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Standardization | Value of Standards

Globalization and Standardization

| Donald Purcell, Gary Kushnier, David Law

Globalization and Standardization

(Reprint)*

Prologue

In the spring of 2015, we decided to write an article on the relationship between globalization and standardization. Between us we have more than seven decades of experience in the world of globalization and standardization. Given the general understanding that standards control access to virtually every market in global commerce, and directly affect more than eighty percent of world trade, our basic conclusion is that the relationship between globalization and standardization is, or should be, a critical area of understanding for policy makers all over the world. To begin development of this article we sent invitations to substantially more than one hundred individuals and standards organizations who are expert in the field of globalization and standardization (academic, private sector, and public sectors) to submit their views and comments on this critical issue. To our surprise, only two standards organizations, the International Electrotechnical Commission (IEC) and DIN (the German national standards organization) accepted our invitation to submit comments. The conclusions from the IEC and DIN comments are set forth in this article. The complete IEC and DIN comments are set forth in their respective attachments to this article. These comments offer insights into the significance of the relationship between glo­balization and standardization. We encourage interested readers to review these comments.

Global Standardization

Introduction

In his book The Lexus and the Olive Tree (1999), Thomas Friedman states that understanding globalization is one of the most important issues that must be under­stood by policymakers and executives all over the world. As stated by Mr. Friedman: Globalization is “The One Big Thing” people should focus on. Globalization is not the only thing influencing events in the world today, but to the extent there is a North Star and a worldwide shaping force, it is this system.

The purpose of this paper is to share some insights into the relationship between globalization and standardization, and to pose some issues relating to this issue for future thought and study.

Globalization

“Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical we ll–being in societies around the world.” (www.globalization101.org/what-is-globalization/) “Globalization is not new, though. For thousands of years, people—and, later, corporations— have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914.” (www.globalization101.org/what-is-globalization/) “A defining feature of globalization, therefore, is an international industrial and financial business structure. Technology has been the other principal driver of globalization. Advances in information technology, in particular, have dramatically transformed given all sorts of individual economic actors— consumers, investors, businesses—valuable new tools for identifying and pursuing eco­nomic opportunities, including faster and more informed analyses of economic trends around the world, easy transfers of assets, and collaboration with far-flung partners.” (emphasis added) (www.globalization101 .org/what-is-globalization/)

Standardization

“Standards govern the design, operation, manufacture, and use of nearly everything that mankind produces. There are standards to protect the environment and human health and safety, and to mediate commercial trans­actions. Other standards ensure that different products are compatible when hooked to­gether. There are even standards of acceptable behavior within a society. Standards generally go unnoticed. They are mostly quiet, unseen forces, such as specifications, regulations, and protocols that ensure that things work properly, interactively, and responsibly. How standards come about is a mystery to most people should they even ponder the question.” (From the foreword to Global Standards – Building Blocks for the Future, Report to Congress, Office of Technology Assessment).

Global Perspectives on the Strategic Value of Standards

For many years, it has been generally accepted that standards control access to markets. Consider, for example, the following statements. “The technology standard has become the source of a core competitive edge for industrial development. To some extent, a technology standard is a kind of development order and rule. Whoever con­trols the power of standard making and has its technology as the leading standard, com­mands the initiative of the market. Technol­ogy standards have become an important means of global economic competition, and directly influence the competitiveness of an industry, region or country. Therefore, as for Chinese enterprises, possessing the successful standard is a strategic choice to seize the leadership of the future indus­trial development.” (Program, Conference on Information Technology, Beijing, China (May 2005); emphasis added) “Standards have become the new [international] bat­tleground.” (Phillip J. Bond, Undersecretary of Commerce for Technology Policy, New York Times article, “China Poses Trade Worry as It Gains in Technology,” January 13, 2004; emphasis added)

Global Technology Base

Several years ago, the Institute for Electrical and Electronics Engineers (IEEE) estimated that 500,000 standards existed in the world that forms the technology foundation of the global marketplace. IEEE estimated that it costs at least $1.5 billion (US) annually to maintain these standards. Imagine a world in which the global mar­ketplace will be significantly transformed by technological advancement in the next few years through the process of globalization, requiring the revision of thousands of exist­ing standards and potentially affecting tril­lions of dollars (US) in international trade.

The Strategic Value of Technology Standards and International Trade

For several years, it has been generally accepted that technology standards directly affect at least eighty percent of international trade. For example, Joe Bhatia, President of the American National Standards In­stitute, estimated in 2011 that standards directly affected at least eighty percent of thirteen trillion dollars in international trade. (http://publicaa.ansi.org/sites/apdl/ Documents/News%20and%20Publications/ Speeches/2-28-11%20-%20Bhatia%20-%20 APEC%20Standards%20Education.pdf)

IEC and DIN Comments on Globalization and Standardization

IEC and DIN recently prepared com­prehensive comments on Globalization and Standardization in response to our invita­tion. These comments are attached to this article. Set forth below are the conclusions from their respective comments.

IEC Conclusion

The global organization of trade and production is rapidly changing, especially in electrical and electronic goods. International manufacturing, trade, and investments are increasingly organized within global value chains where the different stages of the production process are located across differ­ent countries. (www.oecd.org/sti/ind/global- value-chains.htm). The emergence of these global value chains challenges traditional, integrated, vertical manufacturing. At the same time it provides new opportunities for small and medium companies in de­veloped and developing countries. The key condition is that they work with universally accepted, harmonized rules—international standards—to be able to contribute effi­ciently at different points of the chain, while extracting maximum value for themselves and their national economies. For electronic and electric devices the world has truly be­come one market. (emphasis added)

DIN Conclusion

If “Economic ‘globalization’ is a his­torical process, the result of human innova­tion and technological progress… and the movement of knowledge (technology) across international borders,” as the International Monetary Fund suggests, it is clear that inter­national technical standards are at the very core of this process (International Monetary Fund, 2000, “Globalization: Threat or Op­portunity?”). As standards play an important role in the diffusion of knowledge they not only support globalization, they also support the technological progress in developing and emerging markets. They can help businesses all around the world to reach a level playing field and get their share of economic success.

Issues to Think About

If standards control access to markets, and directly affect more than eighty percent of world trade, there are some important issues that should be considered by all parties in the world interested in global trade and economic development.

Global Competition and Control of the Global Standardization Process

Among the most important issues are global competition and who controls the global standardization process. This is a difficult issue to address because there is an absence of data on the effects of competition in the global standardization process. Moreover, since standards are typically developed by various groups or committees in the private and public sectors, it is difficult to discern who was sitting at the table during development of a particular standard, and whose interest did the participants represent. In short, global competition and control of the global standard­ization process operates in a rather cloudy en­vironment. Should the global standardization process become much more transparent so that interested parties can more fully understand the potential competitive effects of particular standards, and exactly who are the interested parties developing a specific global standard?

Standardization Skills and Experience

The development of complex technol­ogy standards requires a multi-disciplinary set of skills and experience. Today’s world is heavily dominated by engineering, sci­ence, and technology issues; however it is not sufficient to participate in a standardi­zation project and depend on engineering, scientific, and/or technology skills alone. Effective participation in standardization projects requires a multi-disciplinary view that includes business, commerce, trade, and public policy issues such as health, safety, the environment, energy, sustainability, ethics, and potential legal risks. In short, par­ticipation in global standardization projects requires considerable preparation.

If success in the world of global stand­ardization is of importance, development of multidisciplinary skills and a global per­spective are essential to achieving success.

The Strategic Value of Standards Education

Prior to 2000, very little attention was paid to the role of standards education in the academic, private, and public sectors except for the role of On-The-Job Training (OJT) programs. Since 2000 there has been a virtual explosion of academic programs on the strategic value of standards education. At the present time, Asian countries such as South Korea, China, and Japan are leading the world in the establishment of university standards education programs. South Korea is estimated to have such programs at more than forty universities; China is estimated to have such programs at more than twenty universities; and Japan has at least twelve universities with standards education pro­grams. China offers a master’s degree in the Business School at Jailing University in which bright, talented graduate students can receive an MBA in Standardization.

Fortunately, the United States has made significant strides in recent years to substantially improve the standards educa­tion programs at various universities. For example, the National Institute of Standards and Technology has funded the creation of more than sixteen new standards education programs. The United States continues to rely heavily on the continued support of the private and public sectors that offer OJT and education programs.

In 2008, The Center for Global Stand­ards Analysis published a report on The Strategic Value of Standards Education. In the Center’s report, Professor Shiro Kurihara of Hitotsubashi University (Tokyo, Japan), offered the following comments on the need for standards education programs:

“The national economy of every nation depends upon its ability to develop and maintain an effective international standards system best suited to its needs. Given that standards are the essential building blocks by which every nation develops and maintains a competitive national economy, the challenge is to develop international standards education programs that meet the specific needs of a particular country in their private, public, and academic sectors. For decades, private cor­porations and government departments and agencies have carried the burden of standards education by preparing their best and brightest employees to work in the complex field of in­ternational standardization (in the form of “on the job” training). There is no question that international standards education programs offered by private corporations and govern­ment departments must be continued and expanded wherever possible. But in today’s fast-paced and highly competitive world, are these efforts enough? A key question we must now address is whether nations need to make significant investments in creating academic opportunities for their best and brightest students to study the complex field of inter­national standardization. (emphasis added)

Conclusion

The essential issue in the relationship between globalization and standardization is survival. The most basic question is whether individuals, companies, and governments are prepared to participate in the complex, multi-disciplinary world of global stand­ardization. Consider the following proverb:

“Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed…every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle…when the sun comes up, you’d better be running.”

Competition in the field of global standardization can be brutal if an individ­ual, company or government agency is not prepared. Are you prepared?

Selected Internet Citations for Globalization and Standardization

“Globalization and Standardization” March/April 2016 issue of Standards Engineering, The Journal of SES – The Society for Standards Professionals reprinted with permission from The Society for Standards Professionals, ©2016.

PurcellDonald Purcell

Donald Purcell has more than three dec­ades of experience in global standardization as an advisor to domestic and international standards committees. He is the former Chairman of The Center for Global Stand­ards Analysis, and is Adjunct Faculty for the graduate course on Strategic Standardization in the School of Engineering, Catholic Uni­versity of America. He can be reached at donpurcell@strategicstandards.com

 

 

Kushnier_ImageGary Kushnier

Gary Kushnier has more than four decades of experience in the field of global standardization as the former Vice President for International Policy at the American Na­tional Standards Institute. He can be reached at gkushnier@gmail.com.