PESTLEM: EUROPIAN UNION

Gen

1. European Union (EU), international organization comprising 27 European

countries and governing common economic, social, and security policies. Originally
confined to western Europe, the EU undertook a robust expansion into central and
eastern Europe in the early 21st century. The EU’s members are Austria, Belgium,
Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta,
the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and
Sweden. The United Kingdom, which had been a founding member of the EU, left
the organization in 2020. 1
 

Fig 1: European Union (Source https://www.britannica.com/topic/European-Union)

Political

2. Origin of EU. The EU represents one in a series of efforts to integrate Europe

since World War II. At the end of the war, several western European countries
sought closer economic, social, and political ties to achieve economic growth and
military security and to promote a lasting reconciliation between France and
Germany. To this end, in 1951 the leaders of six countries—Belgium, France, Italy,
Luxembourg, the Netherlands, and West Germany—signed the Treaty of Paris,
thereby, when it took effect in 1952, founding the European Coal and Steel
Community (ECSC). The ECSC created a free-trade area for several key economic
1
Britannica Home/ Politics, Law & Government/ International Relations/ European Union. Retrieved from
https://www.britannica.com/topic/European-Union
and military resources: coal, coke, steel, scrap, and iron ore. To manage the ECSC,
the treaty established several supranational institutions: a High Authority to
administrate, a Council of Ministers to legislate, a Common Assembly to formulate
policy, and a Court of Justice to interpret the treaty and to resolve related disputes. A
series of further international treaties and treaty revisions based largely on this
model led eventually to the creation of the EU.

3. Political Factors Affecting EU. There is little doubt that peace in Europe is
the origin of the European Union as the continent was devasted by the Second
World War. The Union has been successful to a large extent in achieving the aim.
Today it has also become a global actor that influences global economy and politics.
EU works with other major world powers and plays an imp role to encourage
democracy, peace, freedom and global security. The EU maintains very good
relations with the United States; however, many analysists argue that the US prefers
a weak and divided Europe. However, there are many Eurosceptics in Europe who
are more comfortable with national politics, law, and economy rather than those of
the EU. It is evident from the referendum results in the UK that triggered Brexit.

4. Accountability to People. Some people question the legitimacy of the EU

and call it undemocratic. They point to the EU Commission (the EU’s executive
body) whose President and Commissioners are not directly elected by the people of
the Union. They also point to the Commission’ solo right to propose EU legislation.
However, others argue that although the European Commission is not elected, it is
fully accountable to the European Parliament. Likewise, the European Parliament is
made up of MEPs from all 27 EU member states.

5. Relationship with China. The EU is a key partner for China with regard to
trade - the EU is China's largest partner in trade, both with regard to imports and
exports - and investment, as a destination and source of Foreign Direct Investment.
China also stands to gain a lot from the European Union's own experience. 2 On 15
September 2021, Parliament voted a report on 'A new EU-China strategy'. The core
demand of this new resolution is that the HR/VP and the Council 'develop a more
assertive, comprehensive and consistent EU-China strategy. The resolution stresses
the importance of an ambitious and dynamic relationship with the USA in the
framework of a Transatlantic Dialogue on China and calls for stronger EU
cooperation with the North Atlantic Treaty Organization (NATO) on Chinese security
challenges, including the implications of China's presence in Africa and in the Arctic.
Finally, Parliament recommends dialogue and coordination with the countries of the
Quadrilateral Security Dialogue. Regarding human rights, the resolution calls for
solid benchmarking of the progress made in bilateral dialogues on human rights. The
resolution criticises China's disregard for human rights in Xinjiang, Tibet, Inner

2
https://howandwhat.net/pestel-analysis-european-union-eu/
Mongolia, Hong Kong and Macao and the lack of basic freedoms (of expression,
association, the press, and religion) in the People's Republic of China in general. 3

Economic

6. Single Market. The European single market is one in every of the best
achievements of the EU. It accounts for about five hundred million customers (EU,
2020). It aims remove all the barriers to business within the member states by
guaranteeing four freedoms i.e., free movement of products, services, capital, and
labour. However, the free movement of people has been a rather controversial issue
and drawn widespread criticisms from Eurosceptic political parties, and plenty
of others.4

7. COVID Effect. The single market has been very effective not only because of
its size, but also for removing tariffs and reducing administrative liabilities with the
application of one set of rules across all the participating member states. However,
the lockdowns in 2020/21 destroyed many businesses and many critics argue that
the Union’s approach to deal with it has not been effective.

8. GDP. The Gross Domestic Product (GDP) in the EU in 2019 was around $16
trillion with Germany, France, and Italy being the major economies. The EU is the
top trading partner for 80 countries. It also worth mentioning that some critics believe
it favours the larger member states at the expense of the smaller ones.

9. Euro (€). The euro is the official currency for 19 of the 27 EU member
countries. These 19 countries with approximately 340 million people collectively
make up the euro area which is also known as the eurozone. The euro was
introduced in 2002, and the symbol is €. The euro is one of the most widely used
currencies in the world. It is managed by the European Central Bank. It is worth
mentioning that euro zone crisis, also known as the European debt crisis, has been
affecting a number of member states since 2009.

10. Trade with China. In 2021, China was the third largest partner for EU
exports of goods (10.2 %) and the largest partner for EU imports of goods (22.4
%). Among EU Member States, the Netherlands was the largest importer of goods
from China and Germany was the largest exporter of goods to China in 2021.
Between 2011 and 2021, the EU continuously recorded a trade deficit with China,
increasing from €129 billion in 2011 to a peak value of €249 billion in 2021. EU
exports to China have been highest in 2021 at € 223 billion.

3
EU-China relations in challenging times. Retrieved from https://www.europarl.europa.eu/RegData/
etudes/BRIE/2021/698751/EPRS_BRI(2021)698751_EN.pdf
4
From Revolution to Coalition – Radical Left Parties in Europe. Retrieved from https://rosalux.nyc/wp-
content/uploads/2021/09/fromrevolutiontocoalition.pdf
 Fig 2: EU Trade in goods with China 2011-21 in Billion Euros

Social

11. Social Benefits. Europe has a shared and rich cultural heritage and the EU
works to support and preserve it. The citizens of the member states can travel, work,
and settle in anywhere within the EU. This helps them deepen their mutual
relationship and learn and benefit from different sub-cultures. The EU is rich and
diverse in sports. Football is the most popular sport; however, basketball, cricket,
tennis, athletics, rugby, Formula 1, ice hockey, and volleyball are also very popular.
Germany, France, and Italy are some of the greatest nations in football. Other EU
giants in football are Portugal, Netherlands, and Spain.

12. Social Challenges. However, the EU is currently facing a number of social

challenges. For example, female employment rate is far below than that of men in
many member states. Family responsibilities and poor provision of or unavailable
childcare usually affect female employment. Likewise, youth unemployment, ageing
population, income and wealth inequality, inefficiencies in hospital care, higher
pharmaceutical spending and unemployment of locals are some other problems
facing the EU. According to some critics, low-skilled migrants from poor EU member
states impact on the employment opportunities for local people in highly developed
economies such as Germany and France.

Technology

13. Level of Tech. As covered earlier, the EU
excellent in many areas including science and
Sweden, Finland, and France are some of the
countries in the world. By any measure, the EU is
contributed immensely to science and technology.
is a global actor, and has done
technology. In fact, Germany,
most technologically advanced
a scientific powerhouse and has
14. Technology Limitations. However, the EU’s technology and IT sector falls
behind economic powerhouses such as the USA, and China. The EU also suffers
from a lack of IT skilled work forces. Companies such as Apple, Alphabet, Alibaba,
Amazon, Baidu and Tencent are either from the USA or China. The EU needs similar
companies of its own. In fact, it really needs to speed up in the artificial intelligence
revolution.

Legal

15. Legal System. The EU has its own legal system. It is separate from
international law and highly respected in the member states. It overrules the national
law of each member country if there is a conflict between the national law and the
EU law. A uniform application of EU law means laws are consistent in their
interpretation and application, and are more accessible, understandable and
transparent. However, many Eurosceptics oppose the dominance of the EU law over
their national laws.

Envt

16. Envt Issues. There is no doubt that some of the most beautiful cities in the
world are located in the EU. Indeed, France, Germany, Italy, and Spain are some of
the most visited countries in the world. Tourism plays an important role in the EU
GDP. For instance, it’s contribution to the EU GDP was 9.5% in 2019 and accounted
for approximately 22.6 million jobs. However, the EU faces some enormous
environmental challenges. For example, air pollution is the biggest environmental
risk to public health in Europe causing an estimated 400,000 premature deaths a
year. And alarmingly, most of the EU member states have failed to meet air quality
standards and the measures taken by the European Commission against countries
branching emissions limits have not been effective either.

Mil

17. EU & NATO. The EU is an economic and political org with vast resources to
make a difference to its own members and to its neighbours. On the other hand,
NATO is a military, defensive organization. Out of the 27 EU member states, 21 are
also members of NATO. Six EU member states, all who have declared their non-
alignment with military alliances, are not NATO members: Austria, Cyprus, Finland,
Ireland, Malta, and Sweden. Therefore, NATO and the EU are essential partners
who share common values, strategic interests and a majority of member nations. In
recent years, the two organisations have developed closer cooperation, focused on
concrete results and improved security for European citizens.
18. A Closer Relationship. NATO and the EU took their relationship to a higher
level in July 2016 when, in a Joint Declaration, NATO Secretary General Jens
Stoltenberg, the President of the European Council Donald Tusk, and the President
of the European Commission Jean-Claude Juncker pledged to boost cooperation
between the two organisations. This commitment was renewed with another joint
declaration on NATO-EU cooperation in July 2018. At their summit in June 2021,
NATO leaders confirmed that the partnership with the EU remains essential, and
declared the intention to continue to develop and deepen cooperation on current and
evolving security challenges, such as strengthening resilience, maintaining our
technological edge, and addressing the challenges to the rulesbased international
order.5

Key Factors

19. The European single market is one of the best achievements of the EU. EU
has been successful to a large extent in maintaining peace in the Europian continent.

20. EU has also become a global actor that influences global economy and
politics and plays an imp role to encourage democracy, peace, freedom and global
security.

21. The EU is a key partner for China with regard to trade - the EU is China's
largest partner in trade, both with regard to imports and exports.

22. The COVID lockdowns in 2020/21 destroyed many businesses and many
critics argue that the Union’s approach to deal with it has not been effective.

23. In a resolution of 21 January 2021, EU Parliament criticised the rushed

agreement on the CAI, 'while not taking concrete action against ongoing grave
human right violations, for example in Hong Kong, Xinjiang Province and Tibet'.

24. China surpassed the US to become the EU’s largest trading partner in 2020-
21 primarily due to strong demand during the pandemic. Experts consider that
despite EU frustrations with Beijing over its stance on the Ukraine war, trade ties will
be hard to break.

25. Out of the 27 EU member states, 21 are also members of NATO. Six EU

member states, all who have declared their non-alignment with military alliances, are
not NATO members: Austria, Cyprus, Finland, Ireland, Malta, and Sweden.
Therefore, NATO and the EU are essential partners who share common values,
strategic interests and a majority of member nations.
5
NATO – EU Relations, November 2021. Retrieved from https://www.nato.int/nato_static_fl2014/assets/pdf/
2021/11/pdf/2111-factsheet-nato-eu-en.pdf
Conclusion

26. Chinese diplomats are often described as “wolf warriors” as they aggressively,
sometimes offensively, assert China’s interests in the international arena. China has
doubled down on “wolf diplomacy” in Europe. In 2020, the Chinese Embassy in the
Czech Republic threatened Czech companies if the Senate president visited Taiwan.
After the EU’s sanctions on China over human rights abuses against the Muslim
Uyghurs in Xinjiang in 2021, China struck back with its own sanctions against the
EU. And in January of this year, China imposed a trade boycott on Lithuania after the
latter allowed Taiwan to open a de facto embassy there. Most recently, in May,
China warned the EU not to “gamble on the Taiwan issue,” after the EU’s decision to
upgrade its trade and investment relations with the island. China needs Europe as a
market for its goods and as a source of technology, especially given the dire state of
its relations with America. While China’s Belt and Road Initiative focuses on
investing in infrastructure (roads, buildings, communications networks, etc.) in
Eastern and Southern Europe, the Comprehensive Agreement on Investment would
complement China’s investment map in Western Europe by allowing more
investment in manufacturing and services sectors. 6

6
https://www.heritage.org/asia/commentary/china-sabotages-its-own-economic-interests-europe-us-should-
take-advantage-the