What is the European Union (EU)?

The European Union (EU) is a unified international organization that governs the economic, political,
and social policies of 27 member states. Originally formed with the desire to achieve peace in Europe,
current EU policies are tailored to ensure the free movement of people, goods, services, and capital
among its member states.

Summary

 The European Union (EU) is a unified organization of 27 member states, with authority
over their political, economic, and social policies.
 The EU aims to ensure peace, encourage free trade, and tailor policies to work toward the
benefit of its members.
 It functions as a single unit in international trade, making it the largest trading power in
the world.

Brief History of the European Union

The European Union was built with the aim of ending frequent wars among neighboring countries
following the Second World War. In 1951, the European Coal and Steel Community (ECSC) started
uniting nations to achieve peace.

The six founding countries of the EU are:

 Belgium
 France
 Germany
 Italy
 Luxembourg
 Netherlands

The Treaty of Rome was signed in 1957, creating the European Economic Community, or a “common
market.” It was followed by a period of economic growth – a result of lowering trade restrictions among
member states.

The EU experienced continued expansion ever since, with the fall of communism and the Berlin Wall
supporting a closer-knit Europe. In 1993, the “Single Market” agreement was completed, allowing four
types of freedoms – the movement of goods, services, people, and money.

As more members joined the EU, it grew from a community of six member states to 27 member states.

Membership in the European Union

To be a part of the EU, applicant countries must meet certain conditions, known as the “Copenhagen
criteria.” The key criteria are listed below:

 Stable institutions guaranteeing the rule of law, democracy, human rights, and respect for and
protection of minorities;
 A functioning market economy and the capacity to cope with market forces and competition in
the EU;
 The ability to take on and implement effectively the obligations of membership, including
adherence to the aims of economic, political, and monetary union.
Following the exit of the United Kingdom in early 2020, there are now 27 remaining member states of
the EU.

Governing Institutions of the European Union

The European Union oversees three main institutions that are involved in legislation:

1. European Parliament

The European Parliament is elected by the EU’s citizens and is responsible for law-making, supervision,
and budget establishment.

2. Council of the European Union

Represents the governments of each of the EU’s member states, with one minister from each state.
Responsible for coordinating policies, adopting EU laws, and voicing the opinion of member states.

3. European Commission

The EU’s politically independent executive arm, responsible for proposing and enforcing legislation,
managing policies, allocating budgets, and representing the EU internationally.

Trade within the European Union

The EU is the largest trading power and the largest single-market area in the world. In 2019, the EU
posted a GDP of $15.59 trillion, only behind the United States in terms of economic size.

Free trade within the EU was one of the union’s foundational rules. Trade among member states is
completely free, allowing the exchange of goods and services across borders without any tariffs or
quotas.

The European Union and International Trade

Besides free trade among member states, the EU also promotes the concept of open economies in
foreign trade. The EU also signed several trade agreements with a number of countries, including:

 EU-Canada Agreement (CETA)

  EU-Japan Agreement
 EU-Singapore Agreement
 EU-Australia Agreement

With each trade agreement, the EU aims to either cut or remove tariffs, making the cross-border flow of
goods and services easier for exporters and importers.

The EU’s top 10 trading partners:

 USA
 China
 United Kingdom
 Switzerland
 Russia
 Turkey
 Japan
 Norway
 South Korea
 India

In 2019, the EU’s five largest exports were:

 Machinery and Equipment (276.8bn euros)

 Automobiles (241.2bn euros)
 Pharmaceuticals (205.2bn euros)
 Chemicals (177.7bn euros)
 Computers, electronics, and optical products (171.7bn euros)

The EU’s five biggest imports were:

 Computers, electronics, and optical products (260.2bn euros)

 Crude petroleum and natural gas (249.6bn euros)
 Chemicals (132.4bn euros)
 Machinery and equipment (124.8bn euros)
 Automobiles (114.6bn euros)

In addition, countries in the EU are the largest importers of cocoa beans, which explains the Netherlands
and Germany’s prowess in the chocolate industry and the high per-capita chocolate consumption across
Europe.

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