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Received through the CRS Web Order Code RS21372 Updated April 6, 2006 The European Union: Questions and Answers Foreign Affairs, Defense, and Trade Division This report provides answers to key questions related to the European Union (EU). It describes the EU’s evolution, its govern ing institutions, trade policy, and efforts to forge common foreign and defense policies. The report also addresses the EU-U.S. and EU-NATO relationships. It w ill be updated as events warra nt. For more information, see CRS Report RS21344, , by Kristin Archick, and CRS Issue Brief IB10087, U.S.-Europe an Union Trade Relations: Issues and Policy , by Raymond J. Ahearn. What Is the EU? The EU is a treaty-based, institutional framework that defines and manages economic and political coopera tion among its 25 member states (Austria, Belgium, Cyprus, the Czech Republic, Denmark, Est onia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, th CRS-2 pooled their national sovereignty and work toge CRS-3 Court of Justice interprets EU law and its rulings are binding; a Court of Auditors monitors the EU’s financ ial management. A number represent economic, social , and regional interests. Why and How Is the EU Enlarging? The EU sees enlargement as crucial to promoting stability and prosperity in Europe, and furthering the peaceful integration of the continent. The EU began as the European Coal and Steel Community in 1952 with six members (Belgium, France, Germany, Italy, following its rejection by French and Dutch voters in separate refe renda in May and June 2005. At their June 16-17, 2005 summit, EU leaders took the French and Dutch rejections into consideration. They rea ffirmed their commitment to the constitution but announced that decisions about the timing of ratification were for each member state to CRS-4 Does the EU Have a Foreign Policy? The EU is seeking to build a Common Foreign and Security Policy (CFSP). Past attempts to further EU political integra tion foundered on national sovereignty concerns and different foreign policy pr erogatives. But in 1993, EU members concluded that the Union must increase its weight in world affairs to match its growing economic clout. CFSP decision-making is dominated by memb er states; they develop common policies in areas in which they can reach consensus, and ensure that national policies are in line with agreed EU strategies and positions (e .g., imposing sanctions on Serbia). In 1997, EU leaders proposed creating a High Representa tive for CFSP; in 1999, they appointed Javier CRS-5 Advocates argue that building more robus t European military capabilities for ESDP will also benefit the alliance. France, the other key driver of ESDP, would prefer a more autonomous EU defense arm. The EU and CRS-6 roughly equal economic strength and neither has the ability to impose concessions on the other. Another factor may be that many disputes involve clashes in different domestic values, political priorities, and regulatory systems. Does the United States Have a For mal Relationship with the EU? Yes. For decades, the United States and the EU (and its progenitors) have maintained diplomatic and economic ties. Washington ha s strongly supported European integration, and U.S.-EU trade and investment relations are extensive. The 1990 U.S.-EU Transatlantic Declara