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[Music] good afternoon everyone and i'm very pleased to welcome you to this timely iaea discussion my name is barry colfer and i'm the director of research here at the iia we're delighted to be joined today by anu bradford henry l moses professor of law and international organizations at columbia law school who's been generous enough to take time out of her busy schedule to speak with us we host this meeting whilst being highly conscious of the rapidly deteriorating situation in ukraine and in some ways i wonder if we should be talking about anything other than this situation to our east it's not for today but we recognize the situation and we think of those who are suffering professor bradford will speak to us for about 20 minutes and then we'll go to questions and answers with you our audience you will be able to join the discussion using the q a function on zoom which you should see on your screen please feel free to send questions in throughout the session as they occur to you and we'll come to them once professor bradford has finished her presentation a reminder that today's presentation and q a are both on the record please also feel free to join the discussion on twitter using the handle at iiea so to introduce our speaker anu bradford's research focuses on international trade law european union law and compare of an international competition law anu holds an sjd and llm from harvard law school and a law degree from the university of helsinki prior to her academic career she practiced competition and eu law in brussels and was an advisor at the finnish parliament and at the european parliament professor bradford is the author of the brussels effect how the european union rules the world and is currently working on her forthcoming book entitled the battle for the soul of the global internet we're really delighted that you can be with us today professor bradford and the floor is yours thank you so much barry and good afternoon everyone i am delighted to share this conversation with you and let me also add my own uh thoughts uh for reason and peace to to prevail i'm extremely concerned about the events unfolding i'm watching them from the united states none of us are insulated from them so uh uh let me just recognize that and uh it is part of when we discuss with talking about one element of power today but power comes in many forms and i did not think that we would need to be focusing as much on military power as we need to be focusing on today but um i do want to talk about a different type of power today which is regulatory power and let me first uh mention maybe why i wrote the book called the brussels effect how the european union rules the world and it was really my response to this conversation that was increasingly negative about the europe's role in the world the idea that the european union is inevitably a declining power a a past power that has little ability to shape the affairs of the world today because that is not the kind of european union that i encounter daily in my research and teaching so let me give you a few examples of where we see the european union uh exercising a tremendous global influence so if we start from here in the united states where i'm looking at the world today and we go to silicon valley west coast of the united states i think some of the most powerful companies that are headquartered in europe most of them in dublin but that really originate from silicon valley and operate across the world if you look at the privacy policies of our companies such as google or apple or facebook or microsoft they are following the european general data protection regulation the gdpr not only when they are dealing with their data users uh in data subjects in europe but across the world and if we stay within the technology industry and think about for instance the uh the hate speech so the kind of speech content that these platforms are taking down from their platforms they are not looking at the first amendment of u.s constitution but they are looking at european definition of hate speech and by day we are talking about facebook so meta these days we're talking about youtube uh we're talking about twitter so american companies again getting their cues from the european regulators and this is not just the question of american companies or the technology industry we also see the european law shape how timber is harvested in indonesia what kind of pesticides are used by farmers are in africa what kind of facilities chinese dairy factories in those factories what kind of chemicals japanese toy manufacturers use when manufacturing toys so these are really examples of the european regulations shaping what we are producing and what we are consuming so these are examples of a phenomenon that i have called the brussels effect and by the brussels effect i i refer to the european union's unilateral ability to regulate the global marketplace so the eu is one of the largest and wealthiest consumer markets in the world and there are very few global companies that can afford not to trade uh in the eu so these companies need to comply with european regulations as the price for accessing the 450 million also relatively wealthy consumers that's not surprising where it gets interesting that often these companies conclude that it is in their interest to extend the european regulations across their global production and they they they global uh services and their global conduct because they want to avoid the cost of complying with multiple different regulatory regimes in different places so all the eu needs to do is regulate the single market it is then the global companies and they market incentives that transplant the european regulations across the world so this is what i call influence and what i call an element of power it is a certain kind of power and part of the book that i wrote that the conversation was really to uh invite a discussion of different forms of power so that we cannot make a blanket assessment that the european union is weak in some areas european union is weak today when dealing with ukraine european union is operating on the territory where it is substantially weaker than when it operates in the territory where it has the power and it can rely on the markets to actually externalize that power um so that kind of power also matters it does affect us every day everywhere in the world it affects the food we eat the air we breathe and the products we produce and consume and to me that is also influence and relevance and that is one form of important power so let me maybe now ask the question why do we talk about the brussels effect and north washington effect or beijing effect because european union is certainly not the only large market in the world so why do we then see europe have this power because ultimately any large economy could potentially have this power if you have costa rica and you decide to now be very stringent regulator of the environment the companies can just decide not to trade in costa rica but it's much harder to decide not to trade in european union but china is big the u.s is big so why no beijing effect and why no washington so what i argue in the book that it's not enough to have the large market that is the necessary precondition but that not that alone is not enough you also need to have the regulatory institutions that allow you to unleash that power of the market and convert it into tangible regulatory influence so yes you have large markets but for instance in china you do not yet have the the sophistication the expertise of the bureaucracy of brussels that is able to generate the kind of rules and apply them even across your borders the way that european union is able to do across the many different domains china is in the process of building that capacity but it still has a way to go the u.s on the other hand there is plenty of regulatory capacity residing in washington dc what is missing is the political will to deploy it so since about 1990s the u.s has whether you have a democrat or a republican running the white house you have had a general hesitation to intervene in the markets there has been a trend towards the regulation across the board americans like markets more there's been much more skepticism of the government to intervene so while the u.s has been stepping back it has been seeding the market for the europeans to then enter and take that role of the global regulator so the europe the americans have not wanted to regulate so the political will has not been there let me offer a caveat though so when we for instance talk about technology the conversation is shifting and there is now an increasing recognition where americans are re-evaluating the kind of techno libertarian foundations of the american regulatory state and there's certainly a different tone in the congress debating whether we actually would need to uh rewrite our antitrust laws with president biden nominating the kind of enforcers to his administration that are now willing to try the boundaries of existing antitrust law there's a debate whether finally the u.s should no longer be an outlier and establish and adopt a federal privacy law whether they should be rewriting the so-called section 230 of communications decency act that would start exercising more discipline over the platforms when it comes to content moderation that takes place on those platforms so there's a different conversation about regulation at least in the domain of technology today in the u.s but it's a different question whether that would actually translate into the kind of political will that will be shown as actual concrete legislations so let's go back to you need to have the large market you need to have the regulatory capacity and you need to have the political will to deploy that capacity and currently across the board european union has been the only power that meets those criteria so let me now say a few words on whether this is a good thing or bad thing so my main argument in the book is that the brussels effect exists by explaining how it happens how pervasive it is and i leave it for the reader to decide whether this is something we should be celebrating or whether it is a matter of concern and i don't think there's a uniform answer to that but let me let me uh run by you three common criticisms that have been leveled against the brussels effect so one is this idea that regulation is costly and it also deters innovation we hear that over and over again from the companies um and here i would pause and take this criticism seriously because it may indeed be that some regulations are costly and they do dampen innovation i remember when i was working on the book i was talking to one uh tech executive and i asked him what is the difference when you deal with european and american regulators and he told me that well what europeans want they want us to satisfy the consumer need and what americans want they want us to change the world or allow the world to be changed and if every tech company innovated towards satisfying the existing consumer need as opposed to changing the world yes some of the most disruptive innovations that can be beneficial to the humanity would never take place so i do take it seriously at the same time i'm not willing to say that regulation every time leads to aaa lack of innovation we have a lot of energy efficient technologies for instance that are good for the environment but that also end up creating more efficient products that can be also lower cost products there's a wonderful book by a french economist thomas philippines who teaches at nyu here in new york um called the great reversal how america gave up on free markets and he shows how the lack of anti-trust the lack of competition regulation in the u.s has led to excessively concentrated markets to high profits for the companies and high prices for consumers whereas in europe there is more regulation so there is more competition that's why i pay a fraction for my flight ticket from brussels to madrid compared to when i fly from new york to chicago that's why my cell phone bills are so much less in europe than they are in america because there's more competition in europe because there is more regulation so this relationship being between regulation and innovation and efficiency is somewhat more nuanced than often thought about so let me now address the second criticism that often you hear level against the brussels effect and that is this idea that this is just a manifestation of european envy driven protectionism look who the europe is going after in all these tech cases it's always the american companies 10 billion in fines against google right now there's a case open against apple against amazon against meta and against google so it is really always the american companies and europe is just not able to generate its own tech companies so it's trying to level the playing field and bring down the ones you can actually innovate so here i would remind you of there not being a european search engine that europeans are trying to protect they're not being really a competitive social media websites if you think about for instance google which was the company that first brought the complaint against google it was an american company it was microsoft if you think about another case that has been recently in in headlines uh the intel case who was the big winner when there was a fine against intel it was another american company amd so when i was speaking to the u.s ambassador under president obama he said he never lobbied in these competition cases because there were american companies on both sides of the dispute so often it's the u.s companies fighting day civil war in the european territory because washington dc has not been willing to extend anti-trust remedies to them so it's not that clear that there would have been protectionist impulse behind these regulations but again here i want to add the kind of caveat that i added when i mention how the conversation about regulation is shifting in the u.s conversation is shifting in europe and around the world about regulation and the general political environment is now much more hospitable to protectionism so there are voices growing in europe who are upset that the regulation has not been protectionist enough and calling for more industrial policy driven merger control for instance this was a big concern when the europeans blocked the the uh the notified acquisition attempt between siemens and austrian and basically suggesting that this was europe's opportunity to build a european champion that could compete against the chinese counterparts well commissioner festar basically said that look we are here to protect consumers this is not good for the consumers we are not here to conduct industrial policy french and germans were not impressed and they issued this manifesto calling for more political veto and more industrial policy considerations are into the competition policy and there's a broader conversation now about strategic autonomy digital sovereignty technological sovereignty there are pressures towards leveraging the brussels effect as a tool for protectionism but let me tell you one thing brussels effect can be effective in exporting regulations that are benign but it can also work as a tool for exporting protectionism should the eu turn its regulation as an instrument of protectionism i can tell you that also would be spreading across the world there will be then brazilian uh agency copying from the eu's playbook when european companies are trying to acquire local companies and say look that's what you are doing as well it's national champions we do not let this merger proceed so the you would need to be careful at what uh that it may get more than it actually bargained for let me now address the last criticism that you often hear and that is more of a political criticism this idea that the brussels attack is a manifestation of european regulatory imperialism we are writing the rules for the world and making the rest of the world to basically accept the trade-offs that european consumers are making when it comes to regulation and again i wouldn't dismiss this concern out of hand because the truth is that we do have african farmers refraining from using gmos even if they probably would need some of them those gmos to feed their growing populations we have a lot more environmentally friendly products a lot more a privacy for american consumers probably even more than they at least directly ask for so the question is whether we are overriding the the preferences of democratic governments in other places who no longer can draft and draft the rules that serve uh the the will of failed populations so here i would have two responses that the european union can extend so one is that european union is only regulating its single market which it has the sovereign right and even the sovereign obligation to do it is not european decision if facebook decides to extend european privacy protections to other side of the world as well because it is more beneficial and efficient for them to have uniform uh regulations so ultimately that's different from regulatory imperialism there's also another argument which i think is more controversial but it's also very interesting which is that there are many in the u.s who say that the current state of regulation doesn't actually reflect our democratic preferences if you look at the leeway that consumer that the corporations have through lobbying influencing regulation this is not how little privacy our consumers want our internet users if you look at them they want more privacy we just have not been able to generate regulations so the european regulations are offsetting some of the deficiencies in the current uh american democratic processes so let me return it to the q a but let me just make two comments on the future of the brussels effect so so one is that we should probably talk about whether this will last a long time even if i convince you that european union right now has this power will beijing effect be there ten years from now so i'm happy to take that up uh in the q a as well in the book i argued that the gdp per capita is a better predictor of the country's willingness and ability to regulate than the gdp as such there's going to be a long while before the chinese gdp per capita the wealth is at the level that there's demand and actual willingness to regulate at that same same level and um that means that the european regulatory power will likely outlive its own regulatory uh its own uh economic power as such the second is that i i would mention this is ireland so i think we we do think about brexit a lot and uh so let me end with the with the remark about brexit and how that intersects with the brussels effect so there was some argument that brexit would undermine the brussels effect and i understand the argument because we just lost a big chunk of the market share and the market size is an important first condition for the regulatory power that the eu can exercise um we also i would argue lost a lot of good regulatory capacity i think the braves were pretty good they were very good uh civil servants they were good judges i wanted them to be part of those conversations and they are gone so they lost a market share it lost market power and it lost some regulatory capacity what probably didn't lose was the idea that the uk wasn't always willing to support stringent regulations and that voice is now gone what it means for the proponents of brexit though is that it doesn't mean that the uk will no longer need to be chained to the regulations coming from brussels it means that there's probably more stringent regulations being drafted in brussels because the uk's pro-market voice is not there to shape them there's more space for french and german preferences to prevail yet the uk has chosen to be a rule taker and not a rule maker because the uk will continue to feel the effects of regulation the eu continues to be the most important market the export market for the uk it's the number one destination for most critical uk industries whether we talk about financial services whether we talk about pharmaceuticals chemicals uh aerospace uh and uh if you think about being a uh uk car manufacturer do you want to prepare your car so that you can sell them in the uk or in the market that is six size six times the size of your domestic market you do need the european market and the question is do you really want to set up a second production line to produce different variants for your domestic market so it leaves me to conclude that when it comes to brexit brexit doesn't really undermine the brussels effect it's the brussels effect that does undermine brexit and ultimately the promise of regulatory sovereignty is much curtail because of the dynamics underlying the brussels effect so let me maybe end it there because i'm eager to hear from the audience and build on any questions that i i mention or fail to mention and hear from you next [Music] you