There’s a global standards race, and China is winning now. That cements Chinese tech dominance, but it’s not locked in. Strengthening IP rights by balancing profitability and transparency creates the incentive and ability for U.S. companies and actors to engage internationally and beat China.

Sujai Shivakumar, “Securing Global Standards for Innovation and Growth,” Center for Strategic and International Studies, 01-27-2022, https://www.csis.org/analysis/securing-global-standards-innovation-and-growth

At the same time, the development and adoption of one set of standards over another can confer advantages to particular firms and national economies. For some technologies, the selection of a given standard often determines whose product will succeed in global markets. As explained in a recent Wall Street Journal article, “whoever has control of industrial norms for telecommunications, electricity transmission and artificial intelligence is in a position to dominate.” Alternatively, doubts about the fairness and quality of standards—or a bifurcation in the framework within which standards are developed—can disrupt technological development and negatively impact economic growth and innovation-driven improvements in consumer welfare.

In this regard, statements and actions by the People’s Republic of China over the past decade are concerning. They signal a determined intention to strengthen China’s participation in global standardization organizations with an eye to gaining a competitive advantage for Chinese companies in a broad range of emerging technologies. Such plans may disadvantage China’s commercial and strategic competitors, but they will also damage networks of cooperation spanning national and global innovation ecosystems, creating a negative-sum game. A recent report from the Office of the U.S. Trade Representative (USTR) on unfair trade practices identifies China’s priorities to acquire foreign technology and intellectual property—focusing on next-generation artificial intelligence, information and communications technologies, electronics, advanced manufacturing, and industrial robotics.

Standards are indispensable to innovation, providing shared platforms for industry participants to work together to bring new technological solutions to the marketplace.

To sustain the broad benefits of innovation, the United States should take active steps to maintain a unified, global, and rules-based system for standards. First, the United States should consistently promote strong and coherent policies that uphold the integrity of intellectual property rights. Second, it should bolster its own public- and private-sector participation in international standards-setting bodies. Third, the United States should foster cooperation with its allies and strategic partners in governing the flow of knowledge and sensitive technologies. Fourth, it should coordinate standardization strategy more effectively between the private and public sectors, prepare the next generation of standards leaders, and incentivize private-sector investment in standardization in order to benefit the U.S. economy and trade.

The Importance of International Standards for Innovation

Innovation is a complex process requiring coordination across numerous actors. For scientists and engineers, being able to understand a common technical vocabulary and system of measurement facilitates teamwork in research across industry and academia. For firms, following established practices and shared standards helps them save on development and production costs. Furthermore, the presence of clear and technically coherent international standards increases the interoperability and market size of these firms’ products, creating potentially higher returns on new technologies. Standards enable entrepreneurial firms to introduce their products into markets dominated by legacy providers. Industries use standardized processes and specifications to ensure that firms can work together seamlessly across technological platforms and national borders. By allowing platform technologies developed by one firm to interface with products designed by other companies, standards mean products can be designed and produced at scale in different locations and marketed worldwide. And for consumers, standards help make products user-friendly, safe, and trustworthy. Moreover, as new service providers or manufacturers enter a defined market with innovative products, standards can stimulate beneficial price and quality competition.

Standards emerge from a variety of sources. In some cases, private companies propose standards to participants of international standards-development organizations (SDOs), hoping to gain significant economic benefits from developing, owning, and licensing the rights to a standard. Firms collaborate internationally with industry players to develop and ultimately adopt standards created through the coordinated technical efforts of national and international SDOs.

A universal rules-based framework for standards provides the coordination essential for firms to participate in the networks of cooperation and competition related to the research, development, production, and marketing of innovative products and services. They facilitate access to global markets, providing firms the advantages of scale economies. In turn, these advantages encourage firms to participate in and align their technology with international standards—creating a virtuous cycle. A case in point is the positive contributions of standards to the development of the wireless industry, as documented in a recent Information Technology and Innovation Foundation report.

Coherent international standards also encourage regulators and governments to improve trade policies and develop better regulations. Standards developed in a process consistent with the World Trade Organization’s Technical Barriers to Trade Agreement, for example, foster trade by assuring firms across the global manufacturing chain that product and testing requirements have global relevance and are accepted worldwide.

With U.S. companies enjoying a strong lead as technology innovators through much of the twentieth century and beyond, the United States has led the way in creating and setting international standards for a variety of modern technologies. Active participation in international SDOs allowed the United States to promote a private sector–led and consensus-driven process for creating and promulgating new standards that set an active pace for innovation—one that has benefited the United States and the rest of the world. U.S. policy regarding the role of government in the standards process is outlined in the Office of Management and Budget (OMB) Circular A-119.

The landscape of standardization is now challenged. China has invested heavily and incentivized engagement in standards-setting processes, seeking to exert more influence over the development and use of technology standards—raising important questions about its impact on the broader networks of innovation, competition, trade, and security.