The Brussels Effect

Abstract

Chapter 2 lays out the conditions under which a single jurisdiction exerts global regulatory authority and shows why the EU today is in a unique position to assume the role of a global regulatory hegemon. These conditions explain the emergence and prevalence of the Brussels Effect. A country’s market size is a well-understood proxy for its ability to exercise regulatory authority over foreign corporations and individuals. But market size alone does not guarantee global regulatory influence. The state must also have the regulatory capacity as well as the political will to generate stringent rules. Moreover, the Brussels Effect only occurs when the EU regulates inelastic targets, such as consumer markets as opposed to capital. Unlike capital, consumers are not able to flee to less regulated jurisdictions, compromising the EU’s regulatory clout. Finally, EU standards become global only when companies’ production or conduct is non-divisible—in other words, when a company’s benefits of adhering to a single standard exceed the benefits of taking advantage of laxer standards in other markets. These conditions, taken together, explain why the EU is the only regulatory regime that can wield unilateral regulatory influence across global markets today.

The MNC‐Coalition Paradox: Issue Salience, Foreign Firms and the General Data Protection Regulation

“…Over the past two decades, the EU has taken on a prominent role in global regulatory politics (Bach and Newman, 2007;Bradford, 2012;Young, 2015). This makes the design of EU policy critical to not just domestic firms, but also for their foreign counterparts.…”

“…This makes foreign business associations like the American Chamber of Commerce (Rasmussen and Alexandrova, 2012, p. 614), or transnational lobbying coalitions like the International Swaps and Derivatives Association, fixtures in Brussels debate. Understanding the role that foreign firms play in EU policy-making becomes particularly important when we consider the fact that the EU chooses to take on a global regulatory role in consumer oriented issue areas (Bradford, 2012) where civil society's resources rarely match those of large European and foreign firms.…”

The Geopoliticization of European Trade and Investment Policy

“…The EU has long been a formidable trade negotiator because of the sheer size of the European single market, which can be used as a reward or as a threat to the outside world both for the possibilities it offers and from fear of being excluded. This market power has enabled the EU to expand its own regulatory practices to the rest of the world and therefore impose its values and politics, forged through its own internal compromises (Bradford, 2012;Egan and Nicolaidis, 2001;Newman and Posner, 2011;Young, 2015). Beyond what the World Trade Organization (WTO) calls product standards, the EU has leveraged its trade power to try to enforce changes in the domestic arena of its trading partners (akin to process standards writ large) throughout the 1990s and 2000s by generalizing the practice of linking access to the ever-expanding EU market to human rights, to labour and environmental standards, to development policies and to stands against the death penalty (Hafner-Burton, 2009;Smith, 1998).…”

Liberal Intergovernmentalism, Illiberalism and the Potential Superpower of the European Union

“…In 2015, members of the EU were collectively both the first destination and the first source of both FDI flows and stocks (European Commission, 2017). Moreover, the EU has become a formidable 'regulatory power': it has developed standards across a variety of policy areas that now must be followed by anyone wishing to enter the internal market (Bradford, 2012;Newman and Posner, 2011;Young, 2015). As we explore below, Europe's 500 million wealthy consumers are a powerful incentive for third countries to comply with the EU's demands in international negotiations and adopt its stringent regulatory standards.…”