Is the European Union Still Unified?
Jun 09, 2015
The European Union has a long and complex history, dating back to the Treaty of Rome in 1957 which established the European Economic Community (EEC), or Common Market, between six European countries (Belgium, Netherlands, Italy, France, West Germany, and Luxembourg). This entity initially consisted of a single market and customs union (no tariffs) between the member countries. The role of the EEC expanded in 1962 with the creation of the Common Agricultural Policy (CAP), aimed at creating a single agricultural policy system complete with subsidies and other farm support programs for all member countries. Over its lifetime, the CAP has enabled the EU to transform from a significant net importer of food to a net export position of $24 billion in 2013. The EU pays its 10.5 million farmers $58 billion in subsidies annually to maintain that position.
The membership of the EEC (now the EU) has expanded greatly over time, and now incorporates 28 countries. The list includes every country in Western Europe except Switzerland, Norway, and Iceland, most of Eastern Europe except Albania and the separate countries that once made up Yugoslavia, plus Estonia, Latvia, and Lithuania, which were once part of the Soviet Union.
The common policy structure of the EU has expanded over time as well--in addition to no internal tariffs, citizens of EU member countries can now cross borders within the EU region without passports and products can move under a harmonized regulatory regime. The EU negotiates as a bloc in international trade and climate negotiations, and recently began to address some foreign policy responsibilities, such as international peace-keeping and treaty enforcement, on a collective basis.
However, there are some key policy areas on which the EU is not unified. The major dividing issue overall is the Euro, the single currency for the EU which was introduced as an accounting currency in 1995 and was adopted as the single currency for the majority of EU member countries in 2002. Today, 19 of the member countries are in the Eurozone, which also entails limitations on national spending and deficits for those countries adhering to the Euro. The largest EU member country outside the Eurozone is the United Kingdom. Because of their inability to revalue their currency, the global financial crisis of 2007-08 put considerable pressure on several of the Eurozone countries’ economies.
Greece was hit the hardest in terms of austerity measures imposed on public sector expenditures to meet the terms set by the International Monetary Fund (IMF) and European Central Bank to provide fiscal bailouts totaling more than $270 billion to date. However, several other Eurozone countries, including Ireland, Portugal, Latvia, Romania, Spain, and Cyprus, have also received bailouts in the aftermath of the financial crisis. Greek elections late in 2014 that brought a left-wing political party (Syriza) to power have led to new negotiations on conditions of the bailout, voicing continuing threats that Greece might drop out of the Eurozone (the so-called ‘Grexit’), and reclaim their own national currency to get some economic breathing space.
Another source of discord within the EU is the member countries’ views of agricultural biotechnology and its products. There’s a long history of EU resistance of this technology, both in importing commodities or food products produced with GMO seed and in allowing farmers in member countries to plant such seeds themselves. Back in 2003, the U.S., Canada, and Argentina initiated a WTO dispute settlement case against the EU for the obstacles the EU had erected to importation of such commodities. The EU lost the case in 2006 and was forced to reform its EU-wide approval system, though it remains among the most complex and slow-moving approval procedures in the world. They also implemented a labeling regime for food products containing ingredients from GMO crops. As of 2015, GMO corn had been grown in Spain and Portugal for about a decade, but no other GMO crops are grown across the region.
Even after the 2006 WTO loss, some EU member governments, including France, Germany, Austria, and Hungary, continued to resist allowing any GMO crops, even those approved under the EU-wide process, to be cultivated by farmers in their country. Although the EU just approved 16 new GMO crop varieties in May 2015, it also adopted new rules this spring which allow member countries to ‘opt out’ of accepting GMO crops approved by the EU-wide system. This new rule will complicate the completion of the U.S.-EU TTIP trade negotiations. In addition, it seems likely to lead to a challenge of the new rule through the WTO dispute settlement process by the U.S., Canada, and other countries growing and exporting GMO crops.
In his successful re-election campaign in May 2015, Prime Minister David Cameron pledged to hold a referendum to let the citizens of the United Kingdom (U.K.) decide whether or not to remain within the EU. He is expected to present a list of unspecified demands for reforms of the EU at the next EU summit later this month that in his view would improve the terms of the U.K.'s membership. If those efforts fall short, the likelihood of a departure of the U.K. from the EU (the so-called Brexit) as a result of the referendum by the end of 2017 could increase. In 2014, the U.K. accounted for one-sixth of total EU Gross Domestic Product (GDP).
The original vision of a ' United States of Europe' enunciated by the late British Prime Minister Winston Churchill in the aftermath of World War II has not been realized, and cracks in the EU as currently configured have emerged in recent years. It will be interesting to see if the pending U.S.-EU trade agreement, if it is ever completed, creates similar divisions.