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Membership
The European Union (EU) is a customs union of 25 member nations.
France, West Germany, Italy, the Netherlands, Belgium,
and Luxembourg formed the EU by signing the Treaty of
Rome in 1957 to stimulate the economic integration and
recovery of Western Europe. The United Kingdom, Ireland,
and Denmark joined in 1973; Greece joined in 1981; and
Spain and Portugal in 1986. East Germany was unified with
West Germany in 1989. Austria, Finland, and Sweden joined
in 1995 to form the EU-15. Poland, Hungary, the Czech
Republic, Slovakia, Slovenia, Estonia, Latvia, Lithuania,
Cyprus, and Malta joined in May of 2004 to form the EU-25.
Bulgaria and Romania are scheduled to join in 2007 if
they can meet the EU’s requirements for membership.
General criteria for EU membership require that a country
be governmentally democratic, geographically European,
and economically viable. A country joining the union must
also adopt the acquis comunitaire, the body of
laws and rules that apply to EU members.
The EU began as a compact between sovereign nations that created
a successful customs union for industrial goods. Control of most
economic policy except for agriculture was formally retained by
the national governments. The economies of EU member nations became
more closely linked with the enactment of legislation in 1993 to
form a single market that eliminated border controls between the
member states. Diverse economies, language, cultural differences,
and historical barriers have complicated economic and political
integration.
However, the EU took a major step toward deeper economic integration
in 1999 with the adoption of a single currency by 11 members (12
in 2001). The EU's monetary union integrates national economies
through a common monetary policy and a common currency, the euro.
A single currency was seen as a necessary step in creating a unified
European market to ultimately allow the free flow of capital, goods,
services, and people.
The EU is a major political and economic force. With a population
of 450 million in 2004, the EU has about 175 million more people
than the United States. The EU's economy, measured by Gross Domestic
Product (GDP), was over 40 percent larger than the U.S. economy
in 2004. However, when measured by purchasing power parity, which
adjusts for living standards and costs, EU-25 and U.S. GDP are
nearly equal. In per capita terms, U.S. per capita GDP is about
50 percent higher than that for the EU-25. The United States has
grown faster economically in the early 2000s than the EU-15, and
with the relatively poor 10 new member states, U.S. per capita
income has moved to a significantly higher level than that of the
EU-25.
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Agriculture
EU agricultural production is dominated by livestock products
(including dairy), grains, vegetables, wine, fruits, and
sugar. Major export commodities include grains (wheat
and barley), sugar, dairy products, beef, poultry, pork,
fruit, vegetables, and wine. Most agricultural imports
are products not suited to the climate of northern Europe
and include soybeans and soybean products, cotton, tobacco,
tropical products, off-season fruits and vegetables, coffee,
cocoa, tea, and spices. The EU imports large quantities
of animal feed to supplement domestically produced supplies.
The EU is the world's largest importer of agricultural commodities
and the largest agriculture importer from developing countries
due to the numerous trade preferences granted to former colonies.
However, these preferences are being reexamined and may be challenged
to conform to World Trade Organization (WTO) rules on reciprocity.
The United States is the EU's largest single trading partner.
EU farms are, on average, considerably smaller than U.S. farms.
In 2001, the average farm size in the EU-15 was 46.2 acres, whereas
the average farm size in the United States was 436 acres. The addition
of 10 new member states with smaller farm sizes than the EU-15
will makes U.S. average farm size more than 10 times that of the
average EU-25 farm. However, farm size varies greatly by country,
ranging from an average of 171 acres in the United Kingdom to 10.6
acres in Greece (a member of the EU-15) and 7.2 acres in Hungary
(a new member of the EU-25).
Responsibility for agricultural policy is centralized in the European
Commission and the Council of Agricultural Ministers. The Common
Agriculture Policy (CAP), the cornerstone of EU agricultural
policy, helped change the EU into a major food exporter (although
it remains the world's largest food importer). EU agriculture has
thrived under a system of generous support to farmers. These high
subsidies have led EU farmers to overproduce, building up large
surpluses of grain, butter, skim milk powder, beef, olive oil and
other products. According to estimates by the Organization for
Economic Cooperation and Development (OECD), EU-15 subsidies and
other transfers from governments of member nations accounted for
37 percent of farm revenue in 2003, compared with 17 percent in
the United States.
CAP farm support is a very large component of the EU's budget.
For example, CAP expenses were 49.2 billion euros (US$61 billion)
in 2004 and accounted for 45 percent of the EU's total budget,
even though agriculture is a very small part of the economy. In
2004, agriculture accounted for only 1.7 percent of EU GDP, and
only 4.3 percent of the EU population was employed in agriculture.
The CAP can also be a source of tension among EU member states
because the amount a country contributes to the CAP budget can
differ dramatically from the amount received in agricultural support.
For example, Germany has the largest economy in the EU and contributes
the most to the EU's budget. In 2003, Germany’s net contribution
accounted for over 40 percent of the EU budget. Since agriculture
is less than 1 percent of Germany's total GDP, Germany is helping
finance agricultural support for other EU countries, particularly
France, the largest agricultural producer in the EU.
EU commitments under the Uruguay Round
Agreement on Agriculture imposed limits on the EU's ability
to support its agricultural sector, raise barriers to imports,
and subsidize exports. CAP
reforms in 1992, 1999, 2003, and 2004
were undertaken, in part, to adhere to WTO rules, prepare for future
negotiations on agricultural trade, and adjust to EU enlargement.
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