When a decision is made in Brussels, a product gets banned in Chile
GDPR – it sounds like an acronym straight from the book of teenage textspeak but it is being talked about intensely by businesses, regulators and lawyers all around the world. It stands for the General Data Protection Regulation and is one the EU’s signature pieces of legislation. In the last week, Facebook announced that it would be applying elements of GDPR to its platform globally, with the only exception being the USA and Canada. What would prompt one of the largest IT companies in the world to apply elements of EU regulation globally? Put simply, it is another visible manifestation of the Brussels Effect.
The Brussels Effect does not describe the syndrome you develop from spending too much time within the drab confines of Schuman Roundabout. Rather, it describes the global power of Brussels lawmaking and regulation to direct and influence regulation in other regions of the world. Anu Bradford, a law professor at Columbia University in New York, has described this effect in detail and says it is growing. While the EU struggles to coordinate its efforts in hard power projection through defence cooperation, it is close to becoming the pre-eminent global regulatory superpower.
This hasn’t happened by accident. If you look through numerous press releases and public pronouncements by EU institutions and EU politicians, reference is continuously made to “making Europe a global leader” . For many officials, they desperately want the EU to be the standard bearer for global policies across as wide a spectrum of sectors as possible. It is linked to the perennial search for European champions in everything from energy to technology to transport and so on.
Because the EU has one of the world’s largest internal markets, global companies that want to sell into it must decide between manufacturing to one set of standards for Europe and another set/s for the rest of the world. For many companies, they increasingly take their lead from the EU.
As it stands you can see the Brussels effect manifest itself in a broad range of policy areas including chemicals, technology, competition, environment, public health and food safety.
So why does this matter?
While the current talk of trade wars might make you think that globalisation is under threat, regulatory globalisation and contagion will remain an ever-present threat for industry. As the EU’s regulatory reach increases beyond its borders, businesses located across the world must remain vigilant of what happens in the EU. Just as in the “Butterfly Effect”, an action in one region can result in a corresponding action on the other side of the world. As such, regulators around the world often face similar issues – how to regulate cryptocurrencies? How to reduce smoking prevalence? How to tackle obesity? They need to find tailored solutions for their local environment. However, regulators often take their cue from their neighbours when assessing the best possible options. In that sense, EU solutions find their way into regulatory processes around the globe.
International organisations also provide ample opportunity for regulators to “socialise” with their EU counterparts and for ideas from Brussels to take hold and diffuse around the world. Let’s not forget that the EU, in its current form, remains the biggest trading and voting bloc in numerous international organisations.
The Brussels Effect has the potential to affect industry, trade negotiations and led to strong debate in the UK over how much regulatory freedom it will really have post-Brexit.
What can you do?
The best way to overcome this effect is to maintain awareness of ongoing regulatory trends in the Brussels bubble and be ready to act on them. It requires a conduit into the EU capital so that you have a detailed overview of the Brussels regulatory landscape and ensuring you are poised to act.