Where Europe leads, others follow it. Well, at least that’s the way things are in the trade sector. Why? Because the alternative might be too expensive. Companies that sell their products in different markets want a uniform approach to regulations and products. This is so special in a world covered by a coronavirus, and all of this gives the European Union the benefit of setting standards beyond its own borders, Bloomberg points out in his material. Even Brexitizing Britain and innovative California can feel the Brussels effect.

What is the Brussels effect?

It is a term used to influence the EU, exerting rules and technological standards adopted by companies and countries around the world. When YouTube downloads offensive video from its site, it uses the EU definition of hate speech. The timber cut in Indonesia, the honey collected in Brazil, the use of chemicals in the manufacture of toys in Japan – all of which comply with the rules set by Brussels. Anti-trust investigations similar to the EU’s against Google are also being conducted in India, South Korea, and even the United States.

Why is the EU so influential?

International companies cannot afford to ignore the rules imposed in one of their strongest import markets, says Columbia University law professor Anu Bradford, who defined the term Brussels Effect. If a business wants to avoid producing different versions of a product for different markets, the preferred template would be the EU one for a number of reasons. EU legislation may be more flexible than in other regions as the bloc draws on experience from its Member States – personal data protection in Germany, an emissions trading program in the UK and more.

European laws must also be approved by consensus, giving voting rights to companies, consumers or activists from different countries.

What business areas does it affect?

Practically everyone. Companies that want to prove that they use safe chemicals will comply with the European REACH regulations. Farmers in Africa who grow produce that can be marketed in Europe will comply with EU standards for genetically modified crops. Illegal felling cannot be used for products to be sold in Europe. And any business that collects and uses personal data (that is, most of it) is aware of GDPR.

The rules on energy efficiency and environmental protection that are applied to meet the EU’s climate goals can also be adopted by different companies and copied to countries outside the bloc.

What about the impact beyond the business?

This is another question. EU support for human rights, for example, is often ignored, and many countries ignore the standards of the Social Security, Health or Wages block. At the same time, the euro has never been a real threat to the US dollar as the world’s leading currency, and the EU’s difficulties with its own financial and debt crises have hampered its role as a global economic power.

Is the Brussels effect purposeful?

The Brussels effect, a variation of the California effect – a phenomenon that has also been described in academic studies – is not intentional, but the European Commission is happy to absorb it. The EC invites foreign representatives to which it explains its policies, with companies and governments from around the world maintaining their representations in Brussels.

What does Brexit mean for the Brussels effect?

Britain’s decision to leave the EU could partly be predicted by the country’s desire to create its own laws. Despite the separation, according to Anu Bradford, London is likely to remain bound by European regulations, as businesses are pushing for uniformity in order to be able to sell on the European market, home to 450 million people. As for the intra-European debate, the separation of Great Britain will remove a defender of business from the ranks of the Member States, which has often opposed calls on Berlin and Paris for more regulation and institutional intervention.

Will Europe maintain its influence?

The EU is not a leader in policy-making in any sector, most notably in emerging artificial intelligence technologies, with Chinese and US companies leading the way. This, in turn, causes the bloc to exercise more control, which may mean tougher provisions in other areas.