Global reset – Technology decoupling (Part 3: The standard setting battleground)
Phuah Eng Chye (9 April 2022)
Tim Rühlig points out “technical standard setting has emerged in recent years as one of the key battlegrounds in the struggle among states to gain dominance in high technology sectors. While the core competition is between the People’s Republic of China (PRC) and the United States (US), there are serious implications for the European Union (EU) and European enterprises as well. China’s rapidly growing footprint in international technical standardisation is of particular significance given that its approach to standardisation is distinct from European and international practice. This is one of several factors that is leading to increased politicisation of technical standardisation, which has raised the risk of bifurcation, fragmentation and decoupling of standards internationally”.
He explains ‘technical standards are omnipresent specifications that generate interoperability, product compatibility and basic safety…In a nutshell, technical standards are specifications for common use that facilitate international trade and economic growth. Technical standards are a form of private self-regulation and, while they are legally nonbinding, they carry significant power. Two types of technical standards exist: formal and de facto. Formal standards are the result of negotiations…within Standards development organizations (SDOs) or industry consortia. They exist at the national…and international levels. De facto standards are the result of market dominance of specific technological solutions from one or a few suppliers”.
Tim Rühlig notes “for a long time, technical standards were exclusively viewed through the lenses of technical and economic competition. In recent years, however, the potential for technical standards to drive competition among different states has emerged. Four dimensions of such technical standardisation power can be distinguished, namely economic, legal, political and ideational. This covers questions of the economic competitiveness of national economies during digital transformation; the legal effects of non-binding technical standards under world trade law; political dependencies as a result of technological lockin effects alongside security implications of technical standards; and values inscribed in key enabling technologies.
China’s growing influence in global standard setting poses a significant challenge to US and European domination. While China “is not yet dominating international standardisation, it has made significant advances. This can be quantified by six indicators: 1) China’s increased share of leadership positions in standardisation organisations; 2) its participation in international standardisation; 3) the number of contributions to standards by China/or the number of Chinese standards contributed; 4) its share of standard essential patents (SEPs); 5) qualitative descriptions from international standard experts; and 6) the increasing role of technical standards in Belt and Road Initiative (BRI) projects. China’s growing footprint in international technical standardisation is somewhat natural given its increasing economic power and gains in innovation capacity”.
Tim Rühlig notes China is using BRI to establish de facto standards. “In 2015, China’s…National Development and Reform Commission (NDRC), issued its first Action Plan for the Harmonisation of Standards along the Belt and Road…China began to translate its domestic technical standards into foreign languages to facilitate their adoption in third countries…By September 2019, China had signed 90 bilateral agreements on technical standardisation cooperation with 52 countries and regions. China has also concluded 16 memoranda of understanding (MoUs) with BRI countries regarding digital standard setting as part of the Digital Silk Road…many concrete BRI projects incorporate Chinese technical standards…It is through these projects that the PRC disseminates its domestic technical standards to third countries without submitting them to international SDOs. Reportedly, other sectors in which China aims to spread its standards to BRI countries include ultra-high voltage transmission technologies and AI…In recent years, China has not only developed – in a non-transparent manner – standards that are not identical to European ones, it has also started to promote its own standards in BRI countries”.
For example, “China offers funding, mostly loans, for the development of railways if they are constructed by the China Railway Corporation or other Chinese manufacturers based on Chinese standards. In addition, China is also striving to take the lead on the development of international railway standards in the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC)…China is quite successful in spreading its own high-speed rail standards in BRI countries…but meets increasing resistance from its partner countries in traditional mainline and metro projects…The spread of Chinese railway standards is crucial to China for both political and economic purposes, creating lock-in effects; deviating standards come with considerable transportation costs, as the BRI’s trans-Caspian corridor demonstrates. For European businesses, the spread of Chinese standards in BRI projects creates hurdles to market access”.
Tim Rühlig highlights “as a result of politicisation, standardisation could suffer from a division into two or more camps. China could aim to develop a rival system of international standard setting, with the BRI serving as its stepping stone, in order to outcompete European standardisation powers. The international standard setting system is already experiencing fragmentation, and the risk of a decoupling of technical standards is growing. As China is a latecomer to the existing global institutional system, established standardisation powers are striving to preserve the system, while simultaneously integrating China without losing influence. As a novice in the game, China could aim to stretch the boundaries of the rules or establish rivalling institutions that undermine the existing framework. Although the ISO and the IEC are currently the key platforms, accounting for around 85 per cent of all international product standards, a multitude of SDOs are already competing for international influence. The risk of such a decoupling of standards is significant and would be highly detrimental to European businesses. This is borne out by the fact that an overwhelming majority of the European firms operating in China find compatibility of Chinese standards with international standards to be very important to their business activities”
Tim Rühlig points out “the EU and European firms rightly fear a loss of influence resulting from China’s growing footprint in international technical standardisation. Current concerns in Europe largely focus on new and key enabling technology standardisation such as AI and lithium batteries. More fundamentally, however, the force of standards themselves could dwindle if they are not considered impartial. Economically, a redistribution of resources dominates concerns over a power shift. Actors that used to gain large shares of royalties from SEPs, not least those based in the EU, could face a situation in which they not only need to pay licensing fees to Chinese competitors, but also bear switching costs when redesigning their technology. To the extent that technical standards are considered part of international trade law, the EU’s capacity to shape international law would also diminish. Another concern is that Europe could face strategic dependency on Chinese certifiers. China purchases European certification agencies, including Notified Bodies (NBs), that certify conformity…At this stage, the related challenges are vague and abstract, as it remains unclear whether NBs are covered by the EU’s FDI screening mechanism. At worst, however, the EU could end up in a situation in which it relies on Chinese SOEs to certify conformity with standards supporting EU regulation in some sectors and countries”.
Tim Rühlig notes “worries are growing in the ICT and automotive sectors in particular, while other, less politically-strategic sectors – such as food or household appliances – are less concerned. Even within sectors, China does not necessarily adopt a unitary policy. By trend, China is more willing to commit to international standards in areas where it is technologically advanced and strives to influence global standard setting. In fields beyond Chinese technology strongholds, China tends to fuel decoupling from international standards. In some cases, such as elevators and postal services, alliances of European actors with export-orientated Chinese businesses have helped to generate support for the adoption of ENs (European standards), or have led to collaboration on developing an international standard based on ENs that was then adopted identically within China”. “Almost the entire European industry is united in its advocacy for the adoption of international standards in China, and academic analysis confirms the benefits of international standards for EU-China trade. By providing interoperability, they facilitate international trade and harmonise technical necessities for market access. The potential to sell products on global markets is a driver for technological innovation. If technical standardisation were to be divided into two distinct spheres, there would be direct economic risks for all actors. If companies were forced to design products in a distinct manner for different geographical areas, they would suffer from a loss of efficiency, and the increase in costs would hamper innovation”.
Overall, standard setting is turning into a battleground as a means of gaining leadership in strategic technologies, gaining advantage in international bidding processes, and reinforcing security needs. Battles are looming in emerging technologies where standards are yet to be set – such as for drones, electric vehicles, lithium batteries, 6G networks, data security, and AI.
China’s standard setting environment
China commitment to aligning domestic standards with international standards arises as part of its obligations to join the World Trade Organisation (WTO) in 2001. Matt Sheehan, Marjory Blumenthal and Michael Nelson notes “beginning in 2014, China initiated a series of reforms that began to shift the country away from a purely state-driven standards system. Those reforms allowed organizations outside the government to create what are termed association standards (tuanti biaozhun), which more closely resemble the voluntary, industry-driven standards prevalent in the United States and Europe. This reform process has continued in recent years under the banner of China Standards 2035, a multiyear research project on the country’s standardization work led by the Standardization Administration of China (SAC). But those recommendations encountered fierce resistance within China’s bureaucracy, particularly from other ministries and local standardization bureaus that saw the plan as stripping them of their standards-setting power. The State Council’s newly released standards strategy can be seen as the central government’s attempt to provide clear guidance to the SAC and other relevant agencies…explicitly call for elevating the role of industry players in standards setting and for increasing the proportion of standards developed by market actors”.
John Lee notes “nonetheless, China has yet to achieve a unified approach to IoT technical standardization. In 2019, SAC established a national coordinating body with a mandate for comprehensive IoT standardization, which was expressly nominated to be a direct counterpart to the international standardization body responsible for the IoT and related technologies. However this body’s membership does not include the organization (China Communications Standards Association or CCSA) responsible for networking communication and security, which continues to develop standards issued by Ministry of Industry and Information Technology (MIIT) relevant to communication aspects of the IoT’s. This has apparently resulted in some siloing of IoT technical standardization work between ecosystems led by MIIT and SAC. However, it would be inaccurate to view all aspects of China’s IoT standardization ecosystems as fragmented. MIIT and SAC jointly issued guidelines for standardizing the industrial internet in 2019, which appear to reflect input from the Alliance for Industrial Internet (AII). The AII is also involved in regulating deployment of China’s new industrial internet identification resolution system that will operate in parallel with the global internet’s addressing system, which was developed by Chinese Academy of Information and Communications Technology (CAICT) and is being trialled nationwide. Standards development organizations (SDOs) within China have also pursued standards development by industry sector in tandem with real-world implementations. The pace of IoT-related standardization therefore responds to market forces, and not only the Chinese state’s declared priorities. The SAC’s webpage indexing “IoT standards” in January 2021 listed 76 national standards; 30 industrial standards; and 62 local, province-level standards. This probably results in some overlap and inconsistency. However, it also reflects the general challenge in standardizing the IoT that stems from the diversity of systems constituting it”.
Matt Sheehan, Marjory Blumenthal and Michael Nelson attribute a surge in Chinese standard output to central government directives that “almost inevitably generates a burst of related activity at all levels of government and in the country’s private sector. Chinese bureaucrats see a chance to prove themselves, Chinese companies see a chance to win subsidies, and both bureaucracies and firms look for some way to claim they are contributing to the national goal at hand…the plan explicitly calls for creating new standardization research institutes, certification centers, and more than fifty “standards innovation bases…new prizes and subsidies given out to researchers and companies for standards work, creating incentives for the types of collusion and pressure campaigns that Chinese SDO participants have been accused of. This type of activity will have major and uncertain spillover effects beyond China. It could position Beijing to wield greater influence on standards setting across the board, including a vast range of products and processes – anything that might be standardized. This flurry of movement promises to mean that representatives from Chinese companies will be a much more active presence in many more standards-setting venues, from the lowest ranks of professional societies up to the International Organization for Standardization (ISO) itself”.
Naomi Wilson points out generally “China’s system has the greatest degree of government involvement and direction and is the least open to foreign participants, while the U.S. system is based in the principles of industry-led, consensus-driven, voluntary, and open standards development. The European Union’s model is distinct from that of the United States in that standards development participation tends to be more exclusive to EU-based participants, particularly when those standards are to be used to provide the de facto means of demonstrating compliance with mandatory regulatory requirements”. “The relationship between standards and regulation marks another key difference among the three systems. In the U.S. and European models, regulations are typically developed in areas of government interest such as health, safety, and consumer protection. Standards are used differently to inform specific elements of certain regulatory requirements and are effectively rendered mandatory by their reference in regulation…The Chinese commercial market is more regulated than EU or U.S. markets, and standards are often used to implement specific regulatory requirements, most notably for security-related regulations. In some cases, Chinese standards are developed and implemented prior to finalization of a regulation, causing significant confusion among industry regarding how to implement a given standard – or whether it should be classified as a standard at all”.
Naomi Wilson explains this “demonstrates China’s preference to use standards as a regulatory tool first and a market facilitating tool second. This is largely driven by the Chinese view that the government should be liable for issues with implementing standards, rather than individual companies. Chinese policymakers also tend to value the quantity of standards over quality as a measure of success. This drives Chinese presence in international standards and production of both domestic standards and international standards proposals. While Chinese participation in international standards bodies is by and large a good thing, the number of submissions is not a valuable metric in standards work, where contributions are adopted based on technical merit to meet the objectives of the standard, and success is ultimately determined by the level of adoption in the market”.
Matt Sheehan, Marjory Blumenthal and Michael Nelson explain that “elsewhere in the world, standards are seen as serving an important but narrow purpose: increasing interoperability, comparability, and compatibility between products. By doing that, standards act as the grease in the wheels of the global economy, reducing friction, facilitating trade, and laying the groundwork for globalized technology networks like the World Wide Web. In China, standards are often seen as a lever for upgrading the country’s industrial base”. “The Chinese government’s plan focuses heavily on creating standards for emerging industries such as intelligent manufacturing, describing them as a tool to promote industry optimization and upgrading. The idea is to set technical standards high, essentially forcing manufacturers to upgrade their processes whether they want to or not. This strategy reflects an abiding belief within the Chinese government that economic and technological progress requires constant (and often mandated) upgrading of production capacities…This is a markedly different vision of what standards are used for, and one that creates major potential pitfalls for China’s innovation ecosystem. Premature standardization, for example, can stifle innovative processes, locking in the use of certain technologies in rapidly changing fields. When it comes to quickly evolving technologies, Western companies have benefited from competing standards that can evolve to meet different and changing needs…one question stands out. Does China have more to gain from a brute-force upgrading of the technologies in its industrial base, or does it have more to lose from an overly rigid and prescriptive approach to technology adoption?”
Tim Rühlig explains “China’s standardisation reform has led to partial convergence with international and European approaches. Now, the PRC’s system consists of five types of standards structured into two tiers, a state-tier and a market-tier. The state-tier continues to consist of national, sector and local standards that are developed under the umbrella of state institutions, and national standards can still be mandatory or voluntary. All local standards and the overwhelming majority of sector standards are now voluntary. The new market-tier includes two types of standards. Association standards are issued by a rapidly growing number of competing industry associations. These associations do not need to receive a licence for standardisation from the SAC, an element inspired by the US’ approach. Enterprise standards are product specifications developed by individual firms”.
Tim Rühlig notes China has committed to improving the openness of its domestic standard-setting system. “The emphasis on high-quality standards, and the introduction of evaluation and feedback mechanisms, could even indicate a tightening of oversight. The strategy speaks of third-party standards quality evaluation, but how this will be implemented is not yet clear. Other reforms include the ambition to shorten the timeframe for developing standards to less than 18 months, digitalise standardisation, strengthen standardisation research, and improve the governance of SEPs and IP protection”.
Tim Rühlig recommends China should work towards ensuring fair and equal treatment and fair access to interested stakeholders that want to engage in domestic standardisation activities – similar to the rights Chinese companies are granted in Europe. “China should guarantee equal rights to all entities participating in standard development committees, ensuring transparency regarding membership requirements, fees and information disclosure, while encouraging inclusive standard setting across standard development associations”. “China is advised to refrain from elevating associations standards that are not developed in an inclusive manner to national or sector standards, and to provide inclusive mechanisms for review and commentary in the process of incorporating association standards into a standard type under the state-tier or administrative measures”. In addition, China should “simplify and streamline conditions for market access and certification…properly synchronised and made fully transparent”. In compliance with WTO obligations, China should ensure “all mandatory approval schemes for market access are based on national mandatory standards…This includes allowing manufacturers to use their own testing laboratories if they meet all necessary accreditation requirements, and making it easier for international laboratories and certification bodies to provide testing accepted in China. China should also fully implement the international framework for patented technology to be licensed under fair, reasonable and non-discriminatory (FRAND) terms”.
International perspectives on China’s influence
Naomi Wilson notes “the international standards community has largely viewed increased Chinese engagement in international standardization activities as a positive development…as the Chinese government and companies learn the ropes and protocols of international standards development…China’s tactics have sometimes created frustration…For example, the Chinese government’s efforts to incentivize contributions in international bodies has resulted in numerous low-quality Chinese contributions. Because of the incentive structure, Chinese stakeholders have sometimes provided irrelevant contributions or divided a single contribution into numerous pieces in order to earn rewards from the government. While SDO protocols and processes are designed to eliminate bad proposals in favor of good ones, an overwhelming number of submissions can of course cause frustration among participants and make the process less efficient. While increased Chinese participation and government involvement has created some procedural challenges, it has not created undue influence or tipped the competitive scales in favor of the Chinese. In fact, U.S. and multinational companies are still largely regarded as the most influential participants in ICT-related standards bodies – based on their technical leadership and expertise, deep understanding of standards processes and rules, quality of contributions, and consistent participation over time. The greatest number of accepted contributions in widely adopted standards continue to come from non-Chinese companies. Where Chinese companies are technology leaders, their contributions to standards bodies are considered high quality and provide value to the ICT sector writ large by helping to ensure that technical standards are best suited for the current technology and consumers”.
Naomi Wilson notes “though China claims it has increased the rate of adoption of international standards, China often adopts international standards with substantial modifications, such as mandating use of only China approved methods of encryption…This requires companies to adapt products and services to the Chinese market, creating interoperability and potential cybersecurity concerns when the national algorithms/standards developments are not open to global expert peer reviews. Estimates indicate that only about a third of Chinese national standards from SAC are adopted from international standards, and the extent to which these are incorporated over time continues to decrease”.
She argues the Chinaunique standards contravene WTO commitments on Technical Barriers to Trade (TBT) which “stipulates avoidance of unnecessary obstacles to trade, including through use and development of international standards. At a broader level, WTO rules mandate non-discrimination and national treatment as concerns standards, technical regulations and product testing, and institutes requirements for transparency and notification of standards and measures that deviate from international norms or stand to have an impact on trade. In addition to concerns about openness to participation, China’s public notification of standards and other measures is often shorter than the length recommended by the WTO TBT Agreement for adequate stakeholder consultation (60 days). Moreover, numerous Chinese standards that are categorized as recommended, are often treated by the Chinese government as mandatory or de facto mandatory”.
In particular, Naomi Wilson points out “policymakers often raise concerns with the Third-Generation Partnership Project (3GPP), which focuses on developing technical specifications for telecommunications, including 5G, and has significant participation by Chinese technology companies. 3GPP has hundreds of members representing the partnership economies and functions under comprehensive rules and procedures that provide protections against dominance and ensure fairness for all participants. It has an engineering culture where technical contributions are often supported by substantial R&D investments focused on telecommunications standardization and are discussed and debated based on technical merit. While the ICT community benefits from Chinese companies sharing the fruits of their R&D and expertise, concerns have been raised regarding China’s participation in 3GPP, including: large numbers of participants, large numbers of contributions which can dominate meeting agendas, meetings held by CCSA to review Chinese proposals and to coordinate positions, and cases of perceived undue influence from certain individual participating companies, etc. Enforcing established 3GPP rules and procedures, such as voter qualification rules, has significantly reduced issues. Some working groups have instituted new rules to limit contributions to one per company, per agenda item. The tech sector believes these issues to be manageable, though appropriate oversight from governance bodies is key”.
Tim Rühlig notes “China claims to have reached an adoption ratio of 85 per cent of international standards; however, the details of these calculations do not conform to international analyses. At best, the claims can be seen as an aspiration to increase synchronisation…it remains uncertain whether this will be an identical adoption, as is being advocated”.
Nonetheless, Tim Rühlig thinks China’s standard setting reforms “provided more opportunities for European firms to shape standard setting in the PRC”; particularly in sectors such as civil engineering and construction, petrochemicals, and information and communication technology (ICT). “However, opportunities continue to be relatively limited”. It remains to be seen if China’s new standardisation strategy, published in October 2021, might bring further positive developments”. Feedback from European companies highlighted nine distinct challenges: “1) formal barriers to participation in domestic standards working groups; 2) informal rules restricting the share of foreign invested enterprises’ (FIEs’) voting rights; 3) exclusion from information coordination; 4) restricted access to technical leadership positions; 5) lack of information and transparency; 6) high participation fees; 7) monopolistic market structures due to preferential treatment; 8) hidden political agendas that impact standardisation; and 9) a lack of intellectual property (IP) protection”.
Tim Rühlig highlights “in order to influence domestic standard setting in China, a combination of the following is required: standardisation expertise; investments in local research and development (R&D); good government contacts; a sound corporate reputation; Chinese language skills; reasonable market share and company size; early commercialisation of innovation; collaboration with influential Chinese companies in joint ventures (JVs); efficient internal coordination; a long business history in China; knowledge of the Chinese standardisation system; and openness to dialogue with Chinese actors”.
Alexandra Bruer and Doug Brake points out “standards-setting organizations are in part a reflection of their corresponding markets and the leaders in innovation. If a particular company has a large share of the market for a specific product (communications operators, various equipment suppliers, etc.), leadership in standards-setting bodies would be expected. These companies would have the largest share of funding for R&D, and thus continued innovation, allowing them to be at the forefront of patents and standards”. “The long-term contraction of U.S. telecommunications equipment providers is further cause for concern. While the United States still retains some key equipment suppliers, and, notably, Qualcomm is a leading contributor to the standards-setting process, the United States has no competitor with as broad a scope as China’s Huawei and instead relies on a patchwork of companies. Such reliance, wherein companies specialize in narrower portions of the overall telecommunications market, makes preservation of transparency and fairness even more critical in order to protect supply chain security and flexibility”.
Matt Sheehan, Marjory Blumenthal and Michael Nelson note “today, other countries will likely view…with suspicion, portending efforts by China to force its own standards on the rest of the world. The mechanisms for that foisting could be both direct and indirect. On the direct side, the Chinese document calls for advancing standards alignment…and for ramping up standards-related dialogues with members of the BRIC grouping and the Asia-Pacific Economic Cooperation forum. It specifically mentions the ISO, which sits at the apex of a global standards-setting hierarchy, as a key venue for China’s standards-setting push”.
Tim Rühlig note proposals to establish Chinese-controlled, international SDOs such as a BRI Regional Standards Forum “begs the question, will China ultimately integrate into the existing international standardisation system or simply strive to project its own power by means of technical standards and undermining international SDOs? Although speculative at this time, it needs to be mentioned that the two actions are not mutually exclusive. While the national standardisation strategy is an encouraging sign, since it emphasises the importance of existing SDOs, China could adopt different sector-specific practices in parallel”.
Alexandra Bruer and Doug Brake notes “the U.S.-China Economic and Security Review Commission’s 2020 Annual Report identifies four key concerns for how China may be impacting the standards-setting process: vote coordination, awards for contributions, manipulation of contributions to maximize the number of contributions, and geopolitical influence tapped into to increase the number of members who support Chinese endeavors”.
The Biden administration has lobbied allies to formulate common positions. Christina Wilkie reports the newly-formed “U.S.-EU Trade and Technology Council will have three overarching goals: establish new global trade standards for emerging technology, promote democratic values online and find ways for the United States and the EU to collaborate on cutting-edge research and development”. Other specific goals of the council include coordinating standards on new technology like artificial intelligence, quantum computing and biotechnology; making supply chains more resilient and less dependent on China; pursuing reforms at the WTO and coordinating regulation of tech platforms. “Dealing with China’s nonmarket practices, its economic abuses and its efforts to shape the rules of the road on technology for the 21st century will be an important part of the work of this council, said the White House official”.
Overall, Stephen Olson notes “the arcane world of international technical standards has become a primary arena in which trade, technological, and even philosophical pre-eminence is now being shaped. While the US has traditionally led in standards-setting, especially in cutting-edge technology sectors, China has raised its game substantially. Global standards in next generation sectors such as 5G, AI, and the architecture of the internet itself, will increasingly be Chinese or heavily China-influenced. Countries that set standards position themselves at the front of the high technology pack. The US has been the technology leader since the middle of the last century, resulting in US technology standards, protocols and products becoming the formal or de facto standard for the world (think about Microsoft Office, for example). This has led to a mutually reinforcing cycle in which the widespread adoption of US standards has further cemented the primacy of US technologies (and US technology companies), which in turn further solidified the adoption of US standards. Leadership for the next half century is now being contested…The ability to set international technical standards not only holds significant economic implications, it is also imbued with broader societal and philosophical overtones. Different national approaches to standards setting can reflect different underlying social and governing philosophies. To the extent one country can secure international acceptance for its standards, it can also potentially embed that country’s values, at least as they pertain to the specific activity covered by the standard. Existing governance of the internet, for example, derives from the US’ traditional hands-off or light touch approach to regulation, and its philosophical embrace of free speech. China’s vision for the future of the internet is substantially different. China’s proposals on future internet governance and architecture have reflected a much more top-down, centrally managed and highly regulated approach. Rather than a truly worldwide web, China’s vision is closer to a series of national internets, tightly surveilled and controlled by each national government”.
Stephen Olson argues “Western proponents of China’s integration into the global economy encouraged China to play: a constructive participant in multilateral governance bodies. The underlying assumption however was that China’s engagement in these global regulatory bodies would gradually but inevitably bring China into greater conformance with the prevailing (and primarily Western) economic and governance philosophies which traditionally underpinned these institutions. In reality however, China could have a greater impact on these institutions (and the regulations they produce) than vice versa. Criticizing China for its ambitions in setting standards would be counterproductive and hypocritical. A more productive response would be to first clearly recognize what’s at stake. Deliberations currently unfolding in international standards-setting organizations around the world will establish the terms and conditions under which future technology leadership will be contested, and how – and within what philosophical context – new technologies will deployed…Until now, the US has preferred a more organic, bottom-up approach to standards setting which moves at a slower pace than China’s more deliberate and expedient top-down approach…The race for the future is already underway. It’s time for the US and other Western nations to get out of the starting blocks”.
The debate on the Western response
First, there are to disagreements on the harm caused by China’s rising influence on standard setting. Second, there are different views on how the West should respond. Jacob Feldgoise and Matt Sheehan notes “SDOs have historically been dominated by the United States and Europe… the U.S. Congress directed the National Institute of Standards and Technology (NIST) to study China’s growing influence in this arena”. They found “most industry commenters do not believe that China is manipulating or breaking the rules of international SDOs” as reports of Chinese misbehavior do not appear widespread. However, they “believe that U.S. companies’ competitiveness in international standards development is threatened by the way China is mobilizing around standard setting”. “Industry commenters believed that the U.S. government should not focus on reforming the rules and procedures of international SDOs” but “should continue to support a global, open, rules-based standardization system that is industry-led and consensus-based”. “U.S. government intervention would tarnish SDOs’ reputation for impartiality and damage their ability to convene stakeholders on neutral ground”. “To accomplish this, the government should focus on reducing barriers to entry that limit U.S. engagement in national and international standards development activities” by subsidizing participation costs and loosening export controls to “allow technology sharing for all standards development activities to all companies on the export blacklist”.
In 2020, Stephen Olson notes “Huawei pitched a remarkably radical proposal for a new internet protocol…create a new architecture for the internet that would replace today’s largely self-regulated web with a new version characterized by centralized rule creation and enforcement. This would open the door to governmental oversight and control over devices connected to the network and empower national administrators to deny access. The key catchphrase is cyber sovereignty – each country sets its own rules and conditions”. Some standards, such as those relating to facial recognition and surveillance, can determine “how new technologies are deployed in developing countries. Human rights advocates have criticized some of the standards under discussion, claiming they cross the line from mere technical specifications to policy recommendations which tilt towards an intrusive degree of surveillance, potentially including ethnic and racial profiling. China Mobile and ZTE have also proposed standards for smart streetlights which reflect ZTE’s design features and would place ZTE in a dominant market position. They also include video surveillance capabilities which the American Civil Liberties Union has cautioned could permit governments to essentially track anyone and everyone in public places”.
John Lee points out “internet standardisation has always been political”. He argues “the Chinese Communist Party (CCP) has limited incentives to redesign the global Internet from the bottom up simply to enable political repression. Cyberspace inside China has already been largely secured against domestic challenges…China’s networks remain connected and compatible with the global Internet…Given the massive benefits China reaps from the global interoperability of networks that characterises the current Internet, the CCP has a strong interest in not fragmenting it”. His view is the debates on the New Internet Protocol (New IP) reflect “the long-entrenched institutional politics of Internet design. As one response put it, evolution [of the Internet] should take place from within the organisations that invented the Internet” and build upon existing structures, whereas New IP represent[s] a departure from the Internet’s fundamental values. The issue with the proposal is less that it comes from Chinese actors than that it threatens orthodox principles of Internet design such as interconnectivity and bottom-up permissionless innovation, raising the prospect of a greater role for hierarchical, proprietary development and state-dominated institutions”. In this context, the New IP is more likely motivated by China’s desire to lead internet design to be in line with its vision for global Internet governance based on national internet sovereignty as well as to pave “a path for Chinese firms to capture first-mover commercial advantages”. He reminds us that “the politics that technology enables are expressed through social environments involving many actors, interests and relations of power” with success ultimately determined by market forces.
Naomi Wilson notes “given concerns with respect to China’s technological and economic ambitions, industry has seen a proliferation of U.S. policies and bills with significant implications for standards participation and competitiveness”. However, they “had significant unintended – and negative consequences – for industry. As written, the guidance inadvertently prevents participation of U.S. companies in ICT-related standards bodies in which a listed entity also participates. This has led to the unfortunate consequences of decreasing U.S. company participation in key standards bodies and ceding ground to Huawei and other Chinese companies… Foreign participants in standards meetings sometimes experience long delays in receiving visas to travel to the United States or do not receive them in time to travel. This sometimes precludes key standards’ drafters from participating in meetings held in the United States or dissuades organizations from hosting meetings in the U.S. at all”. She recommends “the U.S. government should coordinate with like-minded countries to encourage use of international standards and encourage countries to bring their contributions and efforts to international standards bodies, where U.S. companies and other stakeholders can influence the direction of the standards. The U.S. government should also continue to use international trade policy to expand the acceptance of rules that foster reliance on international standards rather than country- or region-specific alternatives”.
Matt Sheehan, Marjory Blumenthal and Michael Nelson suggest “the first step is to recognize that much of the Chinese strategy does not require a response. China’s slow shift toward an industry-driven approach is a potentially positive development, while the comprehensive use of standards for industrial upgrading could have unintended consequences, such as introducing new kinds of friction and rigidity within China, with premature standardization locking Chinese producers into using technologies that quickly become outdated. As for the international dimension of China’s plan, it would be wise to take a targeted approach. SDOs are sprawling and highly international organizations that operate based on a shared interest in the minutiae of technology and the collegiality of fellow professionals (although hidden agendas of industry employers are also understood to be at play). Heavy-handed interventions seeking to exclude researchers or companies from China would backfire, given their credentials and affiliations, and such attempts could potentially upend ongoing work at crucial standards-setting bodies. Instead, concerned policymakers in other countries should engage with the leaders and participants of key SDOs to understand exactly where distortionary practices are happening and what the best methods of combating these practices are. These countermoves could include a push for SDOs to tighten their internal voting procedures or for concerned policymakers to pursue proactive domestic policies, such as support for companies to participate in international standards-setting bodies”.
Patrick Lozada thinks that interoperability, trade and costs to companies and consumers “should be at the forefront of discussions about China’s participation in and adoption of global standards…important to keep in mind that the vast majority of standards-setting activities pose little to no concern with respect to human rights or security”. “Even in areas related to emerging technology, it is important to consider that the development of standards takes place in the context of a consensus-driven, rules-based environment with significant public visibility. On a structural level, no single party can determine the trajectory of a particular standard. And if a standard is not in their commercial interest, then companies will not adopt that standard”.
Nonetheless, Patrick Lozada concedes “the New IP proposal initially advanced by Huawei and other Chinese stakeholders” concerns “a broad array of companies and governments and has security and human rights implications because of how it pushes the architecture of the internet toward state control. The response to standards of concern should be robust participation by global stakeholders for the advancement of common interests in security, rights, and economic prosperity”.
Tim Rühlig argues “technical standards are not simply a public good; they also carry enormous power. Central is that the political implications are not always obvious, since these standards are very technical in nature. Apart from economic distributive effects that can have enormous influence on our competitiveness, technical standards carry normative and security implications as well as creating dependencies”. “Technology is not value-neutral. Whether an innovation is developed in a democratic or autocratic ecosystem can shape the way it is designed – often unintentionally. Only a tiny share of technical standards developed in China reflects authoritarian values, but if they turn into international standards, they carry transformative potential, because once a technical standard is set, accepted, and used for the development of products and services, the standard is normally taken for granted”.
In addition, Tim Rühlig notes “in theory, the transparency and openness of technical standardization should create security. However, the more complex important technical standards get the more difficult it gets to properly review them all. If a country succeeds in establishing a technical standard with vulnerabilities as a global one, it could exploit the resultant backdoor. Technical standards can increase security, but they can also spread vulnerabilities…Finally, technical standards create markets. If standards are applied globally, they facilitate trade and fair competition. However, when incompatible standards are established in different parts of the world recipients rely on suppliers that produce according to the technical standards established in their country. If China strategically spreads its own technical standards for critical infrastructure in package deals along the Belt and Road, it creates one of the most effective forms of technological lock-in that turns into political dependency”.
Helen Toner explains the example of Chinese engagement in setting 5G standards “may lead us astray” because it is not representative. This is because “telecommunications is an area where global interoperability is nigh essential…the world must settle on a single set of protocols, meaning that although the standards are voluntary in theory, it’s difficult in practice for any given country or company to opt out”. In addition, 5G standards had to be developed and implemented in one coherent package, not piecemeal, in order to function” and “Chinese companies came into the discussions with a clear technological advantage”. For example, in the case of USB standards while customers prefer interoperability but it is not essential and the iPhone uses Apple’s proprietary Lightning cable. In emerging technologies such as AI, “no clear precedents exist to dictate which organizations’ standards – if any – will be adopted widely”. “Lastly, it is rare for Chinese companies to lead as decisively in a technology as they did in 5G”.
Helen Toner suggests “a prudent U.S. response to valid concerns about Chinese involvement in standards setting could be, first, to support the industry-led functioning of these processes, including pushing back on Chinese interference and facilitating the engagement of U.S. firms. Second, the United States could monitor ongoing standards processes to identify the small minority of cases where Chinese interference could meaningfully harm U.S. interests (i.e., cases more similar to 5G than to USB-C). Improved situational awareness could enable Washington to take action where warranted, without interfering unduly in the vast majority of standards discussions. Finally, policy that strengthens the underlying U.S. science and technology ecosystem will help bolster U.S. firms in standards discussions of all kinds”.
Naomi Wilson concludes “effective international standards development relies on a consensus-based, global system to develop standards that facilitate interoperability, open markets, and increase the benefits of economies of scale. It is a competitive and cooperative process in which no country or company can succeed by acting alone, and therefore does not lend itself to definitive winners or losers. Global experts collaborate and compete, independent of nationality or company, because their companies recognize the strategic advantages of the model. In the United States, competing technical contributions to standardization activities fuel collaboration and innovation to produce high-quality standards. Ultimately, the market decides what technology, products, and services will be the most successful. Standards simply ensure that technology that the market deems most appropriate for the consumer operates effectively across companies and markets. Ensuring that China – and other countries – recognize these benefits and continue to support and participate in the process will benefit companies, countries, and consumers alike”.
Will decoupling inevitably lead to the fragmentation of technical standards? We can think of it this way: Adopting common standards is a critical driver of globalisation. But the interoperability of devices and networks makes the objective of clean and self-reliant production chains and networks meaningless and undermines decoupling. The West thus face dilemmas in attempting to align the goals of global standard setting with decoupling. First, it is impossible to impose standards unilaterally or exclude China from the standard setting process without losing access to the Chinese sphere. Second, de facto standards are not dictated by national policies but by commercial players. Third, standards are not zero-sum games. A technical standard stand-off hurts all commercial firms and consumers. This implies standards cannot be used as a tool for exclusion and decoupling. In fact, standard setting represents a forum for discussion and a means for competitors to compromise and bridge differences amicably.
Alexandra Bruer, Doug Brake (8 November 2021) “Mapping the international 5G standards landscape and how it impacts U.S. strategy and policy”. Information Technology and Innovation Foundation (ITIF). https://itif.org/publications/2021/11/08/mapping-international-5g-standards-landscape-and-how-it-impacts-us-strategy
Christina Wilkie (15 June 2021) “America and Europe will create a joint tech council to craft new rules on trade”. CNBC. https://www.cnbc.com/2021/06/15/america-and-eu-will-join-forces-to-craft-new-rules-on-trade-and-tech.html?__source=iosappshare%7Ccom.apple.UIKit.activity.CopyToPasteboard
Hiroyuki Akiyama (11 August 2020) “Japan grows wary of China’s smart-city global standards”. Nikkei. https://asia.nikkei.com/Politics/International-relations/Japan-grows-wary-of-China-s-smart-city-global-standards
Jacob Feldgoise, Matt Sheehan (23 December 2021) “How U.S. businesses view China’s growing influence in tech standards”. Carnegie Endowment for International Peace. https://carnegieendowment.org/2021/12/23/how-u.s.-businesses-view-china-s-growing-influence-in-tech-standards-pub-86084
John Lee (28 April 2020) “Will China reinvent the internet?”. The China Story.
John Lee (24 June 2021) “The connection of everything: China and the Internet of Things”. Mercator Institute for China Studies (Merics) https://merics.org/en/report/connection-everything-china-and-internet-things
Matt Sheehan, Marjory Blumenthal, Michael Nelson (28 October 2021) “Three takeaways from China’s new standards strategy”. Carnegie Endowment. https://carnegieendowment.org/2021/10/28/three-takeaways-from-china-s-new-standards-strategy-pub-85678
Naomi Wilson (13 March 2020) “A China Model? Beijing’s promotion of alternative global norms and standards”. Information Technology Industry Council testimony to U.S.-China Economic and Security Review Commission. https://www.uscc.gov/sites/default/files/testimonies/March%2013%20Hearing_Panel%203_Naomi%20Wilson%20ITI.pdf
Patrick Lozada, Tim Rühlig, Helen Toner (6 December 2021) “Chinese involvement in international technical standards: A DigiChina Forum”.
Phuah Eng Chye (12 March 2022) “Global reset – Technology decoupling (Part 1: Challenges, checkpoints, chokepoints and IOT)”. http://economicsofinformationsociety.com/global-reset-technology-decoupling-part-1-challenges-checkpoints-chokepoints-and-iot/
Phuah Eng Chye (26 March 2022) “Global reset – Technology decoupling (Part 2: Decoupling race and scenarios)”. http://economicsofinformationsociety.com/global-reset-technology-decoupling-part-2-decoupling-race-and-scenarios/
Sadao Nagaoka (15 May 2019) “Licensing of standard essential patents: Hold-up, reverse hold-up, and ex-ante negotiation”. Voxeu. https://voxeu.org/article/licensing-standard-essential-patents
Simone McCarthy (30 September 2019) “Could China’s strict cyber controls gain international acceptance?”. SCMP. https://www.scmp.com/news/china/diplomacy/article/3030758/could-chinas-strict-cyber-controls-gain-international
Stephen Olson (27 April 2020) “China strengthens its global influence through standards setting”. Hinrich Foundation https://hinrichfoundation.com/trade-research/global-trade-research/thought-leadership/china-strengthens-its-global-influence-through-standards-setting/
Tim Rühlig (2 December 2021) “The shape of things to come: The race to control technical standardization”. European Union Chamber of Commerce in China, Swedish Institute of International Affairs and the Swedish National China Centre. https://static.europeanchamber.com.cn/upload/documents/documents/The_Shape_of_Things_to_Come_EN_final%5b966%5d.pdf
U.S. Patent & Trademark Office (USPTO), National Institute of Standards and Technology (NIST), U.S. Department of Justice, Antitrust Division (DOJ) (19 December 2019) “Policy statement on remedies for standards-essential patents subject to voluntary f/rand commitments”. https://www.justice.gov/atr/page/file/1228016/download
 In October 2021.
 The AII represents prominent IOT industry players in China – including German industry leaders SAP, Siemens and Schneider Electric. See John Lee.
 See Sadao Nagaoka for analysis of licensing of standard essential patents. See U.S. Patent & Trademark Office (USPTO), National Institute of Standards and Technology (NIST) and U.S. Department of Justice remedies for standards-essential patents that are subject to a RAND or FRAND licensing commitment.
 Matt Sheehan, Marjory Blumenthal and Michael Nelson cite the “practice involves forcing Chinese participants to vote for proposals put forth by the major Chinese technology company Huawei – a major violation of the let-the-best-technology-win norm of these institutions.”
 See Hiroyuki Akiyama on Japan’s concern over China’s smart-city standards.
 See Patrick Lozada, Tim Rühlig and Helen Toner.
 See Patrick Lozada, Tim Rühlig and Helen Toner.
 See Patrick Lozada, Tim Rühlig and Helen Toner.