particularly the European Union has become an increasingly influential force, heavily shaping the
content of international market rules in areas as diverse as food safety, wireless communications,
environmental protection and data privacy. The shifting pattern of influence, away from U.S.
dominance and toward a more complicated situation where Europe and the U.S. score in different
areas, is an obvious empirical puzzle. At the same time, it highlights a theoretical puzzle about
the variables determining international regulatory influence and the mechanisms that link these
variables to tangible outcomes. Did the U.S. indeed enjoy a dominant position in a previous era
because it liberalized its domestic industries earlier than other countries? Or was it due to its
large domestic economy? The shift in U.S. influence, however, is not obviously correlated to a
significant change in economic might, as the U.S. economy continues to be the single largest
economic area in the world. Timing also does not appear to offer a universal explanation, as the
U.S. liberalized markets for wireless communications and genetically modified organisms, for
example, years before European competitors.
Standard arguments in the International Relations literature stress market power as the
critical determinant of international regulatory influence. Market power is difficult to define ex
ante and observers thus conventionally operationalize it through various measures of domestic
market size. The intuitive argument is that the larger one’s domestic market relative to the global
market, the greater the ability to export domestic rules and regulations through unilateral
extraterritorial projection or in the context of multilateral international bargaining. While not
disputing the importance of market size, this paper argues that market power entails much more
than just a sizeable domestic market. Existing work tends to undertheorize the concept of
markets in the domestic setting, focusing solely on material components such as market liquidity,
transaction volumes, or geographic reach. To correct this imbalance, this paper focuses
2
See Glimstedt 2001 and Young 2003.
2
Convention