Was Regulation Ever Enough to Project Power?
January 5, 2026
Angela Garcia Calvo
Assistant Professor
University of Reading a.garciacalvo@henley.ac.uk
The remarkable belief that regulatory leadership could project influence was most forcefully advanced by Anu Bradford (2012; 2020). She argued that the EU economy was so large that the regulations it promulgated were becoming the global standard. Thereby presumably making the EU a global power. She called it the Brussels effect. Was the EU ever a “superpower” because of its regulations? If it was, what economic benefit would Europeans have gotten? And if not, what does pursuing this mean for the EU in a transforming global economy? The USA’s recent intervention in Venezuela wipes away the delusion that regulation in a neo-mercantilist structure provides influence, let alone projects power: the reality is that real technological and economic strength and military power underpin the projection of influence. Recent European compromises on digital regulation, semiconductors, and the green transition also show that the Brussels effect is more limited than previously thought and Europe’s incapacities in the real world of techno-business more salient. This is not simply a result of Europe’s relative importance in the global economy but rather a reflection of Europe limited capabilities in economically propulsive technologies. All of this raises hard questions about Europe’s future.
The Brussels effect and its limits
A polity can exercise global influence through hard power, soft power, or leading with allies. The most influential polities rely on a combination of these elements. Since the end of World War Two, the USA has led the world through a combination of industrial leadership, military might, culture, values and policies that others considered legitimate, and international organizations that the USA controlled.
Europe lacks leadership in any of these elements. What it has, in some domains, is regulatory power, due to its sophisticated institutional apparatus and its large internal market. Bradford argued that these factors enabled the EU to externalize its laws and regulations outside its borders through market mechanisms, without negotiating with other states or using coercion. Can the EU use its regulations to exert power over others, as Bradford argues?
There are examples in which EU regulations has influenced outcomes outside its borders. The EU’s decision to block the proposed acquisition of Honeywell International by General Electric in 2001 (European Commission 2001) banned the merger worldwide because it was legally impossible for the operation to proceed in some markets and not in others. Another area of transnational influence is chemicals’ safety standards, where several multinational corporations adjusted their production to meet the requirements of the EU’s 2007 Registration, Evaluation, Authorisation, and Restriction of Chemicals (REACH).
Despite these examples, the idea that the EU may externalize its laws and regulations solely through market mechanisms is severely limited. This is true even in areas the literature highlights as examples of the Brussels effect such as food and safety. The case of beef hormones illustrates this. The EU’s ban on beef hormones goes back to the 1980s and was disputed at the GATT and later the WTO, which sided with the USA and Canada in 1997. A second WTO ruling in 2008 resulted in a standoff in which the EU is allowed to continue its export ban and the USA and Canada are allowed to impose trade sanctions on the EU (Johnson 2017). The cultivation and sale of genetically modified crops (GMs) is another example. In 2001 and 2003, the EU adopted regulations to establish a system to trace and label GMs and regulate food derived from them. The agro-chemical industry-dominated WTO ruled against the EU in 2006 (WTO 2008). In 2010, and following a formal request from 13 EU states, the Commission introduced a proposal that gave Member states a broader basis to restrict or allow the cultivation of GMs (Laaninen 2015).
In other cases, EU and international regulations may be aligned but it is not clear whether the main causal mechanism is the size and value of the EU market, domestic political interests or a clever combination of the two. South Korea’s regulation on data protection is often presented as an example of the international adoption of the EU’s General Data protection Regulation (GDPR). Korea’s Personal Information Protection Act (PIPA) was adopted in 2011, several years before the inception of GDPR. It has since been modified multiple times. Two such modifications in 2020 and 2023 aimed to enable free and safe data flows between the South Korea and the EU (Lim and Oh 2025). However, reforms to PIPA were also a response to public outrage and parliamentary demand for stronger data protection and legislation enforcement after a series of high-profile domestic privacy breaches. Addressing such cyberattacks remains major public concern in Korea (Bahk 2025). It is also critical to the reputation and expansion of Korean digital firms, a key objective of Korea’s industrial strategy. In fact, Korea has a long track record of restricting domestic data transfers on the basis of national security (Um 2022). Far from being influenced by the EU, data restrictions are part of Korea’s strategy to support the development of its domestic digital stack: lack of access to detailed, geolocational data prevented Google and Apple from competing directly with Korea’s online platform firms such as Naver and Kakao, creating space for them to thrive (Ahn and Ha 2025).
Power and Domestic Technological Capabilities
Even if we acknowledge that EU regulation can be exported under certain circumstances, Europe does not aspire to become a global hegemon in the way that the USA and China do (Marsh 2025). The EU’s first-mover regulatory impetus responds first and foremost to the necessity to set common rules for the 27 to ensure the survival of the Single Market. One of the most labor-intensive aspects of the European building process has been the harmonization of the legislation of individual Member States. Unsurprisingly, as new regulatory areas emerge, the EU takes the lead to establish a common normative base. Ipso facto for a long time, the Brussels effect was a mostly unintended side effect of a EU’s regulatory agenda driven by the Union’s domestic needs (Bradford 2020).
However, the EU has also used its regulatory power believing that it could be a source of global leverage. This belief appears to have emerged around 2007, at a time when Europe’s position in the global economy was already declining. This is apparent in the 2007 policy papers “The external dimension of the Single Market review” and “A single market for citizens”, in subsequent Communications by the Commission, and in the drafting of the GDPR. To the extent that the EU purposefully wanted to set a global standard, the blindspot in Bradford’s argument was to assume that a large market, such as the EU’s, is the equivalent of a technologically-leading economy.
Market size may be a necessary condition to exert global leverage but it is not sufficient. The USA was the largest global economy before the end of the nineteenth century but it only become a global power after defeating the axis powers. China became the world’s second largest economy in 2010 but its rise to superpower status is much more recent.
To become a global leader capable of exerting power over other sophisticated economies, an economy also needs to be strong. A strong economy occupies powerful positions in central propulsive technologies, has the industrial base to dominate critical nodes within global production networks and can use its technological strengths to protect itself. To illustrate, the USA has been the leader in petrochemicals and internal combustion engines, and it captured the semiconductor/computers wave. The USA also supported investments in science and advanced engineering technologies that played a determinative role in the development of defense outputs and turned commercial innovation into advanced military production (Borrus et al. 1992; O’Mara 2019).
Ultimately, a polity cannot truly project power abroad without an economic and technological base in the leading technologies of the period. Regulatory power of kind that results in the creation of global standards also derives from technological capabilities. As Borrell (2020) argued, historically, Europeans had been norm setters because they had been technological leaders, but if they lost the leadership of technologies, they would not be able to continue being the norm setters.
Today, the USA is still a large economy by share of global GDP (14.7%) (IMF 2025). The basis of USA’s economic strength being submarine cables, computation, software, data centers and semiconductors (Farrell and Newman 2023). China accounts for 19.7% of global GDP and is a powerhouse in manufacturing, materials processing, and, very importantly, in clean-tech (for cleantech, see Lewin et al. 2025). Europe accounts for 14.3% of the global economy. However, the bloc specializes in mature, mid-technology sectors, especially those around internal combustion engineers. In addition, the EU depends on the USA, China and others for technology, communication infrastructures, raw and semi-processed materials, energy, and access to markets. As the Draghi report (2024) points out, this specialization in mid-technologies and various other reasons, has resulted in European economic growth lagging behind that of the USA and China in the past two decades.
Given these realities, the USA, in particular, and, more recently China, have been able to force Europe to retreat from regulatory initiatives that it has proudly introduced. There is ample evidence for this. Europe has consistently compromised with the USA on digital regulation. Recently, the government of the Netherlands seized Nexperia, a Dutch semiconductor components firm that had earlier been purchased by a Chinese firm. The reason given was alleged governance shortcomings that compromised European security only to retreat a few weeks later despite no apparent changes in governance. The true reason is that Europe has no substitutes for US platform firms or Nexperia’s chips. EU’s own domestic firms and the governments of some Member States understood that there would heavy costs if the EU continued on its course. Another example of retreat was the recent reversal of the 2035 ban on industrial combustion engines.
The Way Forward
To continue to believe that the Europe is a superpower is to misunderstand that power over others stems from industrial and technological leadership. US platform giants set the standards for European information and communication technologies and, almost certainly, Chinese firms will set the standards for electric vehicles, battery storage and renewable energy generation.
The only way for Europe to strengthen its hand is to understand its position in global value chains and build capabilities in critical areas of innovation with which to turn its weaknesses into interdependencies. Only then can the EU bargain from a strong position for the resources it needs to protect its interests and provide its citizens with improving standards of living. Of course, this is far easier said than done.
Building capabilities requires innovation with intentionality. Firms are essential actors in the process, but they alone are uncapable and unlikely to do it. Institutional barriers, such as fragmented capital markets and multiple administrative regimes are Europe’s realities – they would need to be turned into advantages in terms of technological development and new firm creation. European firms also face economic disincentives. European online platforms and cloud service providers have difficulty redressing market outcomes in winner-takes-all environments against better-financed US first-mover platform firms (Garcia Calvo et al. 2024). Sunk investments in organizational and physical structures make legacy automakers reticent to abandon internal combustion engine business models despite trapping them into a “melting internal combustion engine island” (Helper et al. 2025). Europe’s lack of digital giants forces European firms to collaborate with foreign tech firms at the risk of being relegated to low-margin assembly roles (Garcia Calvo 2025). Further, in industry after industry, Chinese competitors challenge European firms in China, in third markets, and now in Europe itself.
Only states can stimulate the appropriate types of investment and innovation and protect the domestic economy from being overpowered by China before domestic initiatives have a chance to grow organically. However, EU institutions were designed for a different purpose and a different era. The EU is not a nation-state and is unlikely to ever become one. The Single Market prevents Member States from supporting domestic startups and facilitates the entry of better-financed extra-communitarian competitors through competition and acquisition. The Commission lacks the fiscal capacity to carry out industrial policies and the agility and knowhow to facilitate entrepreneurial action, which always occurs at the local level. The natural tendency of national governments, where politicians must consider local concerns, makes it difficult to reach agreements on important issues such as platform regulation, AI, and Chinese imports of and dominance in EVs.
Whether there ever was a Brussels Effect, today, it has become significantly less relevant because Europe has lost or is unable to build the organization with the necessary capabilities to support its regulatory ambitions. The real question now is whether Brussels can help build new capabilities and do it better than individual member states. If the EU cannot make Europe a relevant player, then what is the value of Brussels? And what would a viable alternative model look like?
References
Bahk, E-J. 2025. Coupang Founder Apologizes Over Massive Data Breach, but Refuses Again to Attend Parliamentary Hearing. Korea Times, December 28, 2025.
Borrell, J. 2020. The EU in the Multilateral System. Speech by the High Representative/Vice-President Josep Borrell at the United for a New, Fair and Inclusive Multilateralism online International Conference. Brussels: 18 September 2020.
Borrus, M. 1992. Re-Organizing Asia: Japan's New Development Trajectory and the Regional Division of Labor," BRIE Working Paper #53.
Bradford, A. 2012. The Brussels Effect. Northwestern University Law Review. Columbia Law and Economics Working Paper No. 533. 107 (1)
Bradford, A. 2020. The Brussels Effect: How the European Union Rules the World. Oxford and New York: Oxford University Press.
Draghi, M. 2024. The future of European competitiveness. Brussels: European Commission .
European Commission. 2021. Data protection: European Commission Launches the Process Towards Adoption of the Adequacy Decision for the Republic of Korea. Published Jun 21, 2016. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_2964 Accessed December 30, 2025.
Laaninen, T. 2015. Member States’ Ban on GMO Cultivation. European Parliamentary Research Service.
European Commission. 2001. Commission Decision of 03/07/2001 Declaring a Concentration to be Incompatible with the Common Market and the EEA Agreement Case No COMP/M.2220 General Electric/Honeywell
Farrell, H. and Newman, A. 2023 Underground Empire. How America Weaponized the Global Economy. London and New York: MacMillan.
Garcia Calvo, A. Kenney, M. and Zysman, J. 2024. Responding to Platform Firm Power: Differing National Responses. New Political Economy. 2024. 30(2): 225–239.
Garcia Calvo, A. 2025. Does the Transition to Battery Electric, Software-Defined Vehicles Create Opportunities for Europe?” European Commission Single Market Economic Papers N 46. ISSN 2529-332X.
Helper, S. Tyson, L., Kenney, M., Zysman, J. with Duffy, A. 2025. Consequences of American Retreat in the EV Competition: Economic Security, Prosperity, and the Industrial Future. A TCIP Study: Technology, Competitiveness, and Industrial Policy (TCIP). Berkeley Roundtable for the International Economy Working Paper 2025-1
IMF, World Economic Outlook, April 2024.
Johnson, R. 2017. The U.S.-EU Beef Hormone Dispute. Washington DC: Congressional Research Service.
Lim, S. and Oh, JY. 2025. Navigating Privacy: A Global Comparative Analysis of Data Protection Laws. ET Information Security Volume 2025, Article ID 5536763, https://doi.org/10.1049/ise2/5536763
Lewin, A., Kenney, M., Shu, E., and Mai, L. 2025. The Demise of the Global ICE Industry. China’s Stunning Role in the BEV Revolution. Cambridge: Cambridge University Press.
Marsh, D. 2025. Can Europe Survive? The Story of a Continent in a Fractured World. New Haven: Yale University Press.
O’Mara, M. 2019. The Code. Silicon Valley and the Remaking of America. London, New York: Penguin Press.
Um, D.B. 2022. Legal Evaluation for Security Exception Claims About the Cross-Border Transfer of the Korean Map: A Case of Google. Social Science Computer ReviewVol. 40(5) 1114–1132.
World Trade Organization. 2008. European Communities — Measures Affecting the Approval and Marketing of Biotech Products. Geneva, World Trade Organization.