The European Union is a
supranational union of 25 European Member States. It was
established under that name in 1992 by the Treaty on
European Union (also known as the Maastricht Treaty).
However, as already explained, many aspects of the Union
existed before that date, through a series of acts dating
back to 1951.
The EU's activities cover all areas of public policy,
from health and economic policy to foreign affairs and
defence. However, the extent of its powers (its competences)
differs greatly between areas. Thus, for example, it
resembles a federation on trade with third countries,
monetary affairs, agricultural and environmental policy. It
resembles a confederation on social and economic policy,
consumer protection, and home affairs, and it resembles an
international organisation in external relations (foreign
A key activity of the EU is the establishment and
administration of a common single market, consisting of a
customs union, a common trade policy, a single currency, a
common agricultural policy, and a common fisheries policy.
The customs union is a free trade zone with a common
external tariff: as the EU is a group of Member States
forming a customs union, it has introduced such a tariff
system. The same customs duties, quotas, preferences or
other non-tariff barriers to trade apply to all goods
entering the area, regardless of which Member State within
the area they are entering.
The EU's 25 Member States negotiate as one through the
European Commission. The formulation of the EU's external
trade policy has traditionally involved Member States'
representatives, who are closely consulted on a regular
basis, and each Member State's government ministers, who
themselves take the key decisions about the direction of
trade policy through majority (or in some areas, unanimous)
voting within the EU's Council of Ministers. The European
Parliament is kept abreast of developments.
The external trade policy of the EU, which covers
approximately one-fifth of world trade, is referred to in EU
parlance as the Common Commercial Policy (CCP). While
commercial policy originally focused on tariffs and other
border measures which affected trade in goods, the scope of
the policy today is far more diverse. Other policy areas,
which can be generally referred to as regulatory issues have
become increasingly relevant to international trade. These
mainly include the following:
The CCP has, furthermore, developed a sophisticated
network, by means of trade agreements and regulations, of
trade relations with third countries. This reflects the
granting of trade preferences. Hong Kong traders familiar
with the Chinese mainland export market will most likely
know, for example, of the EU's Regulation on the Generalised
System of Preferences, or GSP. The Regulation grants
reductions in import duties, or nil rates, depending on the
"sensitivity" of the products imported into the EU.
Beneficiary countries are the world's developing countries,
although some sectors for some developing countries are
excluded. A good example of this is mainland China's textile
sector, which the EU believes to be developed enough not to
need a competitive boost under the GSP (the GSP and its
application to Chinese mainland exports is analysed later in
The EU's CCP is designed so as to both restrict and
promote trade. While - in large part due to WTO rules and
the pressure of multilateral liberalisation - trade policy
has become less restrictive over time, considerable scope
for protection remains in particular sectors. Textiles and
clothing are one such sector. Agriculture is another.
The use of anti-dumping measures and regulatory barriers
are additional ways in which trade is restricted. While the
former are used so as to protect domestic industry which is
under threat or suffering from price-undercutting imports,
the latter comprise a large body of EU legislation, whether
to protect the environment or human and animal health.
Regulatory measures come in many guises, from mandatory
labelling to prohibitions on the use of certain dyes or
hazardous substances. These will be dealt with further below
as, strictly speaking, although they very much affect trade
in goods, they do not fall under the CCP.