When Regulatory Ambition Meets Economic Reality: The Brussels Effect's Self-Inflicted Wounds
The Financial Times' recent examination of how the "Brussels Effect" backfired reveals an uncomfortable truth: the European Union, convinced it could redesign the world through rule-making prowess, is discovering that regulatory ambition divorced from economic reality produces not global leadership but global irrelevance.
The Brussels Effect, where EU regulations become de facto global standards, once represented genuine power. But somewhere between GDPR's success and the AI Act's struggles, Brussels confused regulatory output with regulatory influence. For senior leaders navigating regulation PR, this shift marks a transition from predictable standard-setting to a volatile era of complex compliance and strategic uncertainty.
The Deforestation Debacle
The EU's deforestation regulation (EUDR), which was delayed twice and is now pushed to December 30, 2026, perfectly encapsulates overreach. Brussels banked on controlling global production to force compliance. As Brazil's EU ambassador observed, "they have over-reached, they went too far in trying to regulate the world." Rather than reshaping global agriculture, the regulation generated mounting objections, and repeated postponements have become strategic retreats.
For companies caught inside these reversals, the risk isn’t just delayed compliance; it’s prolonged uncertainty and the danger of being framed as obstructive while political ground shifts. This is where agri-commodity regulation PR becomes essential to protect a brand's licence to operate.
The lesson: regulatory power requires economic leverage. When your GDP share shrinks, your industrial base hollows out, and your tech sector trails competitors, commanding compliance becomes harder.
From Missionary Zeal to Pragmatic Retreat
Ursula von der Leyen's first Commission term (2019–2024) represented peak regulatory ambition. However, the second term tells a different story: a watered-down Green Deal and "simplification" as the new watchword. This was a recognition that regulatory maximalism created compliance nightmares without delivering benefits.
At SPQR, we use our Public Relevance® engine to identify these shifts early, helping clients reclaim their seat at the table when activism drives policy. When external resistance and internal doubt grow simultaneously, regulatory imperialism quickly becomes regulatory isolation.
As we explored in our previous analysis on the rise of the ‘policy priesthood’ and its impact on industry, regulatory imperialism quickly becomes regulatory isolation when external resistance and internal doubt grow simultaneously.
Anu Bradford's 2012 "Brussels Effect" captured real phenomenon. Her 2020 book arrived at arguably the high-water mark of European influence. But as Bradford now acknowledges, the Brussels Effect is being "tested." The US "forcefully pushes back whilst the EU's own confidence in its regulatory agenda is waning." When both external resistance and internal doubt grow simultaneously, regulatory imperialism becomes regulatory isolation.
The Technology Gap
The EU's diminishing capacity to set global tech standards reveals a fundamental vulnerability. While GDPR addressed clear problems, the AI Act and Digital Markets Act face different challenges.
As Dyuti Pandya of the European Centre for International Political Economy observes, the EU applied "internet age" thinking to the "much more fast-moving and volatile world of AI and quantum computing." The problem isn't exporting rules, it's creating frameworks for technologies whose evolution nobody can predict. "No one knows how AI and quantum technologies will evolve, which makes it hard for a single jurisdiction to create a lock on a global standard."
Michael Birnhack of Tel Aviv University describes countries that previously adopted EU standards now taking "wait-and-see" approaches. "There's a delicate balance, who moves first, technology or policy, and we need to allow breathing space for technology. These attempts at future regulation will have less Brussels effect than GDPR."
When even friendly jurisdictions hesitate to follow your lead, you've lost regulatory credibility. For businesses in this space, regulation narrative management is critical to ensure that perception moves before policy hardens.
When Complexity Becomes a Barrier
The struggles extend beyond digital frontiers. The EU's Medical Device Regulation and In Vitro Diagnostic Medical Device Regulation, introduced in the early 2020s, have been delayed by certification capacity shortages. Rather than strengthening EU leadership, complexity made Europe less attractive for product launches.
In practice, this forces organisations into an uncomfortable position: complying with rules that damage competitiveness, or resisting them at the risk of reputational and political backlash. Either way, the exposure is public, not just regulatory.
MedTech Europe's industry survey reveals the damage: large manufacturers choosing the EU for first product launches dropped from 73% to 39%. Oliver Bisazza, MedTech Europe's CEO, explains: "The EU regulations have earned a reputation for being a bit of a mess. While very robust, they're less agile and predictable and have raised the bar to the extent that the EU has become the most costly and time-consuming jurisdiction to get medical device approval."
Rules designed to strengthen patient protection and cement EU leadership instead drive innovation elsewhere. The CE mark—once globally accepted proof of reliability—now signifies a "tangled environment" companies actively avoid.
The chemical industry experiences similar frustrations with REACH regulation revisions. Marco Mensink, director-general of the European Chemical Industry Council, observes that "whilst the EU had become much less attractive to global boardrooms, Brussels had continued to legislate as if it was a regulatory hegemon. The EU model was to set out ambitious regulation assuming others would follow, but we're approaching a situation where Europe is leading alone."
| Leading alone isn't leadership, it's isolation.
The Economic Foundation
Regulatory power depends on economic power. The Brussels Effect worked when European markets were valuable enough that compliance costs seemed worthwhile. The EU's shrinking GDP share and eroding industrial base undermine this foundation.
Former Italian PM Enrico Letta describes the Trump administration perceiving EU regulation as "like garlic for Dracula." When the world's largest economy treats your regulatory framework as toxic rather than aspirational, regulatory reach contracts. When compliance becomes optional because alternative markets offer better opportunities, influence evaporates.
The Carbon Border Adjustment Mechanism (CBAM), effective January 2026, reportedly encourages Brazil, China, and Japan to accelerate carbon pricing, while elements of the Digital Markets Act have been adopted by Canada, Mexico, Brazil, Japan, and others.
But these may demonstrate the opposite: adoption follows when regulations address genuinely global challenges or align with others' interests, not when reflecting primarily European priorities. Bradford suggests building coalitions around attractive standards rather than "issuing ever more complex rules and expecting others to fall into line."
MedTech Europe's Bisazza offers conditional optimism: if the EU successfully rationalises its approach, "the Brussels effect in AI could reinforce Europe's role as a global leader." Note the conditional: if the EU reduces complexity, if it focuses on innovation. Significant ifs for a regulatory system moving in opposite directions.
For organisations operating in regulated markets, the lesson is uncomfortable but clear. Regulatory outcomes are increasingly shaped long before legislation is finalised, through public legitimacy, political confidence, and the narratives that define who regulation is seen to protect.
Regulatory Leadership Requires Economic Leadership
The Brussels Effect's struggles offer clear lessons: regulatory influence requires economic leverage, competitive industries, and genuine value proposition for compliance. When your regulations make you less attractive as a market, when your standards drive innovation elsewhere, you've achieved regulatory isolation, not leadership.
GDPR worked because it addressed real problems with clear solutions when EU market access remained highly valuable. Attempting to regulate fast-evolving technologies in markets you don't dominate, whilst your economic position weakens, produces different results.
Letta's assessment seems apt: he doesn't consider the Brussels Effect dead, but acknowledges "the rulemaking engine Europe had exported to the world was definitely not in good shape."
The lesson for the UK, and any jurisdiction contemplating regulatory leadership, is clear: you cannot regulate your way to relevance. Standards become global when they emerge from strength, not when they compensate for weakness. The EU spent the past decade treating regulatory output as if it were economic output. The Brussels Effect's struggles represent the bill coming due.
When you confuse your ability to regulate your own market with the ability to regulate the world, you end up doing neither effectively. SPQR specialises in perception change PR to ensure that when you speak, the world listens, not because they have to, but because your Public Relevance is undeniable.
