 Good afternoon, everyone, and I'm very pleased to welcome you to this timely IIA 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 a 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 this situation and we think of those who are suffering. Today 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 IIA. So to introduce our speaker, Anu Bradford's research focuses on international trade law, European Union law and comparative and international competition law. Anu holds an SJD and LLM from Harvard Law School and the 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, Have 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 thoughts for reason and peace 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 let me just recognize that and it is part of when we discuss, we're 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 I do want to talk about a different type of power today, which is regulatory power. Let me first 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 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 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 and 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 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 data users in data subjects in Europe, but across the world. And if we stay within the technology industry and think about, for instance, the hate speech or the kind of speech content that these platforms are taking down from the platforms, they are not looking at the First Amendment of US 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, 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 in Africa? What kind of facilities, Chinese dairy factories install 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 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 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 the global production and they global services and they 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 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. 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 not 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 are 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 US is big. So why no Beijing effect and why no Washington effect? So what I argue in the book that it's not enough to have the large market, that is the necessary precondition, but that alone is not enough. You also need to have the regulatory institutions that allow you to unleash the 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 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 US, on the other hand, there is plenty of regulatory capacity for residing in Washington, DC. What is missing is the political will to deploy it. So since about 1990s, the US 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 deregulation across the board. Americans like markets more. There's been much more skepticism of the government to intervene. So while the US 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 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 rewrite our anti-trust laws with President Biden nominating the kind of enforcers to its administration that are now willing to try the boundaries of existing anti-trust law. There's a debate whether, finally, the US should no longer be an outlier and establish and adopt a federal privacy law, whether there should be rewriting the so-called Section 230 of Communications Business 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 US, 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. I explain 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 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. 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 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 a 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 Tillipon, who teaches at NYU here in New York, called The Great Reversal, how America gave up on free markets. And he shows how the lack of antitrust, the lack of competition regulation in the US 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 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. Ten 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 company. So it's trying to level the playing field and bring down the ones who can actually invest. So here I would remind you of they're not being a European search engine that Europeans are trying to protect. They're not being really a competitor to social media websites. If you think about, for instance, Google, which was the company that first brought the complain against Google? It was an American company. It was Microsoft. If you think about another case that has been recently in headlines, 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 US ambassador under President Obama, he said he never lobbied in these competition cases because they were American companies on both sides of the dispute. So often it's the US companies fighting their 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, I want to add the kind of caveat that I added when I mentioned how the conversation about regulation is shifting in the US. 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 notified acquisition attempt between Siemens and Alstern and basically suggesting that this was Europe's opportunity to build a European champion that could compete against the Chinese counterparts. Well, Commissioner Festarker 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 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 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 EU would need to be careful at what 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 Effect 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 and a lot more privacy for American consumers, probably even more than they at least directly ask for. So the question is whether we are overriding the preferences of democratic governments in other places who no longer can draft the rules that serve the will of very old 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 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 US who say that the current state of regulation doesn't actually reflect our democratic preferences. If you look at the leeway 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 American democratic processes. So I'm going to turn it to the Q&A, but let me just make two comments on the future of the Brussels effect. 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 10 years from now? So I'm happy to take that up in the Q&A as well. In the book, I argue 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 level. And that means that the European regulatory power will likely its own regulatory, its own economic power as such. The second is that I would mention this is Ireland. So I think we do think about Brexit a lot. And so I let me end 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. We also, I would argue, lost a lot of good regulatory capacity. I think the British were pretty good. They were very good civil servants. They were good judges. I wanted them to be part of those conversations and they are gone. So the EU lost some market share. It lost market power and it lost some regulatory capacity. What probably it 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. Yes, 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, aerospace. And if you think about being a UK car manufacturer, do you want to prepare your cars so that you can sell them in the UK or in the market that is 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 curtailed 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 mentioned or failed to mention and hear from you next.