By Phil Wennblom, Director of Standards Policy and
Greg Slater, Director of Global Trade Policy
By enabling products and technologies from different companies to interoperate, or work together, standards are fundamental to advancing innovation. Standards simplify product development, facilitate the sharing of information among purchasers of products from competing manufacturers, enhance the utility of all affected products, and enlarge the overall consumer market. Standards also lower costs by enabling product manufacturing volume growth. And standards can accelerate the adoption of new technologies by reducing the risk that they become obsolete due to incompatibility, which in turn reduces the risk of investing in high tech products.
In the technology sector, the important standards are global and used on a voluntary basis. Such standards respond to the needs of global consumer markets because they are developed by standardization processes that are open and transparent. Today’s digital economy is built upon global standards, which serve as essential building blocks for global supply chains and international trade to meet the needs of consumers who expect their digital devices to work everywhere.
But many of these benefits do not materialize when a government seeks to develop unique national standards to favor domestic technology developments. Consider the example of Japan’s 3G phones, which suffered from the “Galapagos syndrome” due to unique and complex features that enabled the customized phones to dominate the Japanese market but rendered them a complete failure abroad. The term has been used to describe similar phenomena in other markets. Domestic technology standards are especially problematic because they balkanize the global digital infrastructure on which so many industries rely.
U.S. and EU negotiators on the Transatlantic Trade and Investment Partnership (TTIP) are well aware of the opportunity to use the largest bilateral agreement ever to set a strong precedent that promotes the use of international or global standards. [i] In September, U.S. Trade Representative Michael Froman encouraged the EU to open up its standardization system so that it is more like the one in the U.S., which would enable TTIP to set a stronger precedent on global standard-setting. Ambassador Froman pointed out the following:
Restricting standards development to nationality-based processes is a tempting way to carve out market share for national constituencies, but the costs are too high, not just for trading partners, but for standards-setters and regulators forced too often to leave cutting-edge technical solutions out in the cold.
There might have been an age where we could afford such costs, but at a time when we are focused on both sides of the Atlantic on growth, innovation and competitiveness—and when the U.S. and the EU have shared concerns about third countries’ use of standards to divide the markets, rather than integrate them—T-TIP should be an opportunity to set a high standard for global standard-setting, to … encourage good practices around the world.
The cloud is one area of relevance to Intel where there is much room for innovation and economic growth, and yet emerging government efforts to create national or regional clouds would severely impair the value of shared computer services. Intel’s Chief Information Officer, Kim Stevenson, noted: “As we move forward, the Cloud will be the dominant IT service delivery model due to economies of scale and time to market benefits. Given this reality, it is more important than ever that we have global IT standards that facilitate interoperability and innovation.”
Several weeks ago, European Trade Commissioner Karel De Gucht affirmed Ambassador Froman’s push to use TTIP to increase market access by removing conflicting standards and favoring global standards. In fact, he proposed that the TTIP establish a new Regulatory Cooperation Council that would bring together the heads of the most important EU and U.S. regulatory agencies to make the TTIP “a living agreement that promotes greater compatibility of our regimes and accelerates the development of global approaches” to standards and regulatory developments.
We agree with Commissioner De Gucht that significant economic benefits are generated by global standards, and it appears we have solid U.S. and EU consensus on this general point. Beyond this high level consensus, however, it remains unclear whether Europe is willing to open its standardization system to rely on a broad range of global standards– not just standards developed through nationality-based organizations.
The challenge for TTIP negotiators will be to develop binding legal language that (i) requires an open system for domestic standards developed in the U.S. and the EU, and (ii) strongly favors international standards. Specifically, we recommend the following:
- The U.S. and EU should agree on a common and broad definition for global or international standards. Global or international standards are so important, we cannot afford to have the EU and U.S. differ in their views on which organizations develop them.
- The parties should promote more effectively the development of global or international standards over national standards and technical regulations. There is arguably no faster way to deny market access to American and European goods than through the use of technical regulations that act as technology mandates because they are prescriptive.
- They also should minimize the use of technology mandates, whether based on global standards or otherwise. Locking in domestic technologies through national regulations, rather than promoting them through market-led global standards, impedes innovation and denies consumers the benefits of new, more advanced ICT goods and services.
We look forward to supporting the TTIP negotiation process. A common, transatlantic approach to market-based standards would pave the way for accelerated innovation, greater technology diffusion, and significant global economic growth.
[i] Like many organizations, we use the terms “global” and “international” interchangeably in the context of standard setting.