The Brussels Effect, by Anu Bradford

What if a mild-mannered economic superpower was shaping the world economy, and most people didn’t notice? What if the decisions that drove globalisation were not made in televised meetings between world leaders at Davos, but quietly by technical compliance officers in anonymous corporate office buildings? What if American protectionist bluster and China’s steely nationalist defiance were largely a sideshow?

The EU is not generally thought of as an aggressive economic hegemon. Its main concern in the US-China conflict is to avoid being trampled. But in sector after sector, it has set the rules for the world economy.

This “Brussels effect” is well known in old-economy industries like chemicals and cars. Often it spreads through market forces. Companies adopt the rules as the price of participating in the huge EU market, and then impose them across their global businesses to minimise the cost of running separate compliance regimes. The rules are sometimes codified by foreign governments or through international organisations, but not necessarily.

Many EU policymakers say they export not just technical standards but also European values of consumer rights, environmental stewardship and the restraint of corporate monopoly. The EU started as a marketplace. Setting rules is central to its identity. Trade and regulation are, to a large extent, the only effective foreign policy the EU has.

Anu Bradford, a professor at Columbia University, originally coined the term “Brussels effect” and has been studying it for several years. Her impressive book assembles evidence going back decades, tracing its development from the “Reach” chemicals regulation, developed in the early 2000s, to the digital age.

The same mechanisms are at work now with data regulation as previously with environment and food safety. The EU may not have much of a tech sector, but its General Data Protection Regulation is setting global standards for privacy and data governance.

Strong European public backing for consumer protection — in this case personal privacy — produced tough regulation. Apple, for example, followed the rules as the price of operating in the EU and then decided to adopt those principles globally. Other governments have increasingly drawn inspiration from the GDPR model, not least because it helps them gain the right to transfer personal data to and from Europe.

As with EU attitudes to food hygiene US policymakers have often been critical of GDPR for being heavy-handed and bureaucratic. Still, when a vacuum in governance develops, EU regulations, however imperfect, get drawn in to fill the gap. GDPR is becoming a model for some US states because the federal government has failed to create its own system.

The Brussels effect is powerful, then, but not necessarily benign. Prof Bradford admits there are fair criticisms to be made. In the case of GDPR, it tends to benefit big tech corporations like Google that have the money and capacity to comply.

It also has limitations. Where markets are what she calls “divisible” and companies can maintain different standards in each, the effect is weaker. A company producing in several countries may keep the same EU environmental regulations throughout, but get away with different employment practices depending on the jurisdiction. The EU has struggled to influence labour standards abroad via trade deals. As shown by France’s retreat last week on taxing tech companies, it also has difficulty exporting its tax regimes.

Prof Bradford may be a little too dismissive of the threats to Brussels’ dominance from other models of regulation, particularly China. Its position as a major producer and consumer has been accompanied by an aggressive push to export standards in areas including facial recognition. Huawei’s strong position in 5G technology has complicated US attempts to drive it out of tech supply chains. We cannot assume the future will look like the past.

What is incontrovertible is that the Brussels effect has dominated global economic regulation to an under-appreciated extent. This book will be the definitive reference guide for those wishing to understand.

Alan Beattie is the FT’s senior trade writer

The Brussels Effect. How the European Union Rules the World, by Anu Bradford, OUP, RRP£25.99, 424 pages