EU cements role as ‘world regulator’

FORMER Belgian prime minister Mark Eyskens famously said in 1991 that the EU is “an economic giant, a political dwarf and a military worm”. Fast forward more than three decades, and a significant number of people still agree with this rather undiplomatic characterisation.

To be sure, the European Union has achieved some significant progress in its goal – under European Commission President Ursula von der Leyen – to become a genuinely geopolitical player on the world stage. This is especially so in regard to Ukraine following Russia’s invasion in 2022.

However, the limits to this ambition have been exposed more recently in the Middle East since the Hamas terrorist attacks in Israel. While the EU, and individual member states such as Germany and France, have tried to influence events in that geography, only the United States has been shown to have any substantive power there, so far.

For many observers of global affairs, this shows that EU claims to be a world power are hollow. The argument often goes that the continent will continue to lack critical influence with its weak economic growth, political challenges, set in the context of the growing influence of revisionist powers such as Russia and China.

Yet, for all the real problems that Brussels unquestionably faces, one area that the EU does have disproportionate influence is that of being a regulatory superpower. This is what scholars – such as Professor Anu Bradford, a legal scholar based in the United States – have called the “Brussels effect”.

By developing far-reaching regulations that have a significant bearing on the global business environment outside of the 27 EU member states, the Brussels-based club helps to ensure that European values shape policy in a wide spectrum of policy areas. This ranges from sustainability and environment to antitrust, plus data privacy to consumer health and safety as a growing number of global firms adopt EU standards as global standards.

One of the standout examples of this, in practice, is environmental legislation. The EU’s Green Deal is a far-reaching compendium of sustainability measures in which Brussels has gone further and faster than almost any other power on the planet.

Most recently, however, the EU has hit the headlines for being a “first mover” in another key policy area with the world’s first comprehensive artificial intelligence (AI) legislation after a breakthrough deal earlier this month. This new regulatory framework will represent the strictest set of measures anywhere for the emerging technology.

There will now be a transition period until the legislation kicks in, and companies that fail to comply with the rules face fines of 35 million euros or 7 per cent of global revenue. The next steps are that, procedurally, the European parliament will now ratify the AI Act proposals early next year, with the far-reaching legislation taking effect as soon as 2025.

The agreement is only the latest example of the EU establishing itself as a world leader on setting the regulatory rules of the global economy, as EU Internal Market Commissioner Thierry Breton highlighted when the legislation was agreed. He said that “the EU becomes the very first continent to set clear rules for the use of AI. The AI Act is a rulebook, but it’s also a launchpad for EU startups and researchers to lead the global AI race”.

To be sure, not many other powers may copy every provision of the new EU legislation. However, a significant number of nations will try to follow the broad-based framework.

Moreover, AI companies which will have to follow the EU’s rules will also likely extend some of those obligations to markets outside Europe. After all, it is not efficient to develop separate models for multiple different markets.

Part of the huge significance of this development is, as von der Leyen has said, that “the AI Act transposes European values to a new era”. This point was also emphasised by Kim van Sparrentak, a Member of the European parliament who worked closely on the new AI rules. She said that “Europe chooses its own path…we have restricted the use of these types of systems. In a free and democratic society you should be able to walk on the street without the government constantly following you on the street, at festivals or in football stadiums”.

The foundation of the new EU agreement is a risk-based, tiered system where the highest level of regulation applies to those machines that pose the greatest risk to health, safety and human rights. The highest risk category is now defined by the number of computer transactions needed to train a machine, known as floating point operations per second (Flops).

The lower tiers of regulation also place major new obligations on AI services. This includes basic rules about disclosure of data used to teach the machine to do anything from writing a newspaper article to diagnosing illness.

There will also be strict restrictions on the use of facial recognition technology, except for narrowly defined law enforcement exceptions. Plus bans too on the use of AI for “social scoring” – using metrics to establish how virtuous someone is – and AI systems that “manipulate human behaviour to circumvent their free will”. The use of AI to exploit those vulnerable because of their age, disability or economic situation will also be banned. Moreover, consumers will have the right to launch complaints, and fines could be imposed for violations.

Until the Act is fully applicable in 2025 or later, the EU will support businesses and developers to anticipate the new rules. Around 100 companies have reportedly already expressed interest to join a transitional AI Pact, by which they will commit on a voluntary basis to implement key obligations of the legislation ahead of the legal deadline.

So this important development potentially gives the EU a powerful, first mover advantage on regulating the new technology in a fast-moving global landscape that recently also saw US President Joe Biden sign an executive order on AI. At the multilateral level too, the Japanese-chaired G7 in 2023 has looked at principles for a code of conduct for firms developing advanced AI systems.

Taken together, the passage of AI legislation will therefore probably only reinforce the EU’s regulatory superpower credentials. While there is much uncertainty about the overall political and economic fortunes of the bloc in the years ahead, this “Brussels effect” may prolong the EU’s influence internationally for much time to come, even if it never fully delivers on the ambition to become a geopolitical giant.

The writer is an associate at LSE IDEAS at the London School of Economics