NEW YORK – In the race for global power, the United States and China are ceding ground to a notable Europeanization of international commerce. Countering the prevailing view of European decline, Chazen Senior Scholar Anu Bradford argues in her new book, “The Brussels Effect: How the European Union Rules the World,” that the EU has become an influential superpower that shapes the world in its image.

“Regulatory power matters because it impacts individuals and companies every day,” she noted at a book launch sponsored by Columbia’s Chazen Institute and Richman Center. “It affects the air we breathe, the food we eat, the clothes we wear, and the products we use.”

The discussion, moderated by Bloomberg Businessweek Economics Editor Peter Coy, explored how the EU wields this power to unilaterally set the rules for the global economy – and revealed four key takeaways for those seeking to understand this phenomenon.

1. The EU has enormous market leverage. Europe’s single market is one of the largest and wealthiest in the world, serving 450 million people. Abandoning the EU market or maintaining different standards across supply chains is often not commercially viable. Instead, multinationals abide by the EU rules as the price for doing business in Europe and generally extend those rules to govern their global operations. As a result, the EU’s standards have become the global standard.
2. The EU is the de facto protector of consumer rights. While critics of globalization decry a “race to the bottom” in which corporations pursue their bottom line at the expense of worker safety or environmental impact, the Brussels Effects explains how effective regulation can encourage a “race to the top” in which companies and countries emulate the EU’s leadership as a protector of consumer rights. At a time when the US is slashing regulations and China is struggling to establish them, Bradford stressed that the EU’s role as a global standard-setter is more important than ever. Whether it’s the definition of what constitutes hate speech, a host of privacy protections being adopted by tech companies globally, or a near-total ban on GMO products, EU regulations shape corporate behavior and transform markets worldwide.
3. Brexit may actually strengthen the Brussels Effect. “Brexit was a false promise. There’s no way that it will liberate the United Kingdom from the EU’s regulatory weight,” Bradford said. That’s because UK companies will continue to comply with the EU’s rules, since about half of British exports are destined for the EU market. The big difference, she pointed out, is that the UK will no longer have a seat at the table where those rules are set. They are now a rule taker, as opposed to a rule maker.
4. The Brussels Effect provides a roadmap for the Beijing Effect and the Washington Effect. It’s a framework for how a single jurisdiction can become the world’s regulatory authority. So if China wants to take the reins, it would need to build institutions to leverage its market size for regulatory influence. But Bradford adds that because access to China’s market isn’t yet as valuable as access to Europe, companies such as Google can afford to stay out of China for the time being. For the US to regain its regulatory influence, it would need to start setting higher standards for the world to follow. Unlike China, the US already has the market size and regulatory capacity. Bradford said the question remains whether it have the will.

To watch a full-length video of the book launch discussion, please visit C-SPAN.org.

To learn more about Anu Bradford’s new book, please visit BrusselsEffect.com.

To read a profile of Anu Bradford, please visit Law.Columbia.Edu.

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About the Jerome A. Chazen Institute for Global Business

The Jerome A. Chazen Institute for Global Business is the interdisciplinary hub of global business knowledge at Columbia Business School. By injecting a global viewpoint into coursework, supporting research on global business, and sponsoring provocative forums where business leaders and policy-makers engage in vigorous debate, we pool the vast wealth of knowledge that exists within Columbia Business School, distill it for people who operate in the world’s marketplace, and provide a global network for lifelong learning.

About the Richard Paul Richman Center for Business, Law, and Public Policy

The Richard Paul Richman Center for Business, Law, and Public Policy at Columbia University is a joint venture of Columbia’s Business and Law Schools. The goal of the Richman Center is to foster collaboration among Columbia University’s distinguished business and legal scholars in order to generate curricular innovations and advanced research that has the potential to inform public policy as well as the theory and practice of business and law.