Shaping Tech Standards – The Diplomat

Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners and strategic thinkers across the globe for their diverse insights into U.S. Asia policy.  This conversation with Anu Bradford – Henry L. Moses professor of law and international organization and director of the European Legal Studies Center at Columbia Law School; nonresident scholar at Carnegie Endowment for International Peace; and author of “The Brussels Effect: How the European Union Rules the World” (Oxford University Press 2020)  – looks at how the EU and China are competing to set global standards for emerging tech.

Briefly explain the “Brussels Effect” and its implications for Europe’s digital single market.

The Brussels Effect refers to the European Union’s unilateral ability to regulate global markets. The EU is one of the world’s largest and most affluent consumer markets, and multinational corporations accept compliance with EU regulations as the price for doing business in Europe. But corporations prefer uniformity and, as a result, often voluntarily extend these EU rules to their global operations to avoid the costs of complying with multiple regulatory regimes.

The Brussels Effect has shaped many policy areas, including the digital economy. For example, EU regulations often determine how big tech companies gather, process, store, and monetize personal data. Facebook, Google, and Microsoft have all adopted one global privacy policy – and it is one that mirrors closely the EU’s General Data Protection Regulation (GDPR). Similarly, EU rules on hate speech online influence the types of speech that internet companies will allow on their platforms. Instead of being guided by America’s First Amendment free-speech protections, Facebook, Twitter, and YouTube use the EU’s definition of hate speech as their benchmark worldwide when deciding which content to remove from their platforms.

This past December, the European Commission unveiled its new landmark regulations for the digital economy: The Digital Services Act and the Digital Markets Act. These regulations are designed to curtail the market power of Big Tech companies, and impose more onerous obligations on these companies to take down illegal or harmful online content. These regulations will advance the digital single marker but are also expected to have a penetrating global effect, shaping the business practices of U.S. tech giants including Apple, Amazon, Facebook, and Google — not just in Europe but around the world.

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What is the Brussels Effect’s impact on regulatory influence beyond Europe? 

The Brussels Effect illustrates the EU’s ability to shape the international regulatory environment without the need to resort to coercion or cooperation. All the EU needs to do is regulate the single market; it is the global corporations that transmit EU rules across the global marketplace as the above examples illustrate. This dynamic allows the EU to exert passive but deep influence on corporate behavior, transforming global markets in the process.

How is Beijing counterbalancing the Brussels Effect with China’s own standards?

China is actively building its regulatory capacity, but it will be a while before a “Beijing Effect” could replace the Brussels Effect. While China’s relative economic impact is growing, its regulatory power lags behind its economic power measured by GDP alone. It takes a while to build the regulatory institutions capable of leveraging the power of the large market. The GDP per capita is also a better predictor than the GDP of the country’s willingness to regulate and it will be a while until Chinese consumers are wealthy enough to demand as stringent regulations as the European consumers do.

However, when it comes to the digital economy, China is making great strides in expanding its influence through other means. Chinese companies, all with ties to the Chinese Communist Party, have supplied critical technological infrastructure to countries around the world, exporting their authoritarian standards in the process. China has also supplied AI surveillance technology to numerous governments eager to deploy Chinese technology towards illiberal ends.  This influence does not follow the logic of the Brussels Effect — where companies voluntarily follow the most stringent standards — but it is significant nonetheless.

Identify the geopolitical dimensions of the Brussels Effect.

In today’s more tense geopolitical environment, the EU is emphasizing its needs to build and protect its “strategic autonomy” and assume a more assertive geopolitical role. It is therefore not surprising that some commentators have tried to convert the Brussels Effect into a geopolitical tool.  That is a mistake. The Brussels Effect is at its heart a manifestation of a bureaucratic power that has been successful in large part because it has not been politicized; instead, it has been able to operate quietly under the radar without igniting a political backlash or elevating geopolitical tensions. This is not to say that the EU does not need a more assertive geopolitical strategy — but the Brussels Effect is unlikely to be one.

Assess U.S. and EU efforts to set and enforce global tech standards vis-à-vis China.

To some extent, we are seeing the splintering of the global digital economy, with many Chinese companies operating in their home market while the U.S. tech giants are steering away from China. As a result, many Chinese tech companies do not even fall under the purview of U.S. and EU regulators — except companies such as Huawei and TikTok that seek to enter deeper into the EU and U.S. markets. These companies are facing an increasingly hostile regulatory environment in the U.S. and the EU.

There is also a broader global contest for influence over the norms governing the digital economy. While the U.S. and the EU have their disagreements, they seem manageable when compared to their shared concern over China’s authoritarian vision of the internet. One of the priorities for the incoming Biden administration should be to work with the EU and other democracies — including Australia, Japan, and South Korea — to counter the spread of digital authoritarianism and jointly advance a vision of the internet that is grounded on the values of liberal democracy and individual autonomy.