The Geopolitics of Technical Standardization
It is well known that the United States and China are competing for tech dominance, yet technical standard-setting is too often ignored as a central arena for this competition. In a new strategy, the United States has signaled that it needs to react to China’s state-centric standard-setting model. This document commits the US to strengthening its private-sector led system, but it also reserves backdoors for political intervention. While this aligns with Europe’s view – at least superficially – deeper differences remain and will complicate close cooperation.
In a new standardization strategy published on May 4, the United States identifies challenges to longstanding US leadership in technical standardization and to the core principles of international standard-setting. It pins the responsibility for these challenges on the People’s Republic of China (PRC) and accuses it of politicizing technical standards. This phenomenon could seriously undermine global innovation if it causes standards to lose widespread acceptance, thereby hindering them from creating global interoperability and global markets.
Tech standards have traditionally been a form of private self-regulation consisting of technical specifications for common use that facilitate international trade and economic growth. Thus, they derive their power not from their political backers in big states, but from their technical merit and wide market acceptance. Legally non-binding, these standards nevertheless carry significant power as they create product compatibility, interoperability, and basic safety.
Or that was the theory anyway. In reality, technical standards have always been a little more political than they might at first appear. As a central feature of technological advancement, standards are a source of national power, and they are an important factor in defining relative economic competitiveness. The United States gained power from its standardization strength in industry consortia that dominate some technical domains such as internet protocol standard-setting. European actors derived power from Europe’s traditional stronghold in formal organizations that develop international standards such as the International Standardization Organization (ISO) or the International Electrotechnical Committee (IEC). Standards also transport societal and political values such as privacy and certain conceptions of sustainability.
The value system that previously guided tech standardization included the principle of free exchange and fair competition. Yet values, though inherent to standards, have not been accepted as a criterion for the selection of standard proposals. That, however, is now changing. Those traditionally involved in standardization – mostly private-sector actors – may not like it, but states are getting more and more involved and so are their concerns. The United States suspects China of using standards to block the free flow of information and slow innovation elsewhere. Further, the White House has identified risks to democratic values and international security that stem from China’s standardization influence. It complains that “the PRC often acting through proxy companies, promotes prescriptive standards, irrespective of technical merit, designed solely to entrench market dominance.”
The Source of US Concern: China’s State-Centric Standardization
The PRC has always had a state-centric approach to standard-setting. Indeed, for decades, the PRC’s standardization system was fully controlled by the state. But, as long as China’s standardization system was fully controlled by the party-state, the PRC struggled to shape international standards. Party-state institutions lacked technical expertise and the proposals put forward by the PRC did not have the technical merit to achieve market acceptance.
This has changed. Over the course of the last decade, China reformed its domestic standardization and strengthened the engagement of its corporate sector. However, heavy party-state influence persists on the business and industry associations that develop standards. This emergent state-corporate complex has boosted government capacities. Today, the most impactful Chinese technical standards are being written in ministerial organizations and local governments.
The Chinese Communist Party (CCP) has keenly acknowledged the advantages that result from dominating international standardization. In October 2021, one of China’s most influential institutions, the Central Committee of the CCP, adopted a strategy to further internationalize China’s own standards. More concretely, the PRC incentivizes international standardization by means of favorable treatment, procurement, regulation, tax breaks, soft loans, export credits, and subsidies.
European firms that currently participate in Chinese standardization rightly identify state actors as playing the most important role in domestic standard-setting. Out of more than 56,000 registered standardization experts in China, fewer than 16,000 come from private companies. Internationally, private institutions largely represent national actors – such as the United States and the member states of the EU – in standard-developing organizations. However, state institutions represent the PRC there. This allows China to closely synchronize its political objectives with its contributions to technical standard-setting.
The United States and EU Face the Same Dilemma
Both the United States and EU fear that China could be jeopardizing the entire standardization system for the purpose of serving its own political interests. Consequently, they face a similar dilemma. They need to adapt to China’s state-backed standard-setting to avoid falling victim to China’s political agenda. But they also need to preserve the non-political approach led by the private sector that has played to their strengths for so long. The trouble is that neither the private sector in the United States nor in the EU sees pushing back at Chinese technical influence as a priority. This means that those sectors must be politically incentivized, or public actors must actively engage in standard-setting to defend public interests.
The US government’s new standardization strategy follows that of the European Commission from February 2022. It represents a renewed commitment to the rules-based, private sector-led approach that has made the EU and the United States strong in international standardization. Both strategies call for more targeted resources that promote the transmission of innovation into technical standards and aim to strengthen standardization education to enlarge the standard-setting workforce.
While both strategies express a preference for concerns being addressed within the existing private sector-led system, they reserve the right to intervene politically. The US strategy characterizes government institutions as well placed to develop standards that address risks to national security and resilience. It opens the door to political involvement with the ambiguous phrasing that the United States could “work with senior government leaders regarding the changing standards landscape.”
The US strategy vaguely speaks of improving the communication between private and public actors. Here, the EU is a step ahead. It has already created a multistakeholder High-level Forum to coordinate public and private priorities. Strikingly, this forum not only holds potential for the EU level but is also raising awareness in some of its member states for the strategic implications of standardization. Germany’s Federal Ministry for Economic Affairs and Climate Action, for example, has created a multistakeholder institution that mirrors the High-level Forum at the national level.
Potential for EU-US Cooperation
Although the transatlantic partners largely share the same assessment of the state of international standard-setting, that does not mean they will be able to work together. True, the administration of US President Joe Biden emphasizes its efforts to cooperate with like-minded partners in bilateral and multilateral fora such as the International Telecommunications Union (ITU) and especially the US-EU Trade and Technology Council (TTC). However, Europe should not be mistaken: this strategy is part of the administration’s broader economic security agenda.
The US Inflation Reduction Act (IRA) shows that transatlantic economic security interests do not always align. By engaging public actors in US standardization, the United States is boosting its industrial policy – indicating that it could restrict access of foreign actors, including Europeans. For example, national labs will more actively engage in standardization relevant for risk mitigation, security, and resilience. For its part, the European Commission has also adopted a targeted instrument that strengthens European actors in an attempt to limit foreign influence on standards that serve European legislation.
Standardization is often referred to as one of the most successful areas of cooperation in the TTC. In practice, however, this cooperation is far less impressive. The often-cited Strategic Standardization Information mechanism of the TTC, for example, is just an agreement to exchange emails between the European Commission and the US government when it is considered useful. While this might be helpful, it is a far cry from being a groundbreaking form of collaboration.
Technical standards require wide market acceptance. Excluding opponents only leads to the collapse of standard-setting. This may explain why the US strategy repeals a previous ban and expressly allows US entities to do standardization work with Chinese organizations that are under US sanctions, such as Huawei.
The bottom line is that European and US standardization systems remain markedly different. They even differ in their definition of what counts as an international standard. This illustrates that, even when both transatlantic partners commit to promoting international standards in trade and investment agreements, they are not aligned. Last year, when the European Commission announced it would house an “Excellence Hub” that pools resources and knowledge, Americans feared this could turn into a parallel system that ultimately undermines the existing standardization system. This shows that, despite the willingness of the EU and United States to cooperate, different standardization systems alongside divergent interests make both less like-minded than one might originally think. Deeper cooperation is desirable, but far from easy to achieve.
This DGAP Memo was published on May 8, 2023.