The Brussels Effect

This Article examines the unprecedented and deeply underestimated global power that the European Union is exercising through its legal institutions and standards, and how it successfully exports that influence to the rest of the world. Without the need to use international institutions or seek other nations’ cooperation, the EU has a strong and growing ability to promulgate regulations that become entrenched in the legal frameworks of developed and developing markets alike, leading to a notable “Europeanization” of many important aspects of global commerce. The Article identifies the precise conditions for and the specific mechanism through which this externalization of EU’s standards unfolds. Enhanced understanding of these conditions and this mechanism helps explain why the EU is currently the only jurisdiction that can wield unilateral influence across a number of areas of law—ranging from antitrust and privacy to health and environmental regulation—and why the markets, other states, and international institutions can do little to constrain Europe’s global regulatory power. AUTHOR—Professor of Law, Columbia Law School. Helpful comments were provided by Lucas Bergkamp, George Bermann, Travis Bradford, Rachel Brewster, Tim Buthe, Grainne DeBurca, Lee Fennell, Jacob Gersen, Tom Ginsburg, Victor Goldberg, Michael Graetz, Todd Hendserson, Aziz Huq, Suzanne Kingston, Katerina Linos, Richard McAdams, Jay Modrall, Henry Monaghan, Jide Nzelibe, Nathaniel Persily, Katharina Pistor, Eric Posner, Tonya Putnam, Charles Sabel, Joanne Scott, Anne-Marie Slaughter, and David Vogel, as well as the participants of the workshops held at Columbia Law School, Duke Law School, University of Chicago Law School, and the University of Florence. I am grateful to Taimoor Aziz, Elliott DeRemer, Peter Dietrich, Christodoulus Kaoutzanis, Pauline Phoa, and Mark Sater for excellent research assistance. N O R T H W E S T E R N U N I V E R S I T Y L A W R E V I E W 2 INTRODUCTION ................................................................................................................. 2 I. CONDITIONS FOR UNILATERAL REGULATORY GLOBALIZATION ............................... 10 A. Market Power ................................................................................................ 11 B. Regulatory Capacity ..................................................................................... 12 C. Preference for Strict Rules ............................................................................ 14 D. Predisposition to Regulate Inelastic Targets ................................................. 16 E. Nondivisibility of Standards .......................................................................... 17 II. EXAMPLES OF UNILATERAL REGULATORY GLOBALIZATION ................................... 19 A. Antitrust Laws ............................................................................................... 19 B. Privacy Regulation ........................................................................................ 22 C. Health Protection: Regulation of Chemicals ................................................. 26 D. Environmental Protection ............................................................................. 29 E. Food Safety ................................................................................................... 32 III. THE EU’S MOTIVATIONS ........................................................................................ 35 A. External Motivations ..................................................................................... 35 B. Internal Motivations ...................................................................................... 39 IV. MARKET-DRIVEN VERSUS POLITICAL HARMONIZATION ......................................... 43 A. The Relative Advantages of Unilateralism .................................................... 44 B. Reasons for Persisting Multilateralism ......................................................... 46 V. LIMITS OF THE BRUSSELS EFFECT ........................................................................... 48 A. External Constraints ..................................................................................... 48 B. Internal Constraints ...................................................................................... 57 CONCLUSION .................................................................................................................. 64