A General Guide to the EU
List of Topics:
What is the EU?
An Outline History of the European Union
The Institutions of the European Union
Qualified Majority Voting
The Single European Market
The Maastricht Treaty
Economic and Monetary Union
The Common Agricultural Policy
The EU (European Union) is a combination of 25 member states. It has grown from six members in 1957 to become the largest trading block in the world. The governments of all these countries have pledged for economic, political and social integration.
1957 - The Original Six
1973 - The First Enlargement
1981 - The Second Enlargement
1986 - The Third Enlargement
1995 - The Fourth Enlargement
2004 - The Fifth Enlargement
An Outline History of the European Union
The Institutions of the European Union
The institutions of the EU are:
Apart from the Court of Auditors they have all been in existence (sometimes under different names) since the Treaty of Rome in 1957. The Court of Auditors came into existence when the Treaty of Rome was revised in 1977.
The Council of Ministers
The Council consists of the relevant ministers from the Member States, therefore if agriculture is being discussed, the Ministers for Agriculture for all the states will attend, if it is transport then the Ministers for Transport will attend and so on. The Ministers of Finance and the Ministers of Agriculture meet once a month, the others all meet twice a year.
Role stated in A.145 of the Treaty of Rome: it acts as a representative law-making forum for the governments of the member states and it instructs the Commission as to policies that are to be carried out. Once policy has been decided the Council informs the Commission of its decisions and the Commission will prepare a proposal as to how the decision could be carried out.
The main function of the Council is to co-ordinate the general economic policies of the member states. It has the power to take decisions and to delegate responsibility for implementation of the decisions. The European Parliament is able to give an opinion on decisions of the Council, but does not have the right to vote and accept or reject them.
The Council has one delegate from each member state government. Each state takes it in turns to hold the presidency of the Council. However, since new states joined in 1995 and 2004 they have yet to reorganise it permanently to accommodate this.
The European Council is quite distinct from the Council of Ministers. It consists of the heads of state and government (i.e. the Prime Minister in the case of Great Britain). They hold a summit meeting at least twice a year. The role of the European Council is to set the political agenda for the EU. It often has to find solutions to problems that the other institutions cannot resolve. Decisions made by the European Council have to go through the normal EU legislative process before they can become law.
The European Commission
The European Commission is the executive organisation (Civil Service) of the EU. It does not have any powers of decision over the aims of EU legislation. The role of the Commission is to ensure that the Council's decisions are converted into proposals. That is where the Commission's influence lies as it puts the Council's decisions into legal wording and can therefore influence how it is framed. It does have a "right of initiative" to withdraw or modify a proposal at any time during the legislative process.
The Commissioners must be totally independent of their national government. They must act in the interests of the EU as a whole and not simply in the interests of their member state. Each Commissioner has at least one area of particular responsibility. They ensure that EU rules are observed in this area.
There is a President of the Commission; at present it is Romano Prodi. He is assisted by two Vice-Presidents. The President and Vice-Presidents hold office for two years, which is renewable. Commissioners hold office for five years, which is also renewable. It is the UK convention to propose one Commissioner from the Labour Party and one from the Conservative Party.
The Commission issues its instructions in three ways:
The European Parliament
Whereas the Council has the main decision-making powers in the EU, the Parliament is the only directly elected body and actually has very little power. There are no private members' bills in the European Parliament and bills are handed down from the Council, put into legal wording by the Commission and only then do the Parliament get to debate and vote on them.
The Parliament can, however, ask questions of the Commission and the Commission is duty bound to answer them. The Parliament can force the resignation of the Commission and gives approval or otherwise to any new Commission. It has some control over the budget, it can reject a draft budget and can amend budgets. It can propose expenditure but this would need to be approved by the Council.
MEPs are elected for five years under each state's own electoral system. The Parliament elects its own President and officers, and draws up its own rules of procedures. Its decisions are made by absolute majority. Officially, parties cannot tell MEPs how to vote; they are supposed to vote on an individual and personal basis.
The Parliament meets in Strasbourg and Luxembourg and most committee meetings take place in Brussels.
The Court of Justice
The Court of Justice is the ultimate arbiter in the EU where there is any dispute as to the interpretation of EU roles. It can declare the regulations or decisions of the Commission or Council void in specific instances, i.e. when the Commission has shown a lack of competence, committed an infringement of essential procedure, infringed the Treaty or the laws relating to its application or committed an abuse of power. They will also act where a member state has failed to fulfil its obligations under the Treaties.
A member state can apply to the Court if they feel another member state has acted wrongly if the Commission has failed to deal with the situation. Member states are bound by the judgement of the Court.
The Court consists of 13 judges assisted by six Advocates-Generals. They are appointed for six years with six or seven judges and three Advocates-Generals being replaced alternately every three years. All these terms are renewable. The judges appoint a President of the Court every three years from among their number.
The Court of Auditors
Member states contribute percentages of their tax revenues to the budget of the EU as well as paying to join the EU. This means that they are entitled to ensure that the money is being spent properly. Thus the Court of Auditors was appointed in 1977 to oversee the accounts of the EU. They make an annual report into the income and expenditure of the EU. They have no powers to enforce their opinions but can do so through the Court of Justice. The Court of Auditors has refused to ratify the EU's accounts for a number of years running owing to suspicions of fraud.
One term which is used quite a lot in connection with the business of the EU is Qualified Majority Voting. This is an important but rather confusing issue surrounding the Council of Ministers. Since all states inevitably act in their own interests it is almost impossible to get a unanimous vote on any issue. Thus if this was mandatory nothing would ever get done by the Council. For this reason the system of "Qualified majority" voting has been introduced.
The way it works is as follows. Each state's delegate has a number of votes depending roughly on the size of their population. A qualified majority must be a certain number of votes in favour (abstentions are counted as not in favour). The votes in favour must come from not fewer than a certain number of member states.
The Single Market was agreed to in the Single European Act 1986 and actually introduced on 1st January 1993. Of the 282 proposals in the Internal Market Programme established in the Single European Act (SEA), 91% had been adopted by the beginning of 1993 and 96% by the end of 1993.
The theory behind the Single Market included the elimination of border controls, free movement of people across borders, common security arrangements, cross-state recognition of vocational qualifications, common technical standards and common commercial laws. When the SEA was passed, it was difficult to calculate the implications of certain of these changes. For example, it was not clear how completely the barriers would be eliminated.
To achieve economies of scale and other efficiency gains from the single market, substantial economic change is necessary. These changes will inevitably include redundancies from bankruptcies, rationalisations, take-overs and the introduction of new technology. The severity of this structural and technological unemployment depends on the pace of economic change and the mobility of labour occupationally and geographically.
A number of factors are also likely to arise which may not have been foreseen. In economics terms, these are known as the multiplier effect - anything that is likely to multiply the effect of a phenomenon. For example, firms are likely to locate as close as possible to their markets and sources of supply. If before the single market came into effect a firm's prime market was in the UK, it may have been located in the Midlands or the north of England. When the barriers were removed its main market may have become Europe as a whole. Thus it might decide to relocate to a place nearer to the market, e.g. the south of England, France or Germany etc. Thus the single market tends to attract capital and jobs away from the geographical edges of the EU and towards its centre.
In an ideal market situation, areas like the west of Ireland, the south of Italy, Portugal etc. should attract resources from other parts of the EU as they are depressed areas with low wages and low land prices which lead to low industrial costs, which should encourage firms to move into these areas. In practice, regional multiplier effects may worsen their problems. As capital and labour (especially young skilled workers) leave the extremities of the Union these regions are likely to become more depressed. Thus their infrastructure is neglected and they become less attractive to new investment.
The free movement of capital is likely to lead to giant "Euro-firms" with substantial economic power. This can raise rather than lower prices and lead to less choice for the consumer.
The single market also makes it more difficult for governments to intervene in their own economies.
The negotiations on the idea of closer union between the member states took place in the Dutch town of Maastricht. Therefore, although the official title of the treaty is the "Treaty on European Union", it is better known as the "Maastricht Treaty" and came into force on 1st November 1993. From that date the former European Community has been officially known as the European Union. The Treaty does not replace the original Treaty of Rome, but amends it.
Some of the matters embodied within the Treaty are as follows.
Common citizenship of the European Union
All nationals of member states became as of this date "EU citizens", who would "receive the rights and undertake the duties imposed by the EU" (what those duties may be do not seem to be made clear). This also means that by signing this Treaty, Ministers effectively made Her Majesty an EU citizen.
European Monetary Union (EMU)
The Treaty set in motion the drive towards EMU.
Home Affairs and Justice
The Treaty establishes the ideal of a common policy amongst member states on home affairs and judicial matters. The areas officially covered between governments as provided for in the Treaty are: asylum policy, crossing of external borders, immigration policies, drugs, fraud, civil and criminal judicial matters and police co-operation.
Foreign and Security Policy
This is seen by many as the most invasive to national political life. It may well also be the portion that is the most difficult to bring into operation. The Treaty confirms that member states shall "define and implement a common foreign and security policy" with the following objectives: to safeguard common values; to strengthen the security of the Union; to preserve peace and strengthen international security; to promote international co-operation; to develop and consolidate the rule of democracy, law and respect for human rights and fundamental freedoms. The example of the former Yugoslavia showed that the EU was unable to agree on a policy, either amongst the member states or with other world peacekeeping agencies. This shows how difficult it is going to be fore the individual states to agree on a policy to deal with any external situation.
The Social Chapter
Because of the attitude of the UK to the ideals of the Social Chapter, it could only be brought in as a Chapter of the Maastricht Treaty. At this stage the UK refused to sign the document. The Labour government signed the Treaty of Amsterdam in 1998, thus finally making the UK a party to the Social Chapter.
It has been suggested that the Social Chapter is an "empty vessel", containing very little and that as soon as Britain signed it, the Commission would start to add to it in order to form their model of a Socialist Europe. Once Britain had signed it, she would be stuck with it.
The Social Chapter covers such objectives as regulating wages, continuing improvements in living and working conditions, vocational training, equality in the workplace, health and safety, working hours, rights for disabled people etc. However, the UK already has excellent social provisions. The NHS, for all its faults, is still a better system than many of the other EU countries have. UK labour relations policy has been a huge success and great progress has been made regarding strikes and industrial relations.
Markets are becoming more competitive and the UK was concerned that a minimum wage would put Europe out of the running and jobs would go abroad to lower wage, more competitive countries. There is also a danger to small businesses that might not be able to afford the minimum wage.
Maximum working hours are also unhelpful to small businesses and the self-employed, who may have to burn the midnight oil as a matter of economic necessity.
The Democratic Deficit
The Treaty's answer to the so-called "democratic deficit" is the introduction of new powers for the European Parliament and European Council and the introduction of a new Committee of the Regions.
Community Competence
The Treaty defines new areas of "competence" in which the Community side of the Union is to concentrate in the future, rather than leave these matters to national governments. These are education, culture, public health, the environment, trans-European networks and consumer protection.
Economic and Monetary Union (EMU)
EMU was agreed upon in the Treaty of European Union (Maastricht Treaty). The signatories to the Treaty of Rome, including Edward Heath's government in 1972, recognised that this was to be the eventual outcome of the Common Market, a fact which came to light a few years ago under the Parliament 30-year rule. Economic interdependence would eventually lead to economic and monetary union.
The programme for EMU was divided into three stages.
Stage 1 - The Preliminary Stage
The Monetary Committee of the EU was to monitor the monetary policy of the member states and provide advice to the Council of Ministers on monetary convergence. Preparations were to be made for the establishment of a European Monetary Institute (EMI), the forerunner of the European Central Bank. This began in the autumn of 1993 when all the member states ratified the Treaty.
Stage 2
This began on 1st January 1994, when the EMI was established, and was to seek to coordinate between the EU central banks. It was to prepare the groundwork for the establishment of a European Central Bank. During this stage member states were to seek to achieve convergence of their economies. To be able to progress to full EMU a country would have to meet five convergence criteria:
By the end of 1996 the EMI was to have specified the details of the central banking system to be established in Stage 3. The Council of Ministers would have decided whether the conditions have been met for the start of Stage 3. The conditions specified that at least seven countries must have met the convergence criteria. Council of Ministers specified the date for starting Stage 3 as 1st January 1999.
Stage 3 - The Stage of Full EMU
The first countries to meet the criteria fixed their currencies permanently to the euro. The euro then became a currency in its own right. National currencies would eventually disappear. The first countries to join were Austria, Belgium, Finland, France, Germany, Holland, Ireland, Italy, Luxembourg, Portugal and Spain. The UK, Sweden and Denmark decided not to join at this stage. Greece initially failed to meet the convergence criteria. Actually, a number of the countries did not manage to meet the convergence criteria, but allowances were made if they were progressing towards these criteria and they were admitted.
At the same time a European system of Central Banks was set up, consisting of the European Central Bank (ECB) and the Central Banks of the member states. These are independent of the national governments and from the EU political institutions. Its board members are appointed by the Council of Ministers for an 8-year term. The ECB operates monetary policy on behalf of the countries which have adopted full EMU. It issues banknotes, distributes them through individual central banks, controls the money supply, determines interest rate policy and takes over the reserves of the member states and uses them to support the euro on the foreign exchange markets.
On 1st January 1999 some countries moved towards EMU and others did not. This has led to what has been dubbed a "Two Speed Europe". It is possible that as time goes on the countries that have joined will trade with each other and leave the others out.
The Common Agricultural Policy
When the Treaty of Rome was signed, people still remembered rationing and shortages during and after the Second World War. Thus at this time guaranteed food supplies seemed to be a very important goal and increased food supplies were seen as an important success. However, this is no longer seen as a valid argument. World prices are usually less than EU prices so there is no danger of difficulty in obtaining food at reasonable prices.
The Common Agricultural Policy (CAP) has involved a system of high fixed prices. These are received by the producer and paid by the consumer. By fixing prices which do not fluctuate with supply and demand, stable prices are guaranteed, but these stable prices are high prices which do not benefit the consumer.
The EU has set "Target Prices" for each major foodstuff. A target price is the price that the EU wants producers to receive (and consumers to pay). The EU intervenes through import levies or buying up surpluses to ensure that the price does not fall below the target level. The effect of this is different depending on whether the EU is self-sufficient in that product or a net importer.
Where the EU has been a net importer the target price has usually been greater than the world price. This means that when these goods are imported, the EU has added a levy onto the price to bring them up to the target price. The world price varies, so the levy is variable. This the system is known as "variable import levies". A variable import levy is a tax on imports to bring the price of imported food up to the target price.
To work out the size of the levy a "Threshold Price" has been set. A threshold price is the price at which an imported foodstuff enters the EU: the world price plus variable import levy. The threshold price is set at targe price minus transport costs from the port. This is the port equivalent of the target price, i.e. as the food has to be transported from the port to the market and this costs money, the port/threshold price does not have to be as high as the target price.
In other words:
Thus the price of EU imports would be brought up to the target price.
In the case of foodstuffs where the EU has been self-sufficient an "Intervention Price" would be set. An intervention price is the price at which the EU is prepared to buy a foodstuff if the market price is below the target price. This would be a few percentage points below the target price. If the market price were to fall below the intervention price, the Intervention Boards of the EU would buy up any surpluses at the intervention price. Foodstuffs that could be stored would be put into an intervention store. Otherwise it might be thrown away, or sold on the world market.
When surpluses are bought by the EU or export subsidies paid (this would happen when EU producers sell on the world market so they would receive the intervention price), the money would come from the European Agricultural Guarantee and Guidance Fund (FEOGA).
It was originally thought that money earned from port levies would be sufficient to finance these payments, but the EU has become increasingly self-sufficient in food. This means that food surpluses have increased and therefore member states have had to make increasingly large additional budget contributions to enable FEOGA to purchase these supplies.
Under CAP some food prices are kept much higher above free market prices than others. This causes a misallocation of resources within agriculture in some instances, for example high levels of support for oil seed rape has led to large amounts of it being grown (drive out into Hertfordshire or Essex and witness the number of fields growing acres of yellow plant - that is oil seed rape). This takes resources away from other items that attract less support.
Under a normal system all farm products would be sold on the market and what farmers would get would depend on the quality of their produce. Under the CAP, food is sold for the same price whatever the quality. This gives rise to the need for inspectors to ensure a minimum standard of quality and more expense for the consumer. In other words, it removes the discipline of the market.
The bigger the farm, the bigger the output, and this leads to bigger benefits from higher prices. Similarly, richer agricultural regions in the EU receive more than poorer ones. The cereal crops grown in North West Europe attract a much higher subsidy than the soft fruit, olives etc. grown in southern Europe. These points add up to increased inequalities in agriculture. This may be a benefit if the aim of the CAP was simply to increase productivity; in this case high incomes would simply be the reward for higher output. If, however, in the light of food surpluses the aim of continued support is to redistribute income from rich to poor, it is a clear failure.
Poor people spend a larger proportion of their income on food than the rich. This means that high food prices penalise the poor. This brings about a general increase in inequality. Before joining the Common Market, Britain used a system of subsidies, which meant lower prices for consumers. The cost was borne by the taxpayer. This increased equality.
There are three reasons why the CAP is inequitable between member states.
By ensuring increased output, CAP encourages destruction of hedgerows and increased use of chemical fertilisers and pesticides which create pollution. Nitrates used in farming are the biggest single cause of river pollution in the UK. In many parts of the EU (especially the UK) the rural landscape has changed dramatically over the last 25 years - hedgerows have been destroyed, woods and copses have been cut down and the former patchwork of small meadows and fields look like the Canadian prairies. This results from the drive to increase production of cereals because of high cereal prices in the EU.
The environment is also under threat from pollutants - pesticides kill wild flowers and animals and can leave toxic residues in the soil, fertilisers can leach into rivers, so can farm waste, slurry and silage. This leads to pollution of drinking water and death of fish and other aquatic life. Cereal production leads to increase in the practice of stubble burning, giving rise to smoke which is a public nuisance, and fire that kills wildlife. The measures that have been taken to overcome this have had only a minor impact on the pattern of production and environmentalists are campaigning for much more radical steps.
Many individual countries consistently break the rules of the CAP. In the face of mounting surpluses, countries have tried to protect their own farmers against those of other members. They have given subsidies or reduced imports from other EU countries.
The CAP has had a very damaging effect on agriculture in non-member countries in two ways. Firstly, import levies on food reduces the amount of food other countries are able to export to the EU. For example, Australia, a low-cost producer of butter, used to be a major exporter to the UK. Now it cannot export any butter to the EU. Secondly, export subsidies allow EU surpluses to be sold at very low prices on the world market. This has a doubly damaging effect on agriculture in developing countries. Exporters of foodstuffs find it very difficult to compete with subsidised EU exports and farmers in developing countries who are producing for their own domestic market find they cannot compete with cheap EU imports. As a result of this, agriculture in the developing world declines. Farmers' incomes are too low to invest in land. Many migrate to overcrowded cities and become slum dwellers in shanty towns with little or no paid employment. Neglect of agriculture can lead to famines if there is poor rainfall in any year. The surpluses that caused the problem are then needed as aid.
Despite the many criticisms of the CAP it remains a central aspect of European integration. It absorbs approximately half of the EU budget.