Europe's Xerox moment

On 13 November 2025, the European Parliament voted 382 to 249 to dismantle the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive. The Omnibus I package reduces by over ninety per cent the companies covered by sustainability reporting obligations, completely eliminates the requirement to prepare climate transition plans, and shifts responsibility from EU level to national level.

Bloomberg documents intense pressure from US business associations and state attorneys general. ExxonMobil is identified as the most active corporate lobbying actor. The political dynamic shows the European People's Party aligning with far-right parties to pass the legislation. Just one month earlier, a more moderate compromise had been rejected by 309 votes to 318. The Social Democrat co-rapporteur resigned in protest. Lara Wolters, who had championed the original legislation, walked out of negotiations.

The official narrative speaks of regulatory simplification, cost reduction, and the need to make Europe more competitive. France and Germany are politically paralysed, so nobody is leading. European industry struggles against the United States and China. Urgent measures are needed.

What everyone sees

Lack of European strategy. Chronic political disunity. Parties allying with enemies when convenient. Corporate lobbying that works. Absence of leadership whilst the eurozone's two locomotives are stalled.

All true. But it's superficial analysis that stops at events rather than seeing structural mechanisms.

The analogy that illuminates the pattern

In the 1970s, Xerox's Palo Alto Research Centre invented the mouse, the graphical user interface, ethernet networking, and object-oriented programming. A team of geniuses literally built the future of computing. Xerox management looked at these projects and saw costly research that didn't generate quarterly profit, that wasn't core business, that distracted from photocopiers.

The result is well documented. They gave it all away. Steve Jobs visited the centre in 1979, saw the graphical interface, built the Macintosh. Bill Gates followed suit. Decades later, Apple and Microsoft are worth hundreds of billions. Xerox is a footnote in technology history.

The problem wasn't lack of talent or technology. It was blindness to what constituted the strategic asset. Xerox saw research and development costs. It didn't see that this was the future of the industry, the only asset that would give it pricing power when the photocopier market saturated.

The same mechanism today

Europe in 2025 cannot compete on price because China has structurally lower costs. It cannot compete on frontier innovation because the United States has an ecosystem of venture capital, talent concentration, and execution velocity that Europe cannot replicate in useful timeframes. American productivity grows at twice the European rate. Real per capita income in the United States exceeds Germany's by twenty per cent, France's by thirty-five per cent, Italy's by forty per cent.

But over the past ten years, Europe had built something unique. Almost by accident, it had created a de facto monopoly on global regulatory leadership. The General Data Protection Regulation of 2018 generated the so-called Brussels Effect. Every global technology company must conform to European standards because the EU market is too large to ignore. European standards become de facto global standards.

The sustainability reporting and due diligence directives adopted in 2024 were replicating the same pattern. Europe was positioning itself as the global quality certifier, the only regulator with credible enforcement, independence from individual corporations, and standards that withstand international scrutiny. This isn't a cost. It's real economic power.

Incentive archaeology

The clinical question is straightforward. If you can't compete on price or innovation, what business model remains? The answer is to become the trusted intermediary, the gatekeeper, the quality regulator that the world accepts because it isn't captured by particular interests.

The estimated value of this position runs into the trillions. Every company wanting to operate in global markets must be compliant with European sustainability standards. Europe becomes the monopolist of certification. It's a strategic position that generates rents without needing to compete on price or technological innovation.

The Brussels Effect on data protection regulations had already demonstrated the mechanism. The sustainability directives were scaling it. And it's precisely this asset that Europe is now giving away, for the same reasons Xerox gave away the mouse and graphical interface. It sees costs for businesses, bureaucracy that makes us less competitive. It doesn't see that this was the only asset giving it global pricing power in a world where it's second or third at everything else.

The timing isn't coincidental

The sequence of events reveals a textbook game theory pattern. France and Germany, which together represent nearly half the eurozone economy, are politically paralysed. No strong actor can veto. The competitiveness crisis narrative dominates public discourse. European industry is struggling, creating pressure to do something immediately. Trump threatens trade tariffs, creating perceived urgency. The United States intensifies lobbying precisely at this moment.

This is the optimal moment for several different actors. American corporate lobbying strikes when defences are low. The European People's Party can do things that would normally carry high political cost, packaging them as emergency measures. The far right gets the policies it wants without having to enter government, allowing conservatives to formally maintain their red lines.

The pattern is identical to a hostile takeover during a liquidity crisis. The acquirer doesn't want to buy when the target is strong. It waits for the moment when the board is divided, cash flow is under pressure, management desperately seeks quick wins, and the internal narrative is that something must be sold to survive. Then it strikes.

Political dynamics as symptom

Manfred Weber, leader of the European People's Party, declared in May 2025 that the inviolable red line was not giving executive power to the far right, recalling how the Weimar Republic made the historic mistake of giving ministries to the Nazis. In November 2025, Weber systematically uses far-right votes to pass policies he couldn't obtain with the centrist coalition.

He has maintained the technical red line in that the far right doesn't have ministries or government positions. He has lost the substantive red line because the far right now writes the laws it wants. The practical difference matters. Executive power decides how and how much to apply norms. Legislative power decides what exists and why. In terms of systemic impact, allowing a coalition to rewrite the rules of the game can be more transformative than access to the executive.

Weber probably thinks he's made a tactically clever trade. He's obtained business-friendly policies whilst formally maintaining his public declarations. In reality, he's sold the equivalent of Xerox's mouse and graphical interface because they cost too much in research and development and didn't generate profit in the current quarter.

Probable trajectory

How could I be proven wrong? If in five years we see European standards still globally dominant, the Brussels Effect intact, and the European Union recognised as a credible guardian of corporate sustainability, then this analysis would be mistaken.

What do I predict instead, based on analogous patterns in corporate and institutional history? Over the next twelve to twenty-four months, American and Chinese corporations will begin ignoring European standards because they're no longer binding for ninety per cent of companies. Regulatory arbitrage will kick in, with everyone incorporating where standards are lowest. A race to the bottom on sustainability reporting will begin. Europe will lose its role as global standard setter. The Brussels Effect on sustainability will collapse before consolidating.

When Germany and France emerge from political paralysis between 2025 and 2026, they'll discover the table has already been set by others. The regulatory moat that protected them whilst they were blocked has been dismantled. The strategic position is now completely exposed.

There was a profitable stalemate in place. Europe paralysed but with regulatory moat intact meant nobody could attack the long-term strategic position. Today we have Europe paralysed and regulatory moat destroyed, meaning the position is completely exposed to external pressures.

A movie already seen

When you're structurally behind on price and innovation, the strategic asset rarely resembles what generates profit in the current quarter. Xerox experienced this by giving away computing's future because it seemed like costly research unrelated to the core photocopier business. Europe is experiencing it by giving away the only asset that gave it global pricing power because it seems like bureaucracy hindering immediate competitiveness.

The mechanism is identical across domains and centuries. The strategic asset for those behind resembles what makes you irreplaceable in the long term, what creates others' dependence on you, what gives you pricing power when everything else is commoditised. Xerox had the graphical interface. Europe had the global regulatory monopoly. Both traded it to breathe in the current quarter.

Europe had built irreplaceability as global regulator through decades of institutional construction, accumulated credibility, and independence from corporate capture. Nobody else could replicate this asset because it required time, international legitimacy, and distance from particular interests. Today it gives it away with a parliamentary vote during a coordination crisis, exactly as Xerox gave away its inventions during a phase of pressure on traditional business margins.

Xerox management, thirty years after the fact, publicly admitted having the future in hand without recognising it. In thirty years, will someone in Europe make the same admission before economic historians studying how a trillion-pound monopoly gets destroyed? If history is guide, and I may always be wrong, the answer is yes