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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is a professor at Georgetown University and co-author of ‘Underground Empire: How America Weaponized the World Economy’ with Henry Farrell, who contributed to this article
The one good thing about Donald Trump’s recent trade deal with Europe is what didn’t make it in. Repeated rumours suggested that the European Commission negotiators considered watering down enforcement of the EU’s Digital Services Act, which obliges US platform companies to police problematic content, in exchange for concessions on tariffs. In the end, the commission held firm. But the US is sure to threaten Europe again. And then some officials might be willing to concede on what they see as economic regulations, rather than crucial underpinnings of European democracy. Such people labour under what can be called the “Brussels defect”: the faith that global politics is all about markets, multilateralism and economic regulation. EU officials love to talk about the “Brussels effect” — Europe’s ability to turn complex technocratic rules into a tool of global power. But what used to be a feature has turned into a potentially deadly decision-making bug.
In a world of multilateral market rules, Europe became adept at magically transforming thorny political controversies, such as privacy rights, into technical issues that could be solved through market pressure on foreign businesses and rulemakers. Back in the high era of globalisation, this worked amazingly well. Multinationals sometimes disliked European regulations, but they preferred having one set of global rules to many. But even before Trump, peace through regulation was losing its lustre.
What looked like eye-popping fines to regulators just became part of the cost of doing business for the likes of Meta or Google. American companies pushed the boundaries of surveillance capitalism — mining consumers’ personal data — and dominated new sectors like cloud and artificial intelligence, while faltering European technology incumbents blamed regulation rather than their own failure to innovate. The Brussels effect began to sputter. Now, the world that it was crafted for is to all intents and purposes dead. Today’s fights are about national security and the underpinnings of democracy. Brussels’ focus on market influence has become a dangerous blind spot. For instance, officials may treat digital protections as bargaining chips rather than a crucial bulwark of European democracy or a defence against foreign influence. That would be a terrible mistake.
The Trump administration explicitly argues that the entire EU structure of social media regulation is an Orwellian project aimed at trampling “western heritage . . . in the name of a decadent governing class afraid of its own people”. It wants to shift Europe closer towards its own preferred model of competitive authoritarianism and is willing to turn powerful economic screws. Europe’s institutions are designed to turn fundamentally political questions into market trade-offs. But the strategy turns defective in a world where its rules are targeted because of disagreements not over consumer protection or market competition but the future of democracy and national security.
Instead, Europe must rethink its dependence on the American platform economy. It could then focus on building its own rules on top of its own technology, based on its democratic values rather than technocratic global bargains. Current proposals for a “EuroStack” — a separate European stack of technologies beginning at the base layer of semiconductors and AI, and building up towards platforms — lay out the most obvious path towards doing this. At a minimum they establish a political call to action that reorients the debate away from regulation towards innovation. The best way to remedy the Brussels defect, then, may be defection. The sooner European officials figure this out, the better.
