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Monday, March 29, 2010

Financial Market Supervision: European Perspectives

James K. Jackson
Specialist in International Trade and Finance


The global financial crisis has sparked a debate over the cause and impact of the crisis. Academics and policymakers are searching for changes in the financial system that can correct any perceived weaknesses in the structure of regulation, the content of regulations, and the coverage of financial instruments and activities. Since the onset of the crisis, numerous proposals have been advanced to reform or amend the current financial system to help restore economic growth. In the United States, the Obama Administration has proposed a plan to overhaul supervision of the U.S. financial services sector. Senator Collins introduced S. 664, the Financial System Stabilization and Reform Act of 2009, with a companion measure, H.R. 1754, that was introduced by Representative Castle in the House of Representatives. The measures would create a Financial Stability Council and grant the Federal Reserve the authority to examine the soundness and safety of the financial system posed by bank holding companies. On March 16, 2010, Senator Dodd unveiled a proposal to reform financial markets that would include a Consumer Financial Protection Bureau within the Federal Reserve; a Financial Stability Oversight Council; new authority to liquidate banks; new regulations for credit rating agencies; new limits on banks' trading activities; and renovation of some federal banking legislation. Other measures include: S. 1682 (Senator Cantwell), the Derivatives Market Manipulation Prevention Act of 2009; S. 1803 (Senator Merkley), the Federal Reserve Accountability Act of 2009; S. 2756 (Senator Warner) the Financial Services Systemic Risk Oversight Council Act of 2009; H.R. 3795 (Representative Frank), the Over-the-Counter Derivatives Markets Acts of 2009; H.R. 3968 (Representative Ellison), to amend the Bank Holding Company Act; and H.R. 3996 (Frank), to improve financial stability. The crisis has underscored the fact that national and international financial markets have become highly integrated, and problems in one market can trigger contagion that can spread both among countries and into economic sectors to affect businesses, employment, and household well being. Increasingly, however, coordination among European capitals and between Europe and the United States has proven to be elusive. 

Similarly, governments in Europe are considering what, if any, changes they should make to their national financial systems. Along with the United States and other countries, European countries also are considering changes to the international systems of financial supervision and regulation in order to ensure prosperity through the smooth operation of domestic and international financial systems. This process may include reconsidering the roles and responsibility of the central banks in the post-financial crisis era. Various organizations and groups are advancing a large number of recommendations and prescriptions. Some goals for any such adjustments may include providing an institutional structure for oversight and regulation that is robust, comprehensive, flexible, and politically feasible while providing appropriate incentive structures to preclude excessive risk taking. Of course, there are no guarantees that amending the current system or employing a different regulatory and supervisory structure will preclude a repeat of the most recent financial crisis given that financial markets and institutions are continually growing, innovating, and responding to government- and market-imposed constraints. 

This report addresses the European perspectives on a number of proposals that are being advanced for financial oversight and regulation in Europe. The European experience may be instructive because financial markets in Europe are well developed, European firms often are competitors of U.S. firms, and European governments have faced severe problems of integration and consistency across the various financial structures that exist in Europe.



Date of Report: March 17, 2010
Number of Pages: 29
Order Number: R40788
Price: $29.95

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Europe’s Preferential Trade Agreements: Status, Content, and Implications

Raymond J. Ahearn
Specialist in International Trade and Finance

Preferential trade agreements (PTAs) comprise a variety of arrangements that favor member parties over non-members by extending tariff and other non-tariff preferences. PTAs, particularly free trade agreements (FTAs), have proliferated in recent years. In the post-war period, the European Union (EU), which is a PTA itself, has developed the largest network of PTAs in the world. The main findings of this report are as follows: 

• Historically, Europe's PTAs have differed among its partners in terms of provisions and commitments and they have been characterized by relatively modest ambition in terms of market-opening. In comparison, the U.S. approach has been more standardized in terms of its provisions and more focused on achieving reciprocal market access. These differences in approaches, however, have significantly narrowed since the EU adopted its more commercially oriented Global Europe strategy in 2006. 

• EU PTAs cover nearly twice as much trade (exports) in percentage terms (70% versus 40%) and seven times as much in value terms ($3.4 trillion versus $0.52 trillion) than U.S. PTAs. These numbers can be used to support the argument that U.S. firms may face more discrimination and possibly reduced sales than EU firms. At the same time, the data may overstate the degree of discrimination because the amount of trade covered by PTAs is not the same as the amount of trade conducted on a preferential (duty-free) basis. 

• Concerns about trade discrimination have been a factor in U.S. and EU efforts to negotiate and implement separate but similar PTAs with five trading partners (Israel, Mexico, Morocco, Chile, and Jordan). Based on market share data analyzed, neither side appears to have gained a competitive advantage from having negotiated a PTA. This, however, does not mean that individual firms and workers have not benefitted or that exports have not risen at faster rates after the PTA became effective. 

• In the past, Europe's PTA program has not been a major factor affecting U.S. FTA policy, which currently is in flux. However, Europe's recently negotiated FTA with South Korea raises the concern that U.S. exports will be disadvantaged due to the duty-free price advantage European-based producers will gain in the Korean market. The United States has also negotiated an FTA with Korea, but congressional approval currently is uncertain. 

• Ongoing negotiations between the EU and Canada over an ambitious and comprehensive FTA could also affect the U.S. FTA debate. If a robust agreement is reached, the EU and the United States would then both have FTAs with Canada and Mexico, making the absence of a FTA between the United States and EU all the more glaring after years of discussion. 

• It is not clear where Europe's PTA policy is headed. There are only a few remaining major developed countries that fall outside the EU's network of PTAs, including the United States, China, Japan, and Australia. While PTA negotiations with these countries could yield large economic benefits and provide a big impact (for good or ill) on the world trading system, some of these countries would likely demand liberalization of European agriculture and services, areas where there is widespread opposition in Europe.


Date of Report: March 22, 2010
Number of Pages: 42
Order Number: R41143
Price: $29.95

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Thursday, March 25, 2010

The Financial Crisis: Impact on and Response by The European Union

James K. Jackson
Specialist in International Trade and Finance

The European Union (EU) and the United States have taken unusual and extraordinary steps to resolve the financial crisis while stimulating domestic demand to stem the economic downturn. These efforts appear to have been successful, although the economic recovery remains tepid. The economic recession and the financial crisis became reinforcing events, causing EU governments to forge policy responses to both crises. In addition, both the United States and the EU have confronted the prospect of growing economic and political instability in Eastern Europe, Greece, and elsewhere over the impact of the economic recession on restive populations. In the long run, the United States and the EU likely will search for a financial regulatory scheme that provides for greater stability while not inadvertently offering advantages to any one country or group. Throughout the crisis, the European Central Bank and other central banks assumed a critical role as the primary institutions with the necessary political and economic clout to respond effectively. Within Europe, national governments, private firms, and international organizations varied their responses to the financial crisis, reflecting differing views over the proper policy course to pursue and the unequal effects of the financial crisis and the economic downturn. Initially, some EU members preferred to address the crisis on a case-by-case basis. As the crisis has ebbed, coordination among European capitals and between Europe and the United States has become more elusive and growing differences threaten the adoption of a coordinated long-term solution to regulatory reform and coordination of financial policies. 

Within the United States, Congress appropriated funds to help recapitalize financial institutions, and adopted several economic stimulus measures. In addition, Congress has been involved in efforts to reshape institutions and frameworks for international cooperation and coordination in financial markets. European governments also adopted fiscal measures to stimulate their economies and wrestled with failing banks. The financial crisis has demonstrated that financial markets are highly interdependent and that extensive networks link financial markets across national borders, which has pressed EU governments to work together to find a mutually reinforcing solution. Unlike the United States, however, where the federal government can legislate policies that are consistent across all 50 states, the EU process gives each EU member a great deal of discretion to decide how they will regulate and supervise financial markets within their borders. The limits of this system have been tested as the EU and others have searched for a regulatory framework that spans a broad number of national markets. Governments that have expended considerable resources utilizing fiscal and monetary policy tools to stabilize the financial system and to provided a boost to their economies may be required to be increasingly more inventive in providing yet more stimulus to their economies and face political unrest in domestic populations. Attention likely will also focus on those governments that are viewed as not expending economic resources commensurate with the size of their economies to stimulate economic growth.


Date of Report: March 17, 2010
Number of Pages: 38
Order Number: R40415
Price: $29.95

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German Foreign and Security Policy: Trends and Transatlantic Implications

Paul Belkin
Analyst in European Affairs

German Chancellor Angela Merkel began her first term in office in November 2005 and was elected to a second term in September 2009. Most observers agree that under her leadership, relations between the United States and Germany have improved markedly since reaching a low point in the lead-up to the Iraq war in 2003. U.S. officials and many Members of Congress view Germany as a key U.S. ally, have welcomed German leadership in Europe, and voiced expectations for increased U.S.-German cooperation on the international stage. 

German unification in 1990 and the end of the Cold War represented monumental shifts in the geopolitical realities that had defined German foreign policy. Germany was once again Europe's largest country, and the Soviet threat, which had served to unite West Germany with its prowestern neighbors and the United States, was no longer. Since the early 1990s, German leaders have been challenged to exercise a foreign policy grounded in a long-standing commitment to multilateralism and an aversion to military force while simultaneously seeking to assume the more proactive global role many argue is necessary to confront emerging security threats. Until 1994, Germany was constitutionally barred from deploying its armed forces abroad. Today, approximately 7,000 German troops are deployed in peacekeeping, stabilization, and reconstruction missions worldwide. However, as Germany's foreign and security policy continues to evolve, some experts perceive a widening gap between the global ambitions of Germany's political class, and a consistently skeptical German public. 

Since the end of the Cold War, Germany's relations with the United States have been shaped by several key factors. These include Germany's growing support for a stronger, more capable European Union, and its continued allegiance to NATO as the primary guarantor of European security; Germany's ability and willingness to undertake the defense reforms many argue are necessary for it to meet its commitments within NATO and a burgeoning European Security and Defense Policy; and German popular opinion, especially the influence on German leaders of strong public opposition to U.S. foreign policies during the George W. Bush Administration. 

President Obama's popularity in Germany suggests that many Germans expected the Obama Administration to distance itself from the perceived unilateralism of the Bush Administration. However, some observers caution that public expectations of President Obama may have been unreasonably high and note that policy differences between the two countries remain. For example, in the face of the global economic slowdown, German leaders on both sides of the political spectrum resisted calls from the Obama Administration to stimulate economic growth through larger domestic spending measures and have urged the Administration to pursue more stringent reforms of the U.S. and international financial sector. In the foreign policy domain, while German officials have welcomed the Obama Administration's strategic review of Afghanistan/Pakistan policy, they have been reluctant to significantly increase the number of combat troops serving in Afghanistan. 
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Date of Report: March 16, 2010
Number of Pages: 28
Order Number: RL34199
Price: $29.95

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Wednesday, March 24, 2010

Cyprus: Reunification Proving Elusive

Vincent Morelli
Section Research Manager

Attempts to resolve the Cyprus problem and reunify the island have undergone various levels of negotiation for almost 40 years. Prospects for a settlement that would end the political division of Cyprus appear to be on the verge of total stalemate and perhaps even a period of retrenchment possibly dominated by harder-line views by both sides and more difficult negotiations. 

Despite a positive and concerted effort over the past 18 months and through close to 60 meetings between Cypriot President Dimitris Christofias, a Greek Cypriot, and Turkish Cypriot leader Mehmet Ali Talat to reach some type of acceptable solution, time and politics appear to be no longer on either's side. On April 18, 2010, Turkish Cypriot leader Talat faces reelection as "president" of northern Cyprus, which by all accounts by observers of the Cyprus issue, he could have a difficult time winning. His likely successor, Dervis Eroglu of the National Unity Party (UBP), while insisting that negotiations would continue, appears to have taken a harder-line posture toward a negotiated settlement, and there are even some in his party who are advocating a permanently divided island and international recognition for the Turkish Republic of Northern Cyprus (TRNC). 

For his part, Republic of Cyprus President Christofias has recently experienced his own internal political difficulties as one of his governing coalition partners, the Socialist Party (EDEK), quit the governing coalition on February 9, 2010, reportedly over disagreements with the President's negotiating strategy. Almost immediately following the EDEK decision, hard-liners in the other coalition partner, the Democratic Party (DIKO), forced a vote of the party's central committee on whether to abandon the coalition as well. DIKO hard-liners had also criticized Christofias for what they considered to be too many concessions to the Turkish Cypriot side. In the end, DIKO voted to remain in the coalition, but the outcome of both votes could indicate that Christofias was no longer guaranteed support for whatever negotiated solution he could achieve in the near term. 

Despite these political setbacks, and although both sides appear to remain far apart on the most critical issues for any settlement, both Christofias and Talat have pledged to continue the negotiations and have scheduled several more formal sessions through the end of March. At that point, Talat will likely leave the negotiations in order to step up his political campaign in a final attempt to win reelection. Some observers are hoping that at the last negotiating session of this term, scheduled for March 30, a joint statement would be issued by both sides outlining the extent to which progress has been achieved on the major issues under consideration. 

The United States has long maintained a position of strong support for a negotiated settlement. This has been reaffirmed by the Obama Administration. Many Members of Congress have continued to maintain their interest in Cyprus during the 111th Congress, partly due to keen constituent concern. Hearings could be anticipated on the future of the negotiations in the aftermath of the April elections in northern Cyprus.


Date of Report: March 23, 2010
Number of Pages: 14
Order Number: R41136
Price: $29.95

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Thursday, March 18, 2010

Iceland’s Financial Crisis

James K. Jackson
Specialist in International Trade and Finance

On March 6, 2010, Icelandic voters overwhelmingly rejected a proposition to pay back more than $5.3 billion to the British and Dutch governments incurred during the financial crisis. The British and Dutch governments had expended the funds to cover the losses of British and Dutch depositors, respectively, when Iceland's major banks failed and were nationalized in the fall of 2008. The issue has continued to strain relations between Iceland and Great Britain and the Netherlands and could complicate Iceland's remaining efforts to join the European Union and to replace the krona with the Euro. 

Following the collapse of the banks, Iceland and the International Monetary Fund (IMF) finalized an agreement on November 19, 2008, on a $6 billion economic stabilization program supported by a $2.1 billion loan from the IMF. Following the IMF decision, Denmark, Finland, Norway, and Sweden agreed to provide an additional $2.5 billion. Iceland's banking system had collapsed as a result of a culmination of a series of decisions the banks made that left them highly exposed to disruptions in financial markets. The collapse of the banks raised questions for U.S. leaders and others about supervising banks that operate across national borders, especially as it has become increasingly difficult to distinguish the limits of domestic financial markets. Such supervision is important for banks that are headquartered in small economies, but operate across national borders. If such banks become so overexposed in foreign markets that a financial disruption threatens the solvency of the banks, the collapse of the banks can overwhelm domestic credit markets and outstrip the ability of the central bank to serve as the lender of last resort.


Date of Report: March 11, 2010
Number of Pages: 10
Order Number: RS22988
Price: $29.95

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Tuesday, March 16, 2010

Regulating a Carbon Market: Issues Raised By the European Carbon and U.S. Sulfur Dioxide Allowance Markets

Mark Jickling
Specialist in Financial Economics

Larry Parker
Specialist in Energy and Environmental Policy

Both the European Union's Emissions Trading Scheme (EU-ETS) and the U.S. Title IV sulfur dioxide (SO2) program provide insights into regulatory issues that may face any future U.S. carbon market. From the initial operations of the EU-ETS, the 2006 price crash raised questions about the adequacy of market regulation. In particular, some suspect that information about allocations leaked before official publication, and that certain traders profited from this knowledge. 

Title IV's longer trading history reveals two important trends: (1) an increasing trend toward diverse and non-traditional participants that is likely to continue under a carbon market; (2), an increasing use of financial instruments to manage allowance price risk that is likely to expand under a carbon market as a hedge against price uncertainty. Indeed, a carbon market may look more like other energy markets, such as natural gas and oil, than the somewhat sedate SO2 allowance market. 

Regulation of emissions trading would have to consider two kinds of fraud and manipulation: fraud by traders or intermediaries against other investors, and sustained price manipulation. Four agencies could have roles in the regulation of an emissions market, each with its own attributes that may contribute to effective regulation. 

The Commodities Futures Trading Commission (CFTC) currently oversees the Title IV program and its mission most closely resembles what a regulator of a future carbon market would do, including market surveillance to prevent or detect fraud and manipulation. The major weakness of the CFTC, according to some, is that it lacks resources and the statutory mandate to do its job. Current derivatives reform proposals would greatly enlarge its regulatory scope. 

The Securities and Exchange Commission (SEC) is much larger than the CFTC, but it also faces resource and capability issues. While the CO2 market will resemble commodities markets more closely than securities, SEC has some appropriate regulatory tools applicable to an emissions market. 

The Environmental Protection Agency (EPA) would likely be responsible for the primary market in allowances. However, EPA lacks experience comparable to that of the CFTC and SEC in regulating trading markets, although the data it gathered in the primary market could be critical to oversight of the secondary market. 

Federal Energy Regulatory Commission (FERC) was granted oversight authority over bulk electricity and interstate natural gas markets in 2005. Its experience with market surveillance and enforcement is thus limited in comparison to the SEC and CFTC, and it does not play an active role in overseeing the Title IV market. 

It is possible that no single regulator would have clear jurisdiction, as is the case in the Title IV program. This kind of regulatory fragmentation has not always worked well. An umbrella group to monitor markets and provide a forum for regulatory coordination might help to prevent regulatory gaps or conflicts in the market. 
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Date of Report: February 26, 2010
Number of Pages: 40
Order Number: RL34488
Price: $29.95

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United Nations System Funding: Congressional Issues

Marjorie Ann Browne
Specialist in International Relations

Kennon H. Nakamura
Analyst in Foreign Affairs

The congressional debate over United Nations funding focuses on several questions, including (1) What is the appropriate level of U.S. funding for U.N. system operations and programs? (2) What U.S. funding actions are most likely to produce a positive continuation of U.N. system reform efforts? 

The U.N. system includes the United Nations, a number of specialized or affiliated agencies, voluntary and special funds and programs, and U.N. peacekeeping operations. Participating states finance the system with assessed contributions to the budgets of the United Nations and its specialized agencies. In addition, voluntary contributions are made both to those agencies and to the special programs and funds they set up and manage. For more than 60 years, the United States has been the single largest financial contributor to the U.N. system, supplying in recent years 22% of most U.N. agency budgets. (See Appendix D for an organizational chart that illustrates the components of the U.N. system.) 

Both Congress and the executive branch have sought to promote their policy goals and reform of the United Nations and its system of organizations and programs, especially to improve management and budgeting practices. In the 1990s, Congress linked payment of U.S. financial contributions and its arrears to reform. 

This tracks the process by which Congress provides the funding for U.S. assessed contributions to the regular budgets of the United Nations, its agencies, and U.N. peacekeeping operation accounts, as well for U.S. voluntary contributions to U.N. system programs and funds. It includes information on the President's request and the congressional response, as well as congressional initiatives during this legislative process. Basic information is provided to help the reader understand this process. 


Date of Report: March 8, 2010
Number of Pages: 57
Order Number: RL33611
Price: $29.95

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Monday, March 8, 2010

The European Parliament

Kristin Archick
Specialist in European Affairs

Derek E. Mix
Analyst in European Affairs

The European Parliament (EP) is one of the three key institutions of the 27-member European Union (EU), and the only EU institution whose members are directly elected. The current EP has 736 members. The most recent EP elections were held on June 4-7, 2009. Members of the European Parliament (MEPs) serve five-year terms. 

Once limited to being a consultative assembly, the EP has accumulated more power over time. It performs important functions in the EU's legislative and budgeting processes, and exercises a degree of supervision over the two other main EU institutions, the Council of the European Union (Council of Ministers) and the European Commission. Although the EP does not formally initiate EU legislation, it shares "co-decision" power with the Council of Ministers in many policy areas, giving it the right to amend or reject proposed EU legislation. The recently ratified Lisbon Treaty increases the EP's role further, giving it amendment and veto authority over the vast majority of EU legislation (with some exceptions, such as tax matters and foreign policy). Moreover, supporters argue, as the only directly elected EU institution, the EP increasingly plays an important checks-and-balances role on behalf of Europe's citizens. 

Members of the European Parliament caucus according to transnational groups based on political affiliation, rather than by nationality. No single group has ever held an absolute majority in the European Parliament, making compromise and coalition-building important elements of the legislative process. Following the June 2009 election, the center-right Group of the European People's Party (EPP) and the re-named center-left Group of the Progressive Alliance of Socialists and Democrats in Europe (S&D) remain the two largest political groups. Every two-and-a-half years (twice per parliamentary term), MEPs vote to elect a President of the European Parliament to lead and oversee its work and to represent the EP externally. The EP has 20 standing committees that are key actors in the adoption of EU legislation and 36 delegations that maintain international parliament-to-parliament relations. 

Although supporters point to the EP's growing institutional significance, the European Parliament faces several challenges of public perception. Some skeptics contend that the EP lacks the legitimacy of national parliaments and exercises little real power. Other analysts observe that the complexity of the EU legislative process contributes to limited public interest and understanding of the EP's role, leading in turn to a trend of declining turnout in European Parliament elections. Another issue is whether MEPs reflect national or European interests—many MEPs tend to campaign on national rather than European issues and many voters view EP elections as a national mid-term election. Criticism has also been directed at the costs incurred by what many consider duplicate facilities—while much of the work of the EP takes place in Brussels, monthly plenary meetings are held in Strasbourg, France, and administrative sections of the EP Secretariat are based in Luxembourg. 

Ties between the EP and the U.S. Congress are long-standing, and the Transatlantic Legislators' Dialogue—the formal mechanism for EP-Congressional exchanges—is expected to continue its activities during the second session of the 111th Congress.

Also see CRS Report RS21372,
The European Union: Questions and Answers,

by Kristin Archick and Derek E. Mix.


Date of Report: February 25, 2010
Number of Pages: 13
Order Number: RS21998
Price: $29.95

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The European Union: Questions and Answers

Kristin Archick
Specialist in European Affairs

Derek E. Mix
Analyst in European Affairs


The European Union (EU) is an economic and political partnership that represents a unique form of cooperation among its 27 sovereign member states. The Union is the latest stage of a process of integration begun after World War II to promote peace, stability, and economic prosperity in Europe. The United States has strongly supported the EU and its progenitors as a means to foster democratic states and robust trading partners. 

The EU has been built through a series of binding treaties and EU member states have committed to a process of integration by harmonizing laws and adopting common policies on an extensive range of issues. For most economic and social issues, EU member states have largely pooled their national sovereignty and EU decision-making has a supranational quality. Decisions in other areas, such as foreign policy, require unanimous consensus among member states. 

EU member states work together through common institutions to set policy and to promote their collective interests. The three main institutions of the EU are the European Commission (essentially the EU's executive), the Council of the European Union (representing the national governments), and the European Parliament (representing the citizens of the EU). The newly ratified Lisbon Treaty is the EU's latest attempt to reform its institutional arrangements and decision-making procedures in order to enable an enlarged EU to function more effectively. 

The EU has a strong common trade policy, and a developing Common Foreign and Security Policy (CFSP) for a more united voice in global affairs. It has also been seeking to build a Common Security and Defense Policy (CSDP) in order to improve its military capabilities and capacity to act independently. Although some shortcomings exist in EU-NATO relations, the two institutions continue to seek a more cooperative and complementary relationship. Over the last decade especially, the EU has also been working to forge common internal security measures in the Justice and Home Affairs (JHA) field, including by boosting police and judicial cooperation and enhancing the Union's ability to combat terrorism and other cross-border crimes. 

The United States and the EU share a large, mutually beneficial trade and investment relationship. The global financial crisis and recession has challenged both sides to forge a common response. The United States and EU have a number of lingering trade disputes, but have led the push to liberalize world trade, and have sought to reduce non-tariff and regulatory barriers in the transatlantic marketplace. 

This report provides a summary overview of these issues, many of which may be of interest to the second session of the 111th Congress.

For more information, also see CRS Report RS21618,

The European Union's Reform Process: The Lisbon Treaty,

by Kristin Archick and Derek E. Mix, and


 CRS Report RS21998,

The European Parliament,


by Kristin Archick and Derek E. Mix.


Date of Report: February 25, 2010
Number of Pages: 13
Order Number: RS21372
Price: $29.95

Document available electronically as a pdf file or in paper form.
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Friday, March 5, 2010

The European Union: Leadership Changes Resulting from the Lisbon Treaty


Derek E. Mix
Analyst in European Affairs

Changes introduced by the Lisbon Treaty, the European Union's (EU's) new reform treaty that took effect on December 1, 2009, have a significant impact on EU governance. The EU is an important partner or interlocutor of the United States in a large number of issues, but the complicated institutional dynamics of the EU can be difficult to navigate.

The Lisbon Treaty makes substantial modifications in the leadership of the EU, especially with regard to the European Council, the Council of Ministers, and the EU's rotating presidency. Every six months, the "EU Presidency" rotates among the 27 member states. Under the treaty, however, the leader of the presidency country no longer serves as the temporary chair and spokesman of the European Council, the grouping of the EU's 27 national leaders. This duty now belongs to the newly created President of the European Council, who serves a once-renewable two-and-a-half year term. In addition, the foreign minister of the presidency country no longer chairs the meetings of EU foreign ministers in the Council of the EU (commonly known as the Council of Ministers). This duty is now performed by the High Representative for Foreign Affairs and Security Policy, another newly created position whose holder serves a five-year term and is both an agent of the Council of Ministers and a Vice President of the European Commission.

Many of the day-to-day duties of the rotating presidency country, however, will continue under the Lisbon Treaty. Ministers of the presidency country will still chair all of the meetings of the Council of Ministers other than in the area of foreign policy. The presidency country is expected to continue preparing and arranging these activities, and playing a leading role in the Council of Ministers to forge agreement on legislative proposals. The presidency country is also expected help formulate a few broad policy priorities for its tenure.

Spain holds the rotating EU presidency for the first half of 2010. The top priority of the Spanish presidency is implementing the provisions of the Lisbon Treaty. During this transition phase in EU institutional affairs, however, there has been some confusion about what degree of responsibility should fall to the Spanish presidency in terms of international issues and overall leadership. Some analysts assert that the EU's new institutional arrangements will only be worked out and defined in practice as the treaty is implemented, and the Spanish presidency may set some precedents in how main actors relate to one another.

EU foreign policy decisions of a political or security-related nature require unanimous intergovernmental agreement among the 27 member states. In many other issues which may relate to external affairs, however, EU members have agreed to pool their decision-making sovereignty. A number of additional EU actors often have particular relevance in these matters. The President of the European Commission represents the EU externally on issues that are managed by the Commission, including many economic, trade, and environmental issues. Many of the issues in which the European Parliament acts as a "co-legislator," such as trade and data protection, relate to external affairs. Some observers also suggest that the Parliament has become an increasingly important forum for debating international issues.

Changes in the structure of EU governance may be of interest to the second session of the 111th Congress. For more information, also see CRS Report RS21372,
The European Union: Questions and Answers, by Kristin Archick and Derek E. Mix and CRS Report RS21618,

The European Union's Reform Process: The Lisbon Treaty, by Kristin Archick and Derek E. Mix. 


Date of Report: March 3, 2010
Number of Pages: 10
Order Number: R41088
Price: $29.95

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congress@pennyhill.com or call us at 301-253-0881.

Monday, March 1, 2010

The Organization for Economic Cooperation and Development

James K. Jackson
Specialist in International Trade and Finance

The Organization for Economic Cooperation and Development (OECD) is an intergovernmental economic organization in which the 30 member countries discuss, develop and analyze economic and social policy and shares expertise and exchanges with more than 70 developing and emerging economies. The member countries include Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States. While all of the member countries are considered to be economically advanced and collectively produce three-fourths of the world's goods and services, membership is limited only by a country's commitment to a market economy and a pluralistic democracy. In January 2010, Chile signed protocols to complete its entry into the OECD as the 31st member. The OECD has also extended invitations to Estonia, Israel, Russia, and Slovenia to open discussions for membership and it has offered enhanced engagement with a view to possible membership to Brazil, China, India, Indonesia, and South Africa. 

The member countries rely on the OECD Secretariat in Paris to collect data, monitor trends, analyze and forecast economic developments, research social changes and patterns in trade, environment, agriculture, society, innovation, corporate and public governance, taxation, sustainable development, and other areas to inform their discussions and to assist them in pursuing their efforts to develop common policies and practices. The U.S. has sparred periodically with other OECD member countries over various issues, including U.S. antidumping laws. Karen Kornbluh was appointed by President Obama to serve as the U.S. Ambassador to the OECD. Key issues for Congress include OECD work on coordinating national approaches to curtailing bribery and the illicit use of tax havens. Congress appropriated about $117 million to the OECD in FY2008.


Date of Report: February 8, 2010
Number of Pages: 11
Order Number: RS21128
Price: $29.95

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