Title: Background Note: European Community (EC)
PA
Source: Office of Public Communication, Bureau of Public
Affairs
Description: Historical, Political and Economic Overviews of the
Countries of the World
Date: Jan, 15 19931/15/93
Category: Country Data
Region: Europe
Country: Belgium, Germany, France, Italy,
Luxembourg, Netherlands, Denmark,
Ireland, United Kingdom, Greece,
Spain, Portugal
Subject: EC, Travel, History, International Organizations,
Trade/Economics, Military Affairs, Cultural Exchange,
State Department
[TEXT]
Official Name:
EUROPEAN COMMUNITY (EC)
PROFILE
Background
Headquarters:
Brussels, Belgium.
Established:
As three distinct European communities: On
April 18, 1951, (effective July 23, 1952), when the European Coal
and Steel Community (ECSC) Treaty was signed in Paris, and on
March 25, 1957, (effective January 1, 1958), when the treaties for
the European Atomic Energy Community (EURATOM) and the European
Economic Community (EEC) were signed in Rome. The ECSC was
created to integrate coal and steel production, EURATOM to develop
common uses of nuclear energy among member nations, and the EEC
to merge separate national markets into a single market with
common economic policies. The Single European Act, signed in
February 1986, (effective July 1, 1987), amends these treaties by
establishing specific provisions for completion of the single market
by January 1, 1993, and for intensifying cooperation among member
states in the areas of economic and monetary union, promotion of
research and technological development, improvement of the
environment, and social policy. The act also institutionalizes
cooperation in the field of foreign policy.
Purposes:
To build foundations for peace through economic
and political cooperation and to create a federation of Europe.
Members:
The Six--Belgium, Germany, France, Italy,
Luxembourg, Netherlands. The Nine--in 1973, Denmark, Ireland, and
the United Kingdom joined the Six. The Ten--in 1981, Greece joined
the Nine. The Twelve--Spain and Portugal joined the Ten on January
1, 1986. In 1990, the Laender (states) of the former German
Democratic Republic entered the Community as part of a unified
Germany.
Official Languages:
Danish, Dutch, English, French, German,
Greek, Italian, Portuguese, and Spanish.
Population (1990):
345 million.
Gross Domestic Product (GDP) (1990):
$6 trillion.
Average Per Capita GDP (1990):
$17,400.
Organization
Principal Organs:
Council of Ministers, Commission,
Parliament, Court of Justice.
Principal Areas of Community Responsibility:
Internal and
external trade, agriculture, monetary coordination, common trade
and commercial policies, development assistance, science and
research, the environment, common social policies, European
political cooperation.
Budget (1992):
$86 billion, financed by customs duties and
agricultural levies, a 1.4% value-added tax collected on the goods
and services consumed in member countries, and a percentage
contribution based on each country's gross domestic product.
Trade
Imports (1991): From non-EC countries-- $812
billion. From US--$103 billion (24% of US exports).Exports (1991):
To non-EC countries--$522 billion. To US--$86 billion (16% of EC
external exports).
EC and US Officials
Commission President: Jacques Delors, France.US Representative to
the EC: Ambassador James F. Dobbins, 40 Boulevard du Regent, B-
1000, Brussels, Belgium; Tel. 32-2-513-4450.EC Representative to
the US: Ambassador Andreas Van Agt, 2100 M St., NW, Suite 707,
Washington, DC 20037; Tel. 202-862-9500.
INSTITUTIONS
Since July 1967, the three communities have functioned with
common institutions. The main EC institutions are: the Council of
Ministers, which has final decision-making authority; the European
Commission, which formulates policies and legislation and
implements decisions of the Council; the European Parliament, which
advises the EC on policy development and proposals emanating from
the Commission; and the European Court of Justice, which interprets
the EC treaties and legislation. Other EC institutions are the Court
of Auditors, which oversees financial management of the
Community, and the Economic and Social Committee, an advisory
body. Member states have agreed to relinquish a degree of national
sovereignty to EC institutions and to cooperate in the joint
administration of these powers.
The European Commission
The Commission, headquartered in Brussels, is made up of 17
commissioners appointed by common agreement of the 12
governments. Each country is represented. The United Kingdom,
France, Germany, and Italy each supply two commissioners.
According to the treaties, members of the Commission act
independently of their governments and of the Council and represent
the interests of the Community as a whole. Each member has
responsibility for one or more policy areas.
The Commission's major responsibility is to oversee the
implementation of the EC treaties and applications of decisions by
Community institutions. The Commission has investigative
authority and can take legal action against persons, companies, or
member states that violate Community rules. The Commission
initiates EC policy by making proposals to the Council of Ministers
and steers its proposals through the Council. These may include
measures beyond the scope of trade and commerce, such as
education, public health, consumer protection, the environment,
research and technology, and aid to developing countries. The
collection and disbursement of EC funds is a third important
Commission responsibility.
The 1987 Single European Act gave the Commission authority to
implement Council decisions; for example, the commissioners may
negotiate trade agreements with non-member states on behalf of the
Community. The Commission's independence and its "right of
initiation" of policy account for much of its supranational authority.
To balance that independence, the Commission is subject to censure
by the Parliament, which can force the entire Commission to resign
as a body by a two-thirds majority vote. (This action never has
been taken.)
The President of the Commission is appointed to a renewable 2-year
term by the Council of Ministers. The Com-mission's administrative
staff of 16,700 is divided into 23 Directorates-General. In 1995,
the terms of the commissioners will be expanded to 5 years to
correspond to the terms of members of the European Parliament.
Council of Ministers
The Council of Ministers is the primary decision-making body of the
Community. It is composed of ministers representing national
governments. Each member state serves as Council President 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. A member
state's foreign minister is regarded as its principal representative
in the Council. Foreign ministers deal with the most important and
wide-reaching topics, while more specific decisions are made by the
ministers of agriculture, finance, industry, energy, social affairs,
and others, deepening on the issue to be discussed.
EC members have the following votes in the Council: Germany (10),
France (10), Italy (10), United Kingdom (10), Spain (8), Belgium (5),
Greece (5), Netherlands (5), Portugal (5), Denmark (3), Ireland (3),
and Luxembourg (2). The 1987 Single European Act created a less
restrictive decision-making process by allowing most voting in the
Council by qualified majority (54 out of a total of 76 votes), rather
than unanimity especially in areas relating to the internal market.
Exceptions include certain health and safety and taxation proposals.
The various ministerial groups meet monthly. A Committee of
Permanent Representatives, consisting of member country
ambassadors to the Community in Brussels, and the Council
Secretariat assist the Council.
European Council
The Single European Act formally established the European Council,
which had met on a regular basis since 1975. The European Council
includes the Heads of State and Government and the President of the
Commission. It meets at the end of each member's council
presidency to discuss general problems regarding the Community,
the progress of political cooperation, and foreign policy issues.
European Parliament
The European Parliament is the only EC institution that directly
represents European citizens. It serves as a public forum to debate
issues of importance to the Community. The Commission must
consult the Parliament before proposals are forwarded to the
Council of Ministers for decision. The Parliament has significant
power over budgetary matters and can amend or reject the budget as
well as approve its adoption. Since 1987, it also has had the right
to amend or reject certain legislation approved by the Council,
which can overrule the Parliament only by a unanimous vote.
Although it cannot veto individual ministers, the Parliament has the
power to pass a vote of no-confidence in the Commission by a
"motion of censure," which would require the entire Commission to
resign. The Parliament also may approve or disapprove applications
of non-member countries to join the Community as well as new
association agreements.
The European Parliament has been elected by universal suffrage
since 1979. Previously, deputies had been nominated by national
legislatures. The 518 deputies of the Parliament are elected to 5-
year terms and are grouped by political affiliation, rather than by
nationality. They include Socialists, Christian Democrats, Liberals,
Conservatives, Communists, and Greens.
Many of the Parliament's specialized committees have emphasized
development of truly European policies in areas such as the internal
market, energy, industrial restructuring, and regional development
funding. Direct elections ensure full public representation in the
Community, and important tasks for the deputies include promoting
the Community's work within their constituencies and increasing
public support for an integrated Europe.
The Parliament meets monthly in week-long plenary sessions in
Strasbourg. The Secretariat staff of 3,500 is located in
Luxembourg; most committee and political group meetings are held
in Brussels.
Court of Justice
The Court is the final authority for the interpretation of EC laws as
embodied in its treaties, regulations, and directives. Complaints
about member-state treaty violations may be lodged by other
member states or by the Commission. Member governments, EC
institutions, and individuals have the right to contest Commission
and Council actions in the Court.
The Court resolves conflicts between Community and national laws.
EC judgments in the area of EC law overrule those of national courts.
The Court's decisions are binding on all parties and are not subject
to appeal. Court decisions generally have tended to strengthen EC
institutions and promote integrated EC policies.
Member governments appoint 13 justices, one from each member
state plus a president of the Court for renewable 6-year terms. The
judges are assisted by six advocates-general. Court decisions are
reached by a simple majority. The Court meets in Luxembourg.
The Single European Act introduced a new Court of First Instance,
which essentially serves as a lower court. It has jurisdiction in
matters covered by the treaty establishing the European Coal and
Steel Community (ECSC), in the field of competition law, and in
actions brought by EC officials.
Economic and Social Committee
This advisory body of 189 members represents various economic and
social sectors, including labor, employers, and other interest groups
such as consumers, agriculture, and professional associations. The
Committee enables a broad spectrum of groups to be represented in
EC decision-making. Through a mandatory consultation process, the
Committee submits its opinions on EC policies and legislative
proposals to both the Council of Ministers and the Commission.
BUDGET
Since 1975, the Community has been fully funded from its own
resources. These are derived from customs duties levied under the
Common Customs Tariff, levies on agricultural imports from non-
member states, and a 1.4% value-added tax collected on the goods
and services consumed in member countries. Faced with the
additional costs associated with the implementation of the 1992
single market program, in 1988, the Council approved the
introduction of a fourth source of revenue, based on a percentage of
member countries' gross domestic product.
Budget expenditures are principally for agricultural support,
regional and social measures, development assistance to Third World
countries and to Central and Eastern Europe, and administrative
costs. The Commission prepares the preliminary draft of each year's
EC budget. The Council discusses the preliminary report and then
submits a draft budget to the Parliament, which can amend or reject
the budget and is responsible for its final adoption.
The approved EC budget for 1992 is $86 billion. The largest budget
item, accounting for about two-thirds of the total, is agricultural
expenditures under the Common Agricultural Policy (CAP). Other
major budget items are energy and industrial programs, research,
and development assistance to poorer regions of the Community,
Central and Eastern Europe, and Third World nations.
PATH TO EUROPEAN INTEGRATION
History
Peaceful union of European countries had been a dream for centuries,
but not until the period following World War II did the process of
economic and political integration begin. After the economic chaos
of the war, governments sought ways to rebuild their economies and
avoid future conflict. The Brussels Pact of 1948 created the first
post-war European intergovernmental organization. The United
Kingdom, France, Belgium, Netherlands, and Luxembourg agreed to
establish a common defense system and to consult on economic and
cultural matters. Since governments remained reluctant to cede
authority to a supranational body, the organization was based on
cooperation rather than on formal integration. The military aspects
of the pact were soon overshadowed by the creation in 1949 of the
North Atlantic Treaty Organization (NATO), an expanded military
alliance including the United States and Canada. In the political
sphere, the Council of Europe--organized the same year by the five
members of the Brussels Pact with Ire-land, Denmark, Norway, Italy,
and Sweden--had as its goal greater European unity and the
protection of human rights. However, all decisions were made by
unanimous agreement, which weakened the Council.
In May 1950, French Foreign Minister Robert Schuman proposed that
French and German coal and steel production be managed by a
common authority within an institution open to other European
countries. Ratified by the Governments of France, the Federal
Republic of Germany, Italy, Belgium, Netherlands, and Luxembourg
(the Six), the European Coal and Steel Community began functioning
in 1952. It was the first international organization with an
integrated federal governing body, the ECSC High Authority.
Members of the High Authority were independent of national
governments, and decisions were binding on member states. A long-
term objective of both Schuman and ECSC President Jean Monnet was
to establish a structure for the eventual political unification of
Europe through economic integration.
With Europe's immediate defense problem met by NATO, efforts were
concentrated on economic questions. Under the direction of Belgian
Foreign Minister Paul Henri Spaak, the foreign ministers of the Six
met to discuss proposals for an integrated economic system and a
common structure for the development of nuclear energy. In 1957,
the Six agreed to establish the European Economic Community (the
EEC or Common Market) and the European Atomic Energy Community
(EURATOM). The two treaties formally establishing the new
communities to work with the ECSC were signed by the Six in Rome
on March 25, 1957. The EEC and EURATOM began operating on January
1, 1958. The wide-reaching EEC was given less supranational
authority than the ECSC, although economic union was viewed as a
prerequisite for eventual political integration.
In 1973, the United Kingdom, Denmark, and Ireland were admitted,
creating the EC Nine. The Government of Norway also had agreed to
accession, but membership was rejected in a referendum. Greece
joined the Community in 1981, and Spain and Portugal became
members in 1986, creating the EC Twelve. In 1990, the five states
of the former German Democratic Republic entered the Community as
part of a united Germany.
The primary aim of the Paris and Rome treaties establishing the
European Communities was to remove the economic barriers that
divided the member countries as the first steps toward political
unity. To accomplish this, the treaties called for members to
establish a common market, a common customs tariff, and common
economic, agricultural, transport, and nuclear policies. The
institutions and policies established by the treaties provided a
framework within which the 12 EC members agreed to integrate
their economies and eventually consider forming a political union.
Customs Union
The authors of the EC treaties recognized that the economic
keystone of unity would be a customs union permitting the free
movement of goods, services, capital, and people within member
states. In 1958, the Community began the difficult process of
eliminating all trade barriers among its members. Ten years later,
all member-to-member duties were abolished, and a common
external tariff of the Six was established. By 1977, this union was
extended to include the new EC members--the United Kingdom,
Denmark, and Ireland.
The common external tariff is key to the customs union. Each EC
member charges the same duty on a given import from a non-member
country. Agricultural imports are subject to the Common
Agricultural Policy, which places variable levies on agricultural
imports to raise their prices to those of EC-produced commodities.
Although tariffs have been eliminated within the Community,
several kinds of non-tariff barriers still exist. Some member states
maintain protectionist measures that the Community has not yet
been able to eliminate entirely, such as limiting public works
contracts and adopting unilateral technical or safety standards that
restrict trade. Numerous health and safety barriers to agricultural
trade still exist. Individual firms and governments can register
trade restriction complaints with the Commission, which attempts
to eliminate the barriers through binding judicial action.
In 1991, exports among Community members were $859 billion,
while external exports were $522 billion, accounting for 17.1% of
world commerce. This makes the EC the world's largest trading unit.
EC imports from third countries in 1991 were $812 billion, mostly
raw materials and unprocessed goods. Most EC exports are
processed goods such as machinery and vehicles.
As provided for in Article 113 of the Treaty of Rome, all member
states adhere to a common EC commercial policy. It provides for
major decisions on trade policy to be taken by the Council of
Ministers by majority vote and assigns to the Commission
considerable executive and negotiating authority. The Community's
trade policy is based on the General Agreement on Tariffs and Trade
(GATT), to which all community members are contracting parties.
Single European Act and EC '92
The establishment of a customs union among the Six resulted in an
expansion of trade which grew from $7 billion in 1958 to $60 billion
in 1972. The enlargement of the Community to include Denmark,
Ireland, and the United Kingdom in 1973 marked the beginning of a
period of limited growth, inflation, and high unemployment. By the
mid-1980s, the Community recognized that, despite progress in
many areas, its aim of creating a true common market (the
dismantling of all barriers within the Community restricting the
free movement of people and trade) had not been realized. In March
1985, Jacques Delors, President of the EC Commission, outlined to
the European Parliament the "single market" program, designed to
chart a course for completion of an integrated market by the end of
1992. A Commission White Paper in June 1985 listed legislative
measures needed to eliminate all physical, technical, and fiscal
barriers to the completion of a unified economic area with free
movement of persons, goods, services, and capital. By October 31,
1992, the Commission had tabled 282 proposals. Of these, 216 have
been approved by the European Council and the European Parliament.
However, only 68 have been implemented in all 12 EC member states.
On July 1, 1987, after ratification by member governments, the
Single European Act (SEA) came into force. The act contained
revisions in the treaties necessary to assure completion of the 1992
program. It extended the principle of qualified majority voting in
the Council of Ministers (thus streamlining the decision-making
process). It also gave the Community new responsibilities (in the
areas of social policy, promotion of research and technological
development, and improvement of the environment) and increased
support for the least developed member states. Budgetary measures
adopted in February 1988, which placed limits on the growth of
agricultural spending and doubled the allocation for structural funds
(resources targeted for regions that are underdeveloped or affected
by industrial decline or unemployment), signaled the commitment of
member states to implement these provisions.
In addition to defining an action program for achieving the single
market, the SEA endorsed the objective of economic and monetary
union, including a single currency. Institutional decisions in this
area would continue to be subject to unanimity in the Council and
ratification by member states. The SEA also formalized procedures
for cooperation in foreign policy among member states and renewed
support for the objective of European political union.
European Monetary System
In 1970, the Werner Report (named after the Luxembourg Prime
Minister) proposed a plan for economic and monetary union within
the Community. As a first step in harmonizing policy, the currency
"snake" (a set of upper and lower limits of exchange rates) was
established in 1972. Central banks of participating countries
pledged to intervene in the currency market to keep the value of
their currencies within fixed limits.
In 1979, the European Monetary System (EMS) replaced the snake in
an effort to reduce exchange rate fluctuations. The EMS provides for
frequent discussions among central bankers and for intervention in
foreign exchange markets to maintain the value of each currency
within a narrow range (generally 2.25%) of the European Currency
Unit (ecu). All Community members belong to the EMS, though not all
participate in the system's exchange rate mechanism. In addition to
currency swap arrangements for defense of currency parities, the
EMS includes a reserve fund.
The EMS created the ecu in 1979. It is the Community's budget and
accounting unit, created by member states depositing 20% of their
gold and US dollar reserves with the European Monetary Cooperation
Fund. It is a combination of differing proportions of 12 member
currencies, reflecting the size of their economies.
Economic and Monetary Union
The concept of economic and monetary union, characterized by
irrevocably fixed exchange rates, a single currency, a single
monetary authority, and a common monetary and exchange rate
policy, was a natural corollary to the completion of the internal
market. At the December 1991 summit in Maastricht, Netherlands,
EC heads of government reached agreement on a draft treaty on
European economic and monetary union (EMU). The EMU treaty
provides a timetable for moving to full economic and monetary
union.
Stage 1 (1990-93). Involves strengthening economic coordination,
bringing all EC members' currencies into the exchange rate
mechanism of the European Monetary System, and lifting
restrictions on internal EC capital flows.
Stage 2 (1994-96). A transitional period, will involve increased
economic convergence ( in terms of inflation, fiscal policy, interest
rates, and exchange rate stability) and creation of a transitional
European monetary authority.
Stage 3. In 1997, if a majority of EC members are politically
willing and economically prepared for full EMU, exchange rates will
be irrevocably fixed, monetary powers will be transferred from
national central banks to a European central bank, and a single
currency will be created. (If the move to Stage 3 does not occur in
1997, it will start definitely by January 1, 1999, for those
countries which have met the treaty's economic convergence
criteria.)
EMU will not go into effect until the Maastricht Treaty package is
ratified by all 12 member states. As of January 1993, the
ratification process was still underway.
POLITICAL COOPERATION
The original EC treaties give the Community wide economic powers
but little political authority. As the Community has begun to
consolidate economic and monetary union, it also has re-examined
its political responsibilities.
The Single European Act underlined the commitment of Community
members to achieving "European Union." At a landmark summit held
in Maastricht, Netherlands, in December 1991, the Heads of State
and Government agreed to further amendments in the EC treaties to
move the Community toward greater political union, including more
unified foreign and defense policies. The Maastricht treaty
increased the scope of the Commission's authority to include the
areas of environment, consumer and health protection, education,
and culture. It established a "citizenship of the union," giving an EC
citizen the right to live anywhere in the Community and vote in local
and European elections. It committed member states to work for
common rules regarding immigration and asylum policy and to
exchange information on terrorism and drug trafficking. The treaty
also proposed an economic "cohesion" fund to channel re-sources to
poorer countries and expanded language on protection of workers'
rights.
Although coordination of foreign policy was not included in the
original EC treaties, it has been undertaken voluntarily since 1970,
when a limited form of European political cooperation, based on
regular meetings of foreign ministers, began to occur. The 12
foreign ministers now meet regularly to coordinate broad lines of
members' international policies. These meetings take place in the
context of European political cooperation, which also includes
regular meetings of EC political directors, who oversee numerous
working groups made up of officials from all EC states, responsible
for geographic and functional areas of foreign policy.
Under the Maastricht treaty, the Council of Ministers, after
consultation with member states, the Parliament, and the
Commission, would approve common foreign policy and security
measures by unanimous vote. A new defense dimension will be added
to the scope of the Community's activities by expanding the role of
the Western European Union (WEU), an alliance of 10 EC countries
(Denmark and Ireland are not members), to provide for a European
defense alliance. The WEU will implement EC decisions with defense
implications.
The Maastricht treaty must be approved by all EC countries prior to
implementation. Ratification ran into difficulties when the treaty
was rejected by the Danes in a referendum in June 1992.
Ratification in the United Kingdom has been delayed until Danish
objections are overcome, unlikely before mid-1993. An
intergovernmental conference scheduled to take place in 1996 will
evaluate progress toward political union.
THIRD WORLD RELATIONS
Improving relations with developing countries in Africa, the
Caribbean, and the Pacific area has been a high priority for the
Community since its creation. The Community has concluded
cooperation agreements with more than 100 Third World countries.
In addition to its desire to con-tribute to the economic and social
advancement of less developed countries, the Community seeks
reliable supplies of primary products and markets for its exports.
The EC has become one of the major providers of Third World
assistance with programs such as food aid, rural development, and
refugee relief. In 1991, assistance was about $7.3 billion. (The EC
program is separate from assistance programs provided by member
states.)
The Community's most notable accomplishment has been the creation
of a series of conventions creating a framework for development
cooperation with more than 60 African, Caribbean, and Pacific (ACP)
states, most of which were former colonies of the EC states.
Launched in Yaounde in 1963 and 1968 and expanded at Lome in 1975,
the agreements provide aid for development projects, free access to
EC markets for almost all ACP manufactured imports, and incentives
to promote European investment in the developing states. The
conventions were renewed in 1979, 1985, and in 1989 for a 10-year
period be-ginning in 1990. The most recent agreement (Lome IV)
puts greater emphasis on market-oriented economic reform in
recipient countries and on human rights. About 40% of EC aid is
directed to the ACP states. Since 1978, 40% of ACP ex-ports have
gone to the Community, which imports about 10% of its raw
materials from the Lome signatories. Community exports to ACP
markets enjoy most-favored-nation treatment.
One of the most important and innovative aspects of the Lome
Convention is Stabex (export receipts stabilization system). A kind
of insurance policy against poor trade years, Stabex provides
currency transfers to countries heavily dependent on a small number
of commodities for export earnings in years when export receipts
drop significantly because of poor harvests or low world prices.
Lome IV is designed to encourage diversification to other crops. The
Lome Convention provides a similar export receipts stabilization
system, Sysmin, to cover mineral export earning losses.
The EC has been an active participant in the multilateral side of the
Middle East peace process. It is a co-organizer of working groups on
economic development, water resources, refugees, and the
environment.
The Community is linked with almost all the countries of the
Mediterranean by a network of agreements which provide duty-free
access for industrial products and some agricultural products as
well as direct grants and loans from the European Investment Bank.
Turkey, Cyprus, and Malta have applied for EC membership.
The Community's ties to the developing countries of Asia and Latin
America are less structured. These usually take the form of
bilateral agreements, which allow for preferential trade treatment
under the Community's Generalized System of Preferences and
certain types of development aid.
RELATIONS WITH EFTA COUNTRIES
Relations with the group of countries participating in the European
Free Trade Association (Sweden, Norway, Finland, Iceland,
Switzerland, and Austria) are strongly influenced by the progress of
the single market program. Founded in 1960 as an alternative to the
Community, EFTA is now the Community's largest trading partner.
Free trade agreements were concluded between the Community and
each of the EFTA countries in 1972-73, after two EFTA members,
Denmark and the United Kingdom, joined the EC (Portugal followed in
1986).
The EC and EFTA countries signed an agreement to create a European
Economic Area (EEA) in February 1992. The agreement will create an
enlarged single market in which goods, services, capital, and
persons move freely between all member states. EC and EFTA
countries also will expand cooperation in research and development,
environmental issues, education, and social policy. EFTA states will
have to adopt certain EC regulations relating to the single market
but will not be able to participate in the EC legislative process. The
treaty also contains provision for the establishment of an EEA court,
council of ministers, and joint committee. Once it is ratified by all
19 national parliaments and by the European Parliament, the EEA
will create a trading zone of 495 million people. It was scheduled
to enter into force on January 1, 1993. However, in a December
1992 referendum, Switzerland rejected participation in the EEA,
requiring the other countries to adjust the conditions of the
agreement.
Austria, Finland, Norway, Sweden, and Switzerland have applied for
membership in the EC. Accession negotiations with all except
Switzerland will start on February 1, 1993.
RELATIONS WITH CENTRAL AND EASTERN EUROPE
Between 1988 and 1990, the EC established limited economic and
cooperation agreements with all the countries of Central and
Eastern Europe. Since then, the Community has designed a new type
of association agreement which goes beyond economic cooperation.
In addition to a phased approach to free trade between the EC and
each nation (whereby the Community will reduce its tariff and other
import barriers more rapidly than association countries), these
agreements consist of industrial, technical, and scientific
cooperation; financial assistance; and political dialogue.
In December 1991, association agreements were signed between the
EC and Czechoslovakia, Hungary, and Poland. As a result of the
dissolution of Czechoslovakia on January 1, 1993, the Czechoslovak
agreement is being renegotiated with the successor states, the
Czech Republic and the Slovak Republic. Agreements with Bulgaria
and Romania were concluded in late 1992. Pending ratification of
these agreements by the parliaments of all participants and the
approval of the European Parliament, the Community's generalized
system of trade preferences has been extended to these countries on
an ad hoc basis. The EC also signed trade and cooperation
agreements with Albania, Estonia, Latvia, and Lithuania in May 1992.
These agreements provide for reduction of quantitative trade
restrictions, reciprocal most-favored-nation treatment, and
economic cooperation. In November 1992, the EC concluded a similar
pact with Slovenia.
The Commission provides substantial assistance to the countries of
Central and Eastern Europe. Grant technical assistance is provided
through the PHARE program (Poland and Hungary--Assistance with
Restructuring the Economy), which has been extended to Albania, the
Baltics, Bulgaria, the Czech Republic, the Slovak Republic, Romania,
and Slovenia. Its aim is to strengthen the process of political and
economic reform, with special emphasis on developing and improving
the private sector.
In addition to the Community's bilateral efforts, after the economic
summit of industrialized countries in 1989, the EC Commission
began coordinating aid to Central and Eastern Europe by the Group of
24 (G-24) countries--the EC, EFTA, US, Canada, Japan, Australia,
New Zealand, and Turkey. The Community also was instrumental in
the creation of the European Bank for Reconstruction and
Development, a multilateral endeavor to support investment and
development of market economies in these countries.
RELATIONS WITH THE NEW INDEPENDENT STATES
In January 1992, the Community announced its plan to negotiate
partnership and cooperation agreements with the states of the
former Soviet Union to replace the trade and cooperation agreement
signed by the EC and the Soviet Union in 1989. This agreement had
included most-favored-nation status as well as financial aid and
was prompted by the introduction of efforts at political and
economic reform. The new agreements would provide for close
political and economic relations, including trade, economic, and
financial cooperation, political dialogue, and cultural cooperation.
Negotiations will begin first with Russia, Belarus, Ukraine, and
Kazakhstan.
EC officials have indicated that assistance to the new independent
states in their transition to democratic institutions and free market
economies is an important priority, and the Commission ranks among
the top donors to the new states.
US-EC RELATIONS
The United States continues to support European efforts to achieve
economic and political integration. The United States and the
Community maintain a continuing dialogue on political and economic
issues of mutual interest and engage in direct negotiations on trade
and investment issues. While the US has expressed its support for
the EC's efforts to develop an integrated market, it is concerned that
the economic and business opportunities offered by the single
market not be offset by the introduction of new trade barriers. The
US holds regular meetings with the EC to discuss aspects of the
Single Market program and to resolve differences, many concerning
agriculture.
The "Declaration on US-EC Relations" of November 23, 1990,
identifies common goals and principles of the US-EC partnership. It
institutionalizes regular consultation and cooperation on economic,
scientific, educational, and cultural matters and establishes a
framework for regular and intensive consultation.
Biannual consultations between the US President and the President
of the European Council and the President of the Commission take
place every 6 months. The US Secretary of State and the 12 EC
Foreign Ministers also meet on a biannual basis to discuss foreign
policy issues; ad hoc consultations between the foreign minister of
the presidency country or the foreign ministers of the Troika (the
current presidency country and its immediate predecessor and
successor) and the US Secretary of State are scheduled as necessary.
Delegations from the US House of Representatives and the European
Parliament meet twice yearly to discuss US-EC relations. Close
consultation is further maintained through the US Mission to the
European Communities, headed by an ambassador in Brussels, and
through the delegation of the European Communities in Washington,
DC, headed by the EC ambassador.
The US has an important economic relationship with the EC. As a
bloc, the EC is America's largest trading partner. Total US-EC trade
exceeded $190 billion in both 1990 and 1991. In 1991, US imports
from the EC were $86 billion and represented 18% of total US
imports. US exports to the EC were $103 billion and represented
24% of total US exports. In 1991, the US trade surplus with the EC
rose to $17 billion, up from $6 billion in 1990. EC exports to the
United States consist mainly of machinery, precision equipment,
iron and steel, and other manufactured products. US exports to the
EC include machinery and transportation equipment, agricultural
products, chemicals, and mineral fuels. The US and the Community
also have significant ties in the area of direct investment. By the
end of 1991, the EC had invested $232 billion in the US, while the
US had invested $189 billion in the EC.
The United States and the Community cooperate closely in several
multilateral organizations, including GATT, OECD, and the
"Quadrilaterals" (periodic meetings of the EC, US, Japan, and Canada).
The US is hopeful that progress will continue in the GATT
multilateral trade negotiations and that both sides will succeed in
resolving differences on agricultural policies. The Community's CAP
has allowed the EC to become self-sufficient in many agricultural
commodities and has provided stable incomes to the European
farming population. However, through its complicated network of
protection, price supports, and subsidies, it has created large
surpluses of many agricultural products, displaced some US farm
exports, and increased prices to European consumers. The global
reform of agricultural policies, including the CAP, remains an
important US objective.
The need to provide financial and technical aid to the new emerging
democracies in Eurasia led to a new phase of cooperation between
the Community and the US. Through the G-24 process, the 1992
coordinating conferences on assistance to the former Soviet Union,
and the international financial institutions (the International
Monetary Fund, the Inter-national Bank for Reconstruction and
Development, and the European Bank for Reconstruction and
Development), the EC and the US assist those countries committed to
achieving democracy and market reform.
Diplomatic Representation.
The United States maintains
close relations with the Community through its mission in Brussels.
The US Mission is directed by Ambassador James F. Dobbins and is
located at 40 Boulevard du Regent, B-1000, Brussels, Belgium; Tel.
32-2-513-4450; Telex 846-21336.
The EC Delegation to the United States is headed by Ambassador
Andreas Van Agt. Its Press and Public Affairs Office is located at
2100 M Street, NW, 7th floor, Washington, DC, 20037; Tel. 202-862-
9500. The EC Press and Public Affairs Office in New York City is at
Three Dag Hammarskjold Plaza, 245 East 47th Street, New York, NY
10017; Tel. 212-371-3804.
FUTURE DEVELOPMENTS
Since its foundation as a customs union, the EC's authority and
influence have expanded greatly as its role in managing the process
of integration has evolved. The possibility of a united Europe, once
only an ideal, is now closer to reality than ever before. Spurred by
revolutionary political change and the continued success of its
efforts to achieve economic and monetary integration, the
Community now faces a new agenda, quite different from the
challenges it has confronted in the past. Of the measures required
to complete the internal market, some of the most complicated
issues--such as tax harmonization, border controls, and social
policy--have not yet been reviewed by the Council of Ministers, and
many have not yet been ratified by member states. Meeting the 1992
deadline and implementing the reforms outlined in the Single Act
will test the commitment of EC members to the principle of true
integration.
Austria, Sweden, Switzerland, Finland, Malta, and Cyprus have
applied for EC membership. No decision has been reached on Turkey's
long-standing application for EC membership. Possible enlargement
of the Community to 16 or more members may require reform of EC
institutions, especially the Presidency and the Parliament. The
eventual expansion of the Community to include the countries of
Central and Eastern Europe and possibly some of the new
independent states of the former Soviet Union also must be
considered, although no decision is expected before the end of the
decade.
A major intergovernmental conference scheduled for 1996 will
evaluate progress in economic and monetary union and consider
greater coordination of foreign policy and security matters.
HOW TO ORDER BACKGROUND NOTES IN PAPER
Published by the US Department of State Bureau of Public Affairs --
Office of Public Communication -- Washington, DC -- January 1993 -
- Editor: Elaine McDevitt; Managing Editor: Peter Knecht
Department of State Publication 9155 Background Notes Series --
This material is in the public domain and may be reprinted without
permission; citation to this source is appreciated.
For sale by the Superintendent of Documents, US Government
Printing Office, Washington, DC 20402 (###)