The regulatory power of the European Union is typically conceptualized as its ability to externalize its regulations into other jurisdictions, famously described by the Brussels effect. Simplified, multinational corporations aim to participate in the European market. To do so, they need to comply to European regulations. Therefore, they need to adjust their production according to European standards. Since both the production sites as well as the produced goods are meant for a global market, the global production of these corporations is adjusted to European regulations. Thereby, the European regulations and standards are spread across the globe.
This paper argues that the Brussels effect relies on the underlying condition of an otherwise unregulated global market that allows multinational corporations to comply with European regulations in other jurisdictions. Conflicting regulatory approaches create obstacles to the Brussels effect. In addition, the paper argues that conflicting regulatory approaches not only hinder the externalization of European regulations but also reveal another aspect of the regulatory power of the European Union: a pull-in effect that drags production sites into the territorial boundaries of the EU, with consequences for the European power potential. It balances asymmetrical interdependencies and increases its potential innovation power.
By introducing the pull-in effect into the scholarly discussion, the paper goes beyond current literature concerned with regulatory power and the Brussels effect. It offers a first conceptualization of the pull-in effect and illustrates it with two examples from the digital economy, more precisely from the cloud sector. Based upon an initial qualitative analysis of the blog posts of two of the biggest cloud providers, the examples provide first evidence for the pull-in effect in empirical reality. The aim of the paper is to open a scholarly discussion about the regulatory power of the European Union beyond the Brussels effect.
