In November last year (2009), the Standards Administration of China (SAC) issued for public comment their “Proposed Regulations for the Administration of the Formulation and Revision of the Patent-Involving National Standards”. As previously outlined, the proposal drew considerable criticism due in large part to requirement that patents be made available either royalty free of for a nominal fee to be eligible for inclusion in Chinese national standards.

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In April, the Chinese Ministry of Science and Technology (MOST) made available for public comment a draft notice outlining a series of proposed changes to rules which relate to the country’s indigenous innovation policy. The proposal – “Notice on Indigenous Innovation Product Accreditation in 2010” (English translation) – drafted in conjunction with National Development and Reform Commission, and the Ministry of Finance will relax a number of requirements for foreign products seeking accreditation and listing upon the approved government procurement lists.

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In May, Talkstandards.com hosted an open forum on the use of standardization as a political tool to face an increasingly global economy. Contributors were asked to discuss a number of issues including: the role that governments should play in international standards initiative, and the consequences of this involvement such as non-tariff barriers to trade.

Keith Maskus argued that “The interjection of nationalist politics into standards setting … is of considerable concern”. In technical areas where goods, such as wireless technology, have considerable network effects attached, there is a temptation for governments to structure standards so as to favour domestic producers/suppliers. While possible to remedy through diplomatic exchanges and commercial relationships, vigilance and coordination between national authorities is of upmost importance.

While acknowledging that areas such as eHealh and safety call for government direction, Ken Krechmer argued that growing government involvement in the standardization process will not produce better standards. He contrasted standards development which looks to maximize efficiency (termed Newtonian) with an evolutionary process, where “each standard just serves a purpose for a span of time to be superseded by other technologies and associated standards” regardless of legislative backing.

In an article that initiated considerable discussion, Andy Updegrove on the one hand warned that national/international standards often intersect to the benefit of protectionist elements, and on the other argued that global issues requiring international standardization such as climate change (SmartGrid, emissions caps, green technology, etc.) are best addressed by governments. He concluded by proposing that perhaps the best alternative is the establishment of a new, treaty-based, infra-national organisation to “drive such ambitious projects on a global, rather than a national basis”.

Helen Disney highlighted a growing tension between governments serving the interests of individual citizens/consumers versus the collective good, and that standards and the standardization process are increasingly becoming areas of political interest. She argued that instead of “demonizing certain types of standards” while favouring others – closed/open, national/global, etc. – policymakers should see them instead as tools to “facilitate good policy outcomes”, e.g. in dealing with issues such as climate change.

Inspired by an Economist article which suggested that Asia, particularly China, is turning the business world “up-side down”, Ajit Jaokar described what he saw as a growing dichotomy between national standards vs global standards and emphasised the role which the “timeless motivation of companies to solve specific problems” will play in driving increased international standardization.

As governments so often lack the required knowledge base to critically assess different technologies within a standard, the result is that, as Jay Kesan explained, policy makers are increasingly looking towards large private companies for guidance. This can potentially create conflict of interest due to differences between public and private motivations. Kesan argued that governments must be vigilant, lest the standardization process become a protectionist mechanism.

Typically, governments are most likely to intervene in highly dynamic industries. From this perspective, Stacy Baird warned of the dangers of government involvement in the burgeoning area of Cloud computing. He argued that “governments should let the IT experts, the CIOs and CTOs pick their own technology” and proposed a simple “public interest” based test, against which governments need assess any ICT market intervention.

The interjection of nationalist politics into standards setting, particularly in areas where global technological coordination is important for increasing the supply of and access to public goods, is of considerable concern. Globalization of trade, investment and technology flows places increasing pressures on national regulations of all kinds, ranging from competition regulation to financial standards such as capital requirements. Whether and how these regulations should be subject to greater multilateral or global coordination is a central policy issue.

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The Europeans (governments) fund their standards development, China asserts its standards development and the US ignores its standards development. There does not appear, at least to me, to be any information that indicates that one of these approaches has been better than the others. With the exception of GSM (3G) the Europeans have little to show for the government funding of standardization.
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Standards often intersect with international trade in protectionist ways. All too often, policy makers have adopted laws and established regulations to protect domestic vendors in their home markets against competition from those abroad that would like to sell similar products into those markets. One goal of the Agreement on Technical Barriers to Trade to which countries that have acceded to the World Trade Organization are signatory is to prevent just such standards-based barriers to trade.
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In the ‘arranged marriage’ of states and markets there are always tensions between serving the needs of individual citizens and consumers versus serving the collective good. Few areas of policy are immune from these debates and standards, as well as global standardization, certainly are not.

Standards and standardisation are becoming more politicized. So what does this mean for the economy and especially for growth sectors of the economy or those which are politically sensitive, such as energy, communications and the Internet?
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In the discussion around global standards and global politics, one of the questions we are discussing is:

Under what scenarios will increased political involvement result in strategically adapted national standards, that foster unilateral interests, as opposed to globally coordinated standards, that serve common interests?

The statement reveals a dichotomy: That of national standards vs global standards, in that it assumes there are only two interests in this discussion which are either national or global. However, there is a third – more important motivation for standards – that of companies to solve problems.

But why are we discussing the issue in the first place?

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Global standards that are developed by technology companies with products and services in the relevant technology arenas, together with government/regulatory or public participation, can be pro competitive and innovation enhancing. Such global standards hold the promise that interoperable and compatible technologies across continents can be realized.

While these benefits are alluring, they can turn elusive and indeed detrimental to global competition and free trade very quickly unless some pitfalls are recognized and astutely avoided.

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IT has truly gone global. Never before has it been so true as with cloud computing. Laws and policies, including procurement rules, that restrict IT choice now have implications for a nation’s ability to take advantage of cloud computing and impairs its participation in the modern, global heterogeneous IT marketplace.
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