There are many strategies that world powers use to get what they want on the global stage. Economically, they can make trade agreements or investments conditional on taking particular policy actions, withhold foreign aid, or threaten to impose sanctions. Some powers build up their military strength to intimidate their neighbors, or even to unlawfully seize territory as Russia has recently attempted. Superpowers also use cultural diplomacy, exporting their media, values, and language, to enhance soft power and influence global perceptions.
The EU is not widely known for being able to project power in these ways. Military coordination remains largely insignificant. There is also no European soft power equivalent to Hollywood, which could allow the EU to spead its cultural norms internationally. To add insult to injury, the EU is one of the largest markets in the world, but cannot use economic pressure to achieve its strategic objectives. Research suggests that the EU’s geoeconomic positioning is primarily defensive, focusing on responding to other states’ pursuit of geopolitical objectives through economic pressure. Additionally, even this tends to be ineffective due to institutional factors like the difficulties in getting member states to agree, and the inability of the Commission to act independently of them in some key fields.
Despite these shortcomings, the EU has found a different way of using its market size and strengths to influence other states. The EU uses unilateral regulation as a powerful tool to exert its geopolitical influence. During this article, I will explore two main cases (the GDPR and the CBAM) in which the EU has been able to unilaterally create new global standards through regulation.
The General Data Protection Regulation (GDPR) is a comprehensive framework protecting the personal data of EU citizens. It forces organizations to obtain explicit consent before collecting personal data and to disclose the purposes for which the data will be used in ways that people can understand. The GDPR also gives citizens the right to access, rectify, and erase their information, and imposes security obligations on data controllers. Foreign companies who target services to consumers based in the EU must comply with it. As the EU has one of the largest markets in the world, a fairly high number of large foreign companies have found themselves in this position, translating to a significant international impact.
Meanwhile, GDPR standards were more extensive than other countries’ pre-existing privacy laws. This has had effects on both private and public decision-making. Many companies adopted GDPR-compliant policies globally, rather than just in the EU. As the GDPR is widely considered the strictest standard, following it usually means firms are close to complying with other standards. Additionally, legislators in Hong Kong, Nigeria, Egypt, Rwanda, Saudi Arabia and UAE have all drawn inspiration from the GDPR to create or update their data protection frameworks. In Hong Kong, efforts are being made to do this not just because the local government appreciates the ideas in the GDPR, but also because aligning standards with Europe is convenient.
Another example of the EU’s growing power to set international standards is the Carbon Border Adjustment Mechanism (CBAM). The CBAM intends to apply a carbon price to imports based on their carbon content. The mechanism targets specific sectors with high emissions and trade exposure, such as steel, cement, aluminum, and electricity. Importers who prove they’ve already been subjected to an equivalent carbon pricing scheme in their home state are exempt.
The EU had previously implemented measures to charge European firms for their emissions by making them buy carbon certificates. This extra cost put European companies at a disadvantage, incentivizing carbon leakage. To fix this, the EU decided to charge importers for the carbon content of their products too, effectively leveling the playing field. This left other countries with the options of either allowing their firms to be charged for their carbon content by the EU, or of implementing their own systems to charge them domestically by similar amounts. If their domestic companies will be charged anyway, countries who export a lot to the EU are incentivized to implement their own taxes or carbon credit systems.
As shown by the GDPR and the CBAM, the EU is increasingly exporting and imposing its regulations on the world. This strategy plays to its strengths for several reasons. Firstly, the EU can impose regulation simply by tying the privilege of selling to its consumers to compliance with internal standards. This tactic is highly effective given the EU’s market size. Furthermore, the EU has extensively developed its legislative capacities. The regulation it develops is therefore usually at the forefront of its field. Other countries sometimes copy it voluntarily because of its quality. The GDPR and CBAM show how the EU is becoming a regulatory superpower and exerting geopolitical influence on its own terms.
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