent to Parliament and the Council for a third reading, so that they can finally adopt it as law.

Areas covered:

– education – culture – consumer protection
– vocational training – nationality – the right to move and reside
– trans-European networks – the free movement of workers – social security for migrant workers
– European Regional Development Fund – the environment – preventing and combating fraud
– setting up a data protection advisory body – implementing decisions regarding the European Social Fund – customs co-operation
– the right of establishment – the internal market – statistics
– research – transparency – the fight against social exclusion
– transport – employment – equal opportunities and equal treatment

VIII. Common Concerns

Despite EU’s promise of progress and unity through European integration and cooperation, serious oppositions to its existence are rampant. Below are a few of the concerns against the EU.

A. Loss of Sovereignty

Anti-EU supporters feel that the power of the EU results to its members’ loss of sovereignty. Many existing EU legislations have repealed or modified existing national legislations.

For example, with the adoption of the euro, countries are unable to control their exchange rates and establish protective monetary policies in times of economic distress.

Another illustration was the legislation by the UK Parliament to prevent Spanish fishermen sailing under the British flag and so taking a quota of fishing rights allocated to theUKby the EU. The Fisheries Act passed both the House of Commons and House of Lords and was signed into law by the Queen in person. But, as the late Lord Tonypandy recalled “The politically motivated European Court of Justice instructed us that our Fisheries Act was illegal. They defined limits on what our Parliament could legislate. Our Westminster Parliament was humiliatingly put behind the European Union. As a further measure of contempt forWestminster,Europeproceeded to give the bullying Spanish fishermen authority to demand compensation for the period that our Privy Council, and our Parliament, by our legislation, kept them out of our waters.”

Anti-EU sentiments spring from the belief that the one-size-fits-all framework used in the EU legislative process has totally disregarded the varying economic conditions of the member-states. It would seem that the member-states are constantly being pressured to adopt and vote for policies which are in fact, highly disadvantageous when local factors are considered.

B. Regulatory Lunacy

Together with the fear for the loss of sovereignty, the European Union is being criticized for enacting unnecessarily detailed policies.

For example, Commission Regulation Number 2257/94 details the regulations covering the quality standards for bananas, including the requirement that they be at least 5.5 inches long and 1 inch wide. The regulation includes the provision that they be free from “abnormal curvature”. Similarly, European legislation lays down standards for the straightness of cucumbers.

C.acquis communautaire

The European Union operates under the doctrine of acquis communautaire which declares that once the EU has determined it has the right to legislate in a new area; its authority in that area is guaranteed in perpetuity. This is a one-way street to centralization. Loss of sovereignty is also a possible perceived effect of this doctrine.

It is also understood to refer to all of the accumulated EU law. At present, EU legislation now covers the following areas for negotiation:

  1. Free movement of goods
  2. Freedom of movement for workers
  3. Right of establishment and freedom to provide services
  4. Free movement of capital
  5. Public procurement
  6. Company law
  7. Intellectual property law
  8. Competition policy
  9. Financial services
  10. Information society and media
  11. Agriculture and rural development
  12. Food safety, veterinary and phytosanitary policy
  13. Fisheries
  14. Transport policy
  1. Energy
  2. Taxation
  3. Economic and monetary policy
  4. Statistics
  5. Social Policy and employment
  6. enterprise and industrial policy
  7. Trans-European networks
  8. Regional policy and coordination of structural instruments
  9. Judiciary and fundamental rights
  10. Justice, freedom and security
  11. Science and research
  12. Education and culture
  13. Environment
  14. Consumer and health protection
  15. Customs union
  16. External relations
  17. Foreign, security and defense policy
  18. Financial control
  19. Financial and budgetary provisions
  20. Institutions
  21. other issues

 


[1] Excerpts from “How the European Union Works: A Citizen’s Guide to the EU Institutions, European Commission: Directorate-General for Press and Communication, 2003.

European Union 101

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