Standard setting in a changing global landscape

Transcription

1 Standard setting in a changing global landscape Report to the European Round Table of Industrialists (ERT) prepared by FIPRA International October 2010

2 Foreword The ERT 2020 Vision identified standard setting as a major driver of European competitiveness. In discussions among the members of ERT, the Foreign Economic Relations Working Group (ERT-FER) was asked to provide a clearer picture of this policy area. Standardisation is basic to co-operative human activity, for anything from exchanging goods and services to using common measures. Standard setting involves considerable costs from many different players who work together to set out uniform specifications, criteria, methods, processes and practices. Standards may be mandatory or voluntary, the product of public or private undertakings, and can be set at anything from local to international level. Standards play a key role in advancing competitiveness and economic growth by allowing increased competition, at the same time that they lower the costs of output and sales. Harmonising international standards can ensure compatibility for business partners who are separated by great distances, removing technical barriers to trade. However, the obvious social and economic benefits for trade are not the whole story, because standards can also be used by governments or business defensively as a strategic tool that creates protectionist barriers to trade and competition. It can also be used offensively, influencing and if possible setting global standards as close as possible to existing own technological developments. ERT-FER invited FIPRA to provide an initial broader overview of status and trends in business and trade relevant standards worldwide, particularly standards that may matter for the competitiveness of European economies and firms, and, thereby, become a strategic issue. We were looking for more information about: - main areas where standards relevant for business are being set from IT to food to sustainability to accounting; - main actors/standard setters, e.g., private, public, and the origins, i.e. Europe, US, etc. - types/categories of standards: de jure, de facto, mandatory, voluntary, etc. - estimates of the number of standards existing as well as trends in the development/setting of new standards (number of additions, e.g. per year). In this form, the paper is drafted as report to ERT, not a report of ERT. We circulate it as a contribution to an important discussion. I would like to thank FIPRA, the two project leaders, Dirk Hudig and Peter Lochbihler and their team at FIPRA for the excellent work. Thanks go also to Ulrich Hofmann, UNCTAD, Roswitha Franz, ISO, Shyam Kumar Gujadhur and Meg Jones from ITC for input at various stages of that fact finding work. Peter Brabeck-Letmathe, Chairman of the ERT Working Group Foreign Economic Relations Chairman Nestlé SA 2

3 Summary A CHANGING STANDARDS LANDSCAPE The total number of standards and technical regulations from all over the world is estimated at around 700,000. As the bulk of international standards are usually transposed into regional or national standards, this number includes a certain amount of duplication. International standards, largely set by the International Standards Organisation, continue to gain importance in today s globalised world where worldwide compatibility matters. In 2009, the total catalogue of existing ISO standards comprised 18,000 documents, around 1,000 new standards were added and 1,250 new standardisation projects registered. Although ISO standards are voluntary, some have been adopted by regulatory bodies or become de facto market standards. Separately, the World Trade Organisation has set a code of good practice for the adoption and preparation of standards, and countries around the world have taken it on board but each is moving at its own speed and in its own direction. Regional standards can be set by institutions such as the European Union standards bodies, where they play an important role in carrying out EU legislation. The European Union has three acknowledged standardisation bodies that help in the regulation of the internal market and at the same time have an increasingly international profile. The number of CEN (European Committee for Standardisation) standards increased dramatically from 900 in 1992 to over 13,000 in 2009, around 60,000 technical experts are involved in the CEN network. At national level, the United States, Britain and Germany have traditionally been leaders in standard setting, and many of their national standards continue to be relevant also in an international context. The German standardisation Institute for instance published 2,300 new standards in The U.S. system is complex but flexible, with a decentralised, sector-based, industry-driven program that can quickly respond to market conditions. There and in other places, private standards have gained considerable importance in recent decades, especially in the areas of information and communications technologies, as well as in agri-food and in social and environmental fields. The success of private standards is often due to their flexibility and ability to quickly react to constantly changing market demands. The rising market economies of China, India and Russia are paying attention to such trends and treat standards as a crucial element in their industrial policy strategies. China is reviewing its old laws as it moves away from a centralised approach in an attempt to become a shaper of standards, rather than a mere follower. India is working to make its standards more international and bring consumers into the picture. Russia has moved away from mandatory government standards and is also trying to internationalise its approach. And also in the European Union, a policy debate on the future of European standardisation and its role for competitiveness, growth and innovation is gaining momentum. BUSINESS IMPLICATIONS Producers and exporters incur considerable costs to agree upon standards needed to meet consumer demand for minimum levels of performance, quality and durability. When there are no international standards, they can face costs imposed by foreign standards that may require them to pay for technical experts and adjust their production processes. Such local standards can pose a barrier for many businesses, in particular smaller enterprises or businesses in developing countries. Even worse, standards may deliberately be used to curtail trade instead of promoting it. Used properly, standards can help achieve economies of scale by permitting compatibility and interoperability. They must be applied in a timely fashion: Too early they may hamper innovation; too late, i.e., absence of standards at the right time, they may slow economic progress. Companies will find it requires considerable financial and human resources to participate in standard setting without the process delivering immediate advantage for the bottom line. Nonetheless, there are fundamental long-term advantages of actively participating. First, participation can help a company prepare for change by aiding its understanding of the future direction of standards. Second, it can allow a company to help shape the direction of standards, giving it an early mover advantage. In any case, international companies are well advised to incorporate the strategic relevance of standards in their business strategy and processes. 3

4 Introduction I. Standards: concept & overview of standard setting bodies 1. Definition, scope and role of standard setting 1.1 Defining standards 1.2 Scope and purpose of standard setting 2. International standard bodies: ISO, IEC, ITU 2.1 ISO (International Organisation for Standardisation) 2.2 IEC (International Electrotechnical Commission) 2.3 ITU (International Telecommunications Union) 3. European standard bodies 3.1 CEN (European Committee for Standardisation) 3.2 CENELEC (European Committee for Electrotechnical Standardisation) 3.3 ETSI (European Telecommunications Standards Institute) 4. National standard bodies: DIN, ANSI or BSI 4.1 ANSI 4.2 BSI 4.3 DIN 5. Standard setting by private consortia 5.1 Private standards: ICT sector 5.2 Private standards: retail and agri-food industry 5.3 Private standards: social and environmental aspects II. Standardisation: global trade, principles & policy trends 1. Global principles: TBT agreements / WTO principles 2. Trends in standardisation policies 2.1 The European model 2.2 The USA model 2.3 The Chinese model 2.4 India 2.5 Russia III. Current trends in standard setting and implications for business 1. Private vs. public & participation of third parties 2. Global vs. regional/ National 3. Traditional vs. new fields 4. Implications for business Conclusion 4

5 Introduction The development of uniform engineering, criteria, methods, processes or practices is inherent to human activity. Standardising has its roots in basic human interest to agree on rules and common measurement in any kind of transaction, such as exchanging land and goods. Remarkable examples of prehistoric use of standards in daily activities were found in the ancient regions of Mesopotamia, Sumer, Egypt and Babylon. Throughout history, in response to society needs different standards were developed in various parts of the world (from basic measurement systems for length, volume, money to more complex systems). 1 Standardisation was developed as an engineering activity around the 18 th century. In the 19 th century standardisation was seen by industrialized countries as a powerful tool to increase productivity through interchangeability and variety reduction. At the beginning of the 20 th century several standardisation bodies were created. During the World Wars standardisation also became a useful management tool for reducing costs. Some three decades later standardisation activities increased in various countries as an answer to consumers interest and market demands. Economy of work, capitalising on existing resources, overcoming barriers and developing fair practices in basic commercial transactions led to the progressive development of standards. Today the word standardisation covers a lot of ground and all possible fields of human life. Standardisation activities increased in various countries, with the special support and involvement of government and industry. Standardisation involves considerable costs, but all in all benefits consumers, businesses, governments and society at large. In recent years the number of technical regulations and standards adopted by countries has grown significantly. The increase of political and regulatory focus on standardisation can partially be attributed to higher standards of living worldwide, which have boosted consumers' demand for safe and high-quality products, and to growing environmental challenges. The increase in standardisation activities is also a response to the accelerating pace of innovation and technology. In addition, the changing face of international trade has increased the demand for globally accepted technical standards and conformance tests by manufacturers and processors. Last but not least, standards have a strategic relevance for each and every company with implications for product and business development, manufacturing and market access. This report intends to provide a brief overview of the concept of standards and standard setting bodies and the key challenges they face in a changing global landscape. Part I of this report aims to answer the following questions: What are standards? Who sets them? What are the procedures? Who are the worldwide actors in standard setting? Part II addresses the questions: What are the global principles and rules applicable to standard setting? What are the dynamics and trends in different standardisation policies? Part III analyses the concepts and trends observed and extrapolates conclusions regarding the new challenges for standard setting. In this part the following questions are subject to our analysis: What are the trends in standard setting? Is standard setting addressing new fields? What are the implications for business? The conclusion deals with the strategic relevance of standards for companies and the relation with innovation and competitiveness. 1 Source: 1

6 I Standards: concept & overview of standard setting bodies Part I Summary While standardisation benefits consumers, businesses, governments and society at large, potential protectionist effects need to be avoided. Standards can be categorised according to their type, origin, geographical dimension or sector. Standards are set at different levels: International: In a globalised world, international standards primarily set by ISO continue to gain importance. Regional: EU standards bodies are an important source of international standards and play a crucial role in implementing EU legislation, especially since the New Approach directive in the 1980s. National: Each country has a national standards body; USA, UK and Germany have historically been driving forces of standard setting. Private: In the past decades private standards gained considerable relevance; especially in ICT, retail/agri-food and social/environmental fields There are a multitude of public and private actors involved in standard setting. Their motivations and levels of engagement differ, but standard setting is generally regarded a tool of industrial policy. 1. Definition, scope and role of standard setting 1.1 Defining standards A standard is a document that establishes uniform engineering or technical specifications, criteria, methods, processes or practices. Standards can be categorised according to their type, origin, geographical dimension or sector. Some standards are mandatory while others are voluntary. Some are de facto standards enjoying informal but dominant usage (often determined by tradition and market leadership). Others have a de jure status, i.e. they are part of formal legal requirements. Standard setting can be a product of either public or private undertakings; standards can be set by a government or regulatory body or by a corporation, union, trade association, etc. Standards can be set at national, regional or international level. There are structures and cooperation agreements in place to ensure the coordination of the work undertaken by the different geographical levels. 2

7 Chart 1: Categorisation of standards Usually, each country has a recognised National Standards Body (NSB). The NSB can be private, public or a mix of the two. Examples include the American National Standards Institute (ANSI), the British Standards Institution (BSI) and the Deutsches Institut für Normung (DIN). 2 At regional level there are several standard bodies such as the European Committee for Standardisation (CEN), the European Committee for Electrotechnical Standardisation (CENELEC), the European Telecommunications Standards Institute (ETSI) 3, the Pacific Area Standards Congress (PASC), the Pan American Standards Commission (COPANT), the African Organisation for Standardisation (ARSO) or the Arabic industrial development and mining organisation (AIDMO). At international level standards organisations work in the development of standards that are available for consideration and use worldwide. The International Electrotechnical Commission (IEC), the International Telecommunication Union (ITU) and the International Standard Organisation (ISO) are the most prominent examples of international standard bodies. ISO is the world's largest developer and publisher of international standards. ISO defines a standard as "a document, established by consensus and approved by a recognized body, that provides, for common and repeated use, rules, guidelines, or characteristics for activities or their results, aimed at the achievement of the optimum degree of order in a given context." 4 Standardisation is defined by ISO as the activity of establishing, with regard to actual or potential problems, provisions for common and repeated use, aimed at the achievement of the optimum degree of order in a given context. It is important to note that although sometimes used interchangeably the terms standard and technical regulation, as defined by ISO, differ: while conformity with standards can be either voluntary or mandatory, technical regulations are by nature mandatory. 5 The concept of standardisation is not to be confused with the concepts of patent or certification. According to the World Intellectual Property Organisation (WIPO) a patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem. In order to be patentable, the invention must fulfil certain conditions ( ) Patents provide incentives to 2 See Chapter I 4: National standard setting bodies: DIN, ANSI or BSI 3 See Chapter I 3: European standard setting bodies & EU policy-making 4 Source ISO Glossary:

8 individuals by offering them recognition for their creativity and material reward for their marketable inventions. 6 The potential for conflict between patents and standards arises when the implementation of a standard implies the use of technology protected by one or more patents. The increase in patenting and the number of standards which incorporate protected technologies require that standard-setting takes place under strict conditions ensuring fair competition. Hence standard-setting bodies must design clear rules that ensure the standard-setting process is done in a non-discriminatory, open and transparent way and hence reduces the risk of competition problems, such as patent ambushes. 7 It is also important to distinguish the concept of standardisation from the concept of certification. According to ISO s definition, certification is a third-party attestation related to products, processes, systems or persons. 8 It is distinct from the other systems of proof of conformity such as supplier declarations, laboratory test reports or inspection body reports. Certification is based on the results of tests, inspections and audits and gives confidence to the consumer on account of the systematic intervention of a competent third body. Product certification has become increasingly popular in our society: it intends to determine if a product meets minimum standards (representing a quality assurance). Certification may require compliance with officially set standards. 1.2 Scope and purpose of standard setting A standard is a document that provides requirement rules or guidelines for a process, product or service hence promoting common understanding. Standards aim at achieving the optimum degree of order in a given context. Standards have, since ancient times, been an integral part of the market system and have played a key role in advancing the wealth of nations. Standards aim at increasing competition and allow lower output and sales cost, benefiting economies as a whole. Standards function by reducing variety, ensuring inter-operability, maintaining quality, and providing information. 9 In addition, standards can be used to ensure desirable characteristics of products and services such as quality, environmental friendliness, safety, reliability, efficiency and interchangeability and economic cost. 10 Standards reflect the outcome of research and development they embody a level of technical expertise and technology, facilitating the uptake of innovation in the marketplace. Standards can also encourage competition and be used as set definitions representing a basis to mediate contractual relations between economic partners. 11 The role of standards is thus important to all of business: for manufacturers they rationalise the process and capitalises on existing resources reducing the cost of manufacture; for customers, standards represent a quality assurance; for traders, standards provide a workable basis for acceptance or rejection of goods or consequential disputes; for technologists, standards provide starting points for research and development for further improvement of goods and services. 12 When dealing with business partners in the same country, the standards followed are generally the same. This, however, is not always true when business is done across borders and continents: standards and practices followed may differ from one country to another. Harmonised international standards can ensure compatibility for business partners who are geographically separated, removing technical barriers to trade. Standardisation has obvious social and economic benefits. However, behind the motivation to set standards there can be strategic political and economic interests. Private consortia, national and regional standardisation bodies as well as governments often have agendas of their own. In fact, those who set standards often enjoy an advantage over market competitors. Therefore, the World Trade Organisation has felt the need to establish guiding 6 Source: 7 Note: A company carrying out a patent ambush does not disclose the existence of patents and patent applications before the standard is set but later acknowledges their relevance and claims higher royalties. 8 Source: 9 Source: 10 Source: 11 Source: 12 Source: 4

9 principles International standardisation bodies: ISO, IEC and ITU 2.1 ISO (International Organisation for Standardisation) The International Organisation for Standardisation - ISO - was founded in ISO is a worldwide network of 163 national standards institutes 14 with a central secretariat in Geneva, Switzerland, that coordinates the system. 15 ISO has a very broad scope of activity covering all fields of standardisation. ISO has developed over International Standards on a variety of subjects and some 1,100 new ISO standards are published every year. 16 The mission of ISO is to encourage the harmonisation of standards worldwide to facilitate exchange of goods and services and to achieve a mutual entente in the intellectual, scientific, technical and economic fields. ISO standards are voluntary. Although ISO itself does not regulate some of its standards have effectively become adopted by different regulatory bodies and become market standards. ISO standards are developed in response to needs recognized by market players. The first step in the process is to check whether specific standards add value. A broad consultation is undertaken to verify support for the proposed development of an ISO standard and, that market players and others will commit resources to its development. If it passes muster, the proposal is assigned to an ISO technical body. ISO standards are developed through a hierarchy of technical committees and subcommittees (and associated working groups). In fact, ISO has more than 2,800 technical working bodies (technical committees, subcommittees, working groups and ad hoc groups). The participating members of technical committees and subcommittees typically come from national mirror committees and bring together representatives of all interested parties at national level, including industry, government, consumers, academia and others as appropriate. Countries participate to different extends in the work of ISO: the top three countries in terms of participation in technical committees are France, UK and Germany, China and Russia are within the top ten, even ahead of the USA and India. ISO principles in standard development are: consensus as it takes into account all interested parties; industrywide solution provision, under which the outcome must be satisfactory to industries and customers worldwide; voluntary because international standardisation is market driven and therefore based on voluntary involvement of all market players IEC (International Electrotechnical Commission) The International Electrotechnical Commission IEC was founded in 1906 in the United Kingdom. IEC is responsible for international standardisation and harmonisation in the fields of electricity, electronics and related technologies. IEC has more than 80 members (59 full members and 22 associated members) 18. Its members are national committees and represent all electrotechnical interests in the countries concerned. National committees obtain a large measure of support from industry and are normally officially sanctioned by their governments. IEC s mission is to be recognised as the provider of globally accepted conformity assessment-related programmes that facilitate market access in the fields of electro-technical products, electronics, electricity and related technologies Chapter II - Global principles: TBT agreements / WTO principles 14 A list of ISO Members can de found at the following link: 15 Source: 16 Source: 17 Source: 18 Source: Full Members list can be found at: 19 Source: 5

10 Technical work is undertaken by 174 technical committees and subcommittees, 404 working groups and 213 project teams. At the end of 2009, IEC had produced 5,520 International Standards, 207 Technical Specifications and 351 Technical Reports. 20 IEC produces standards and conformity assessments: the IEC's multilateral conformity assessment systems, based on its international standards, aim to be truly global in concept and practice, reducing trade barriers caused by different certification criteria in various countries. 21 Both ISO and the IEC have central offices in Geneva, Switzerland, and operate according to similar rules. The transposition of ISO and/or IEC standards into national rules is voluntary. 2.3 ITU (International Telecommunications Union) The International Telecommunications Union ITU was created in It has been a specialised agency of the United Nations since ITU international recommendations are developed in the fields of both telecommunications and radio communications. ITU is an intergovernmental public-private partnership organisation and has a membership of 191 countries and more than 700 public and private sector companies as well as international and regional telecommunication entities, which undertake most of the work. Similar to the efforts of IEC, ITU also seeks to harmonise international standards. The ITU mission is to ensure the efficient and timely production of standards covering all fields of telecommunications on a worldwide basis, as well as defining tariff and accounting principles for international telecommunication services European standards bodies: CEN, CENELEC and ETSI 3.1 CEN (European Committee for Standardisation) The European Committee for Standardisation CEN was founded in CEN is the only recognized European organisation, according to Directive 98/34/EC, for the planning, drafting and adoption of European Standards in all areas of economic activity with the exception of electrotechnology (CENELEC) and telecommunication (ETSI). CEN covers a broad range of activities including air and space, chemistry, construction, consumer products, energy and utilities, environment, food, health and safety, healthcare, heating, ventilation and air conditioning, information and communications technology, machinery safety materials, measurement, nanotechnologies, pressure equipment, security and defence, services, transport and packaging. Its membership comprises the national standards bodies of 30 European countries. Additionally, CEN has 7 Associate Members representing pan-european professional and trade federations as well as consumer and environmental interests. Seventeen National Standards Bodies from EU neighbouring countries have an affiliate status. CEN also has a Partner Standardisation Body (PSB) programme which links NSBs from outside Europe to CEN. The European Commission and the European Free Trade Association Secretariat act as CEN s Counsellors for policy issues. More than 60,000 technical experts, along with business federations, consumer and other societal interest organisations, are involved in the CEN network. A Technical Board is in charge of the coordination, planning and programming of the work, which is conducted within the work bodies (technical committees, subcommittees, working groups), the secretariats of which are decentralized in the different EU member states. 3.2 CENELEC (European Committee for Electrotechnical Standardisation) 20 Source: Figures on IEC s deliverables available at: 21 Source: 22 Source: 23 Source: 6

11 The European Committee for Electrotechnical Standardisation CENELEC was created in CENELEC is a non-profit organisation. It is composed of the National Electrotechnical Committees of 31 European countries. In addition, 11 National Committees from neighbouring countries participate in CENELEC work with an affiliate status. CENELEC members have been working together since the 1950s, creating standards requested by the market and harmonised standards in support of European legislation. CENELEC s mission is to prepare voluntary electrotechnical standards to help develop the European internal market for electrical and electronic goods and services by removing barriers to trade, creating new markets, and cutting compliance costs. The priority areas for CENELEC standardisation work are those, which determine the safety and the free movement of goods and services that are directly or indirectly related to EU Directives. 3.3 ETSI (European Telecommunications Standards Institute) The European Telecommunication Standards Institute ETSI was created in ETSI develops European standards in the telecommunications field. ETSI is a not-for-profit organisation. ETSI has 740 members from over 60 countries/provinces (including administrations, manufacturers, network operators, service providers, research institutes etc). Unlike CEN and CENELEC its membership is not limited to National Standard Bodies. ETSI unites manufacturers, network operators, national administrations, service providers, research bodies, consumer groups and consultancies. This cooperation has resulted in a steady stream of highly successful ICT standards (some examples include: mobile, fixed, and radio communications and a range of other standards that cross these boundaries, including security, satellite, broadcast, human factors, testing & protocols, intelligent transport, power-line telecoms, ehealth, smart cards, emergency communications, and the cloud, as well as aeronautical applications.) 4. National Standard Bodies (e.g. ANSI, BSI, DIN) 4.1 ANSI The American National Standards Institute (ANSI) was established in ANSI is a private, non-profit organisation that administers and coordinates the United States private sector voluntary standardisation system. It comprises of government agencies, organisations, companies, academic and international bodies, and individuals. It represents the interests of more than 125,000 companies and 3.5 million professionals. ANSI s primary goal is the enhancement of global competitiveness of U.S. business and the American quality of life. ANSI approves standards as American National Standards (ANS) and says it safeguards the integrity and value of the ANS designation by requiring openness, balance, due process, consensus, and transparency to all directly and materially affected interests in the private and public sectors. ANSI facilitates the development of ANS by accrediting the procedures of Standard Development Organisations (SDO). As of 2009, ANSI has in total 222 SDOs and 9,380 approved ANS. ANSI is also the U.S. national member of ISO, IEC, and other non-treaty, regional and international standards and conformity assessment organisations. It is a member of the Pacific Area Standards Congress (PASC) and the Pan American Standards Commission (COPANT). ANSI is also a member of the Pacific Accreditation Cooperation (PAC) and via the ANSI-ASQ National Accreditation Board (ANAB), and a member of the Inter American Accreditation Cooperation (IAAC). 4.2 BSI 7

12 The British Standards Institute BSI was created in BSI represents British economic and social interests to European and international standards organisations. 6,000 people from 1,800 organisations are involved in helping BSI to set about 1,700 standards each year. More than 14,000 organisations engage with BSI every year, which is nearly 9 percent of UK businesses. In fact, BSI has 21,000 Members in 7 categories: 1) partnerships and consultancy services; 2) Industrial and commercial organisations; 3) local authorities, police and fire services; 4) educational, housing associations and healthcare establishments; 5) associations, institutions and representative bodies; 6) Retailers; 7) Special industry (food, beverage, pharmaceutical and biotechnology). BSI British Standards has 27,000 standards, which BSI says provides an economic benefit of; 2.5bn per year DIN Deutsches Institut für Normung e.v. 26 (DIN, or The German Institute for Standardisation) is the German national organisation for standardisation and Germany's ISO member body. Established in 1917, DIN is a private, non-profit organisation. DIN s website statement mirrors its approach to standardisation: Because standardisation is a form of industry self-regulation, DIN sees itself as a business partner in all sectors of the economy. DIN has 1,796 Members, which come from industry, associations, public authorities, commerce, trade and research organisations. As of 2009, DIN had 71 standards committees, 3,244 subcommittees, four commissions and 28,628 external experts. According to the DIN s website, its standards provide an annual benefit to Germany of 16 billion Euros. DIN Standards, covering nearly every field of technology. For that reason DIN has in recent years signed agreements with other countries, including the United States, the Russian Federation, China and India. Ninety percent of the standards work carried out by DIN are international. As of 2009, DIN had published 32,189 standards in total of which 2,337 were newly produced or revised in DIN s international consultation services assist other countries, in particular developing countries, in establishing or developing their national standardisation systems. The German Standardisation Strategy 27 consists of five goals and courses of action to meet those goals: 1) standardisation secures Germany's position as a leading industrial nation; 2) standardisation as a strategic instrument supports a successful society and economy; 3) standardisation is an instrument of deregulation; 4) standardisation and standards bodies promote technological convergence ; 5) Standards bodies provide efficient procedures and tools. 5. Standard setting by private consortia 5.1 Private standards: ICT sector Private standard setting is particularly pronounced for information and communication technologies. The first private consortia were closed groups formed by ICT companies. Their early initiatives were criticised for not including interested parties and non-disclosure of specifications. Nevertheless, over time many of these groups became more open and achieved broader recognition. Certain standards have become de facto international standards, due to their wide acceptance in the market. In the mid-1990s, the ISO Council established an ad hoc study group to evaluate the potential consequences of a de facto international standardisation system. ISO concluded that these groups were an inevitable consequence of the strategic interests of ICT companies and that the formal system should find ways to interact with them. As a 24 Source: 25 Source: 26 Source: 27 Source: 8

13 result of this study, ISO introduced a special procedure to process their work through the formal standardisation system. This initiative, initially modest, increased significance in recent years as a result of policies by some governments to favour open, international voluntary standards. In consequence standards such as the Linux operating system and the OASIS open document format (ODF) were transformed into formal ISO/IEC international standards. Likewise, previously proprietary standards, such as Adobe s portable document format (PDF) became formal international standards in ISO. 5.2 Private standards: retail and agri-food industry The establishment of private standards in the agri-food and retail sector is recent, and has been managed by leading companies. While such standards may benefit from a high level of expert industry input, they do not necessarily adhere to the same principles as formal international standards, nor do they always comply with WTO principles. This issue has been addressed by the WTO and its Committee on Sanitary and Phytosanitary Measures 28, which deals with government regulations in the areas of food safety, animal and plant health. Discussions have focused on three areas namely: 1) Market access: even if the private standards can help delivering high-quality products they can be restrictive and act as additional barriers to market access; 2) Development: complying with private standards and getting certifications can be costly, especially for small and medium producers from developing countries; 3) Global trade and WTO actions. In fact, certain agri-food private standards exceed requirements established by laws and regulations. In this area, the acknowledged international standards are typically international standards developed by the intergovernmental Codex Alimentarius Commission (CAC) 29. In this sector, ISO and the formal standardisation system have made progress in recent years to facilitate the evaluation and harmonisation of basic food safety management systems by introducing the ISO series on food safety management systems. 5.3 Private standards: social and environmental aspects A new trend in standardisation relates to social and environmental fields and associated claims, certification and labelling programmes. These standards address new concerns such as carbon footprint, eco-labelling, sustainable management of natural resources, fair trade practices, organisational accountability and social responsibility. Private bodies originated these standards: from retailer consortia to social and environmental non-governmental organisations. The standards development practices of these organisations vary widely. Efforts have been made to improve the consistency of principles and criteria supporting these activities, as well as any associated conformity assessment programmes. In a number of cases, private standards initiatives in the social and environmental field could be reconciled or merged to avoid confusion, fragmentation of the marketplace and potential dilution of their intended effects. The formal international standardisation system is a platform that can potentially complement, or harmonise the plurality of private standards. The formal standardisation system has helped consolidate a number of subjects by providing some important international standards on key social and environmental subjects 30. II Standardisation: global trade, principles & policy trends 28 More information on voluntary standards and agrifood standards and WTO: 29 The Codex Alimentarius Commission was created in 1963 by FAO and WHO to develop food standards, guidelines and related texts such as codes of practice under the Joint FAO/WHO Food Standards Programme 30 ISO provides international standards addressing such subjects as environmental management (ISO 14001/4); environmental labelling (ISO 14020/21/24/25), lifecycle assessment (ISO 14040/44); greenhouse gas measurement, verification and validation (ISO 14064/65); and drinking water and wastewater services (ISO 24510/11/12). 9

14 Part II Summary Annex 3 of the TBT Agreement is the Code of Good Practice for the Preparation, Adoption and Application of Standards : it recognizes the importance of international standards to improving efficiency of production and facilitating international trade. Trends in Standardisation policies: European Union: The 3 acknowledged European Standards Organisations, play a crucial role in the development and consolidation of the internal market and support other EU policies, acting as an efficient co-regulation tool. USA: The U.S. system is complex but flexible. The standards system is decentralized, sector-based and marketdriven and can easily respond to changing market demands. The United States is committed to a sector-based approach to voluntary standardisation activities. China: Increasingly decentralized process of standard setting; law under review. China has the ambition to pass from a made in China to an innovated in China logic and from a standards-follower to a standards-co-shaper and ultimately to an internationally recognized standards setter. India: Key policy goal includes increasing internationalisation and building a climate for quality culture and consciousness and greater participation of consumers in standards formulation. Russia: Standardisation policy is changing: from mandatory to voluntary standards, from state financed to stakeholder financed; from national to international standards through harmonization. The ambition is to become a significant international player. 1. Global principles applicable to standard setting: TBT agreements / WTO principles The initial provisions of the General Agreement to Trade and Tariffs (GATT 1947) contained a general reference to standards and technical regulations. Technical barriers were concluded to be the largest category of non-tariff measures faced by exporters and after years of negotiations, at the end of the Tokyo Round in 1979, 32 GATT Contracting Parties signed the Agreement on Technical Barriers to Trade (TBT). A revised version was agreed upon during the Uruguay Round and is an integral part of the WTO Agreement. The TBT Agreement 31 is one of the 29 individual legal texts of the WTO Agreement, which obliges members to ensure that technical regulations, voluntary standards and conformity assessment procedures do not create unnecessary impediments to trade. In addition, Annex 3 of the TBT Agreement is the Code of Good Practice for the Preparation, Adoption and Application of Standards. 32 In accepting it WTO Members agree to ensure that their standardising bodies accept and comply with this code of good practice. The TBT Agreement recognizes the importance of international standards and conformity assessment systems to improving efficiency of production and facilitating international trade. The code says that where international standards exist or their completion is imminent standardising bodies should use them. It also aims to harmonise standards as widely as possible, encouraging all standardising bodies to play as full a part as resources allow in the preparation of international standards by the relevant international bodies. 33 The WTO also pressures member governments to base their domestic standard making on international standards and on international standard-setting techniques. WTO is meant to develop uniform international standards and to promote harmonisation of technical standards. Under WTO standard-setting bodies such as the ISO and Codex are given the task of setting presumptively permissible global standards. 2. Trends in standardisation policies 31 Source: 32 Source: 33 Source: 10

15 2.1 The European model For the European Union standardisation serves various purposes: it is a tool to enhance market-based competition as well as to achieve objectives such as the interoperability of complementary products and services. In addition it has a public interest dimension as it can support public policies, e.g. by providing agreed test methods and requirements for health, safety, organisational and environmental performance. 34 In fact, European standards, developed by one of the three acknowledged European Standards Organisations, play a crucial role in the development and consolidation of the European Single Market and support other EU policies, providing an efficient co-regulation tool. 35 The European Union standardisation system took a big step in 1985 with the so-called New Approach, defined in a 1985 resolution by its Council. The New Approach defined responsibilities of the EC legislator and the European standards bodies (CEN, CENELEC and ETSI) in the legal framework. 36 European standardisation is a voluntary activity of building consensus to create technical specifications carried out by, and for, all interested parties. Under this procedure, the European Commission requests the European Standards bodies to develop and adopt European standards in support of European policies and legislation. In order to give fresh impetus to the technical harmonisation system, in 2003 the Commission recommended better ways to implement the New Approach Directives with the goal of reinforcing the free movement of goods in the context of an enlarged European Union. In recent years, the Commission has launched several studies and evaluations of its policies, especially regarding the openness of the standards-making process and the Community financing. In 2009, following the Commission communication "Towards an increased contribution from standardisation to innovation in Europe" (2008) and the conclusions of the Competitiveness Council, an independent group, the Expert Panel for the Review of the European Standardisation System (EXPRESS) debated and delivered a report on "Standardisation for a competitive and innovative Europe: a vision for The report contains a vision of European standardisation and 12 strategic goals, with specific recommendations. Strategic goals include: strengthening the influence of European standardisation internationally in order to open and serve markets and to increase European competitiveness and support trade policy; to respond effectively and efficiently to the global challenges of the next decade; to improve the link between standardisation and the research communities and innovators; to promote and use standards in order to further support for the internal and external markets; to use standardisation to address the issues of climate change and other future global energy, environmental and societal challenges; to implement improved mechanisms for cooperation within the ESS and in particular between ESOs and fora/consortia; to ensure the easy access of all interested stakeholders to national, European and international standardisation work and their effective participation. In parallel, the European standards organisations have embarked on a convergence programme called FLES (Future Landscape of European Standardisation). FLES has already led to a merger of the Central Secretariats of CEN and CENELEC and more cooperation between both organisations. In addition, the issue of standardisation won attention of the European Parliament in the form of a report by Edvard Kožušník on the 'Future of EU standardisation', which was debated and in the European Parliament Committee on Industry, Research and Energy at the end of September All relevant documents on European Standardisation Policy can be found at the following link: 35 Source: 36 The general framework for European standardisation policy is provided by Directive 98/34EC (laying down a procedure for the provision in the field of technical standards and regulations); Decision No 1673/2006/EC (on how the financing of European standardisation establishes the legal basis for the financial support provided by the European Commission to the European standardisation system); the general guidelines for the co-operation between CEN, CENELEC and ETSI and the European Commission and the European Free Trade Association (signed in 2003). 37 ttp:// 11

16 The report says the European standardisation system needs to change, which will have consequences on the overall legal framework of European standardisation. The key policy objective is to create a flexible and dynamic EU legislative standardisation framework to optimize the added value of standardisation for competitiveness, innovation and growth. Commission Work Programme 2010 covers standardisation, strategic objectives include: to increase the contribution of European standards to the competitiveness of EU enterprises, especially small and medium enterprises, and performance of the European Standardisation Organisations. As part of the EU strategy for growth and jobs, the European Commission and the Council of the European Union have identified standardisation as one of the key instruments to be improved in order to support and enable innovation. The Commission proposal for a new "Europe 2020" said that interoperable standards are important for business innovation. The consultation on the "White Paper" for a new ICT Standardisation Policy (Com 2009(324) - Modernising ICT Standardisation in the EU - The Way Forward) has demonstrated the urgency of a reform of the standardisation system in Europe. 2.2 The USA model The U.S. standards development system is very different from that of the European Union. American standards are developed by more than 450 standards-developing organisations, with the 20 largest producing about 80 percent of the standards, and at least 150 consortia outside the formal standards development process. 38 The U.S. system is complex but flexible. The decentralized, sector-based and market-driven standards system can respond easily to changing market demands. The United States is committed to a sector-based approach to voluntary standardisation activities, both domestically and globally. Different viewpoints and objectives among major private sector standards-development organisations in the U.S. have sometimes made it difficult to reach a unified position. Recent trends indicate that U.S. agencies and regulatory bodies increasingly rely upon voluntary consensus standards. Add the more than 50,000 standards estimated to come from the private sector in America and the nation s total inventory of standards quickly approaches 100, Therefore, the U.S. system is often described as pluralistic, sometimes fragmented, ad hoc and marketdriven. There is also a dichotomy between standards developers representing professional societies and those representing trade associations. The U.S. federal government is the largest single creator and user of specifications and standards. Decisions about which standards are most appropriate for U.S. government use are left to the discretion of individual agencies. 2.3 The Chinese model China s standardisation law dates from 1988 and is being challenged by a new reality. In fact, since the 1980s market opening has progressively challenged China s standardisation system. In recent years China s standardisation system has matured considerably. Standard setting in China is no longer based on a top-down, government-centered approach. While the government still remains in charge of managing standardisation, most standards development activities are carried out in a decentralized manner, in several hundreds of technical committees scattered among different sectors. In addition to the Standardisation Law of 1988 the State Council promulgated in 1990 a regulation for implementation of the standardisation law. In 2001 the Government established the Standardisation Administration of the People's Republic of China (SAC) which is in charge of management, supervision and overall coordination of 12

17 standardisation. Its responsibilities also include formulating, implementing and revising the state laws and regulations on standardisation. A revised regulatory framework is under discussion to adjust to a new political and economic reality. Meanwhile, the framework in place is a four-level system of standards - national, sector, local standards, and enterprise. The government presides over the formulation and application of all the levels of standards except enterprise standards. In fact, the original law did not give industrial associations a legal status to formulate standards. The degree of participation of the private sector in standard setting is one of the main elements of the debate in China. The Chinese standardisation policy is to be integrated in a broader industrial policy strategy aiming to transform the domestic industry structure from made in China to innovated n China. In order to do that it must transform from the factory of the world to an innovation-based society and from standards-followers to standards-co-shapers and ultimately to internationally recognized standards setters. 40 The government has started to reduce its intervention in the formulation of standards and introduce openness, transparency and consensus into the system. The Chinese system is gradually merging with the world s standardisation system. China is a member of the ISO Council. By the end of 2006, 9,931 of national standards had been adopted from international standards and advanced foreign standards, among which, 5,064 were from ISO, 2,075 from IEC, 314 from ISO/IEC, 50 from ITU, 2,428 from other places. 41 The EU and China are cooperating in standard setting. The regulatory dialogue between the European Commission (EC) and the General Administration of Quality Supervision, Inspection and Quarantine of China (AQSIQ) takes place every year and includes a working group dedicated to cooperation in standardisation. The three European standards organisations together with the European Commission and the European Free Trade Area established a post for the Seconded European Standardisation Expert in China (SESEC) in Deepening the cooperation further, in 2009 CEN, CENELEC and ETSI signed a Memorandum of Understanding with the Standardisation Administration of the People s Republic of China (SAC). 2.4 India Founded in 1947, the Bureau of Indian Standards BIS - originally called the Indian Standards Institution, was created to prepare and promote the adoption of national standards. All standards are generally voluntary in nature. For formulation of standards, BIS has committees, subcommittees and panels for dealing with specific group of subjects under division councils and comprising representatives from industry, government, research and development organisations, consumer organisations and individual experts. All stakeholders can propose standard setting activities. During , BIS formulated 321 (170 new and 151 revised) standards, bringing the total number of standards in force to 18,424 in BIS represents India at regional and international levels. BIS uses international standards, wherever they exist, as a basis for the standards development. So far BIS has harmonised 4,495 Indian standards with international standards. Overall, 78 percent of Indian standards are harmonised with ISO/IEC. Now the government is looking to help gain international acceptance for some Indian standards, and has established a public-private partnership, the Global ICT standardisation Forum for India (GISFI) to promote that goal. The BIS has also said it wants greater participation of consumers in standards setting, and has also encouraged other stakeholders. 2.5 Russia

18 The Russian standards system was at its origin a tool to serving the state s interests and financed exclusively by the state. 42 The Russian Committee for Standardisation was created in 1925 and set compulsory standards for all areas of business and industry in the country. These standards did not usually match international standards. In 1992, after the fall of communism in Russia, many of these standards became voluntary. Today the Federal Agency on Technical Regulating and Metrology (GOST), as the standard setting body was re-named in 2004, looks outward, representing the Russian Federation in international and regional organisations. In fact, a reform is underway. Increasingly Russia seeks to pass from a logic of mandatory to voluntary standards and from financed by state to finance by all participants. It has the ambition to be a significant international player; therefore it has increasingly been participating in ISO s activities. In fact, from Russia will take the Presidency of ISP for the third time. In addition, Russia is now is working to apply international standards, a requirement if it is to reach its goal of joining the World Trade Organisation. Russian news media says many standards have already been harmonized with EU standards. III - Current trends in standard setting and implications for business Part III Summary Private vs. Public and participation of third parties: Since the 1980s private standard setters have gained importance, largely due to their more flexible approach, but raising concerns of legitimacy and governance. Global vs. regional and national: Standards stemming from standard setters of strong national markets remain important despite globalisation. Duplication could be better managed by a system of mutual recognition. Traditional vs. new fields: Standard setting bodies public and private are keen to answer new challenges with new standard projects, covering areas with societal interests such as environment and sustainability. Implications for business: Standards involve costs, but also opportunities for companies. Active participation allows to shape the form future standards take. 1. Private vs. public & participation of third parties There are public, private and mixed standard-setting. The standard setting is done at multiple levels and with different modus operandi. The level of engagement of the industry in standard setting can also depend on the industry sector (financial resources, market development strategies etc.). Some countries like the US are clearly more open to industry own initiatives and industry inputs than are others. In any case, the accelerating pace of technological evolution has affected the methods of proposing, developing and implementing new standards. Traditional standard-setting bodies sometimes moved so slowly that their products were quickly obsolete in the technological arena, prompting the growth of more nimble industry consortia and other private standards-setting bodies in the 1980s and early 1990s. Despite sometimes having limited resources, given their structure and flexibility, they achieved results that helped them enjoy international acceptance. 43 The trend towards voluntary standard setting has emerged across a wide range of policy areas at the national and international levels, increasingly involving groups of corporations in different industry sectors. Comparisons across issue areas indicate common factors motivate this response. Private sector standard setting is a new reality that poses new challenges to both business and government More information on Standard setting by private consortia: 44 Source: 14

19 In the debate on the benefits and risks of standard setting there are several elements to be considered such as market competition and business leadership, technology and innovation, partnership and dialogue and the threat to government or intergovernmental regulation. In the first chapter we mentioned three main sectors that are being subject to private standard setting. Despite the potential benefits, standard setting exclusively done by private entities has created some problems and attracted critics, even prompting investigations by competition agencies. a) In the ICT sector the activity of private standard setting groups is often criticized because all interested parties are not always represented. Sometimes individual companies are criticized for withholding information about patents, clearing the way for them to charge royalties once the standard is adopted and becomes widespread in an industry. The European Commission, for one, is wrestling with such issues in its Digital Agenda proposals. b) In the agricultural, food and retail sectors there is also some criticism regarding the influence of strong market players in defining standards that can indirectly affect healthy market competition. In this sector the issue is not innovation but the increasing demand of consumers for product quality and safety, a cry that dates back to the early days of the 20 th century when the U.S. government began setting standards and regaling in response to a scandal created by muckrakers who chronicled the filthy conditions in slaughterhouses. Discussion and debate about private standards and their potential to act as actual or potential barriers to trade has increased in recent times, notably in the context of the WTO TBT Committee and in the WTO Sanitary and Phytosanitary (SPS) Committee. c) Consumers in developed countries increasingly demand products that are produced with less impact on the environment and by workers who are treated humanely, which has, for example, spawned labelling by private nonprofit groups which certify coffee as fair trade. Others certify products as being green or having a smaller carbon footprint. These organizations have taken international trade into new territory. 45 This has sometimes led to confusion because companies may face too many separate standards thrust on them by well-meaning nongovernment organizations. ISO, and its sister organisation, IEC have responded to the setting of ad hoc standards by consumers and other social groups by suggesting that they set standards which take into account the views of consumers and others without seeking to drive the policy behind it. At the same time, these standards would also take into account the views of governments, other public organizations and others involved in the process. The participation of 'societal' stakeholders 46 in the standardisation process brings a strong and important dimension of accountability. However, such goals are sometimes difficult to translate into practice. Both national and regional standardisation fora understand the importance of international standardisation. The Asia-Pacific Economic Cooperation (APEC), for example, has also placed the alignment of national standards to international standards as a main item on its agenda. The European Commission even defines standardisation as the voluntary process of developing technical specifications based on consensus among all interested parties. The European standardisation process formally allows for participation and input from all interested stakeholders such as large enterprises, small and medium-sized enterprises, consumer associations, trade unions, environmental organisations, public authorities, universities and research organisations. In practice however there are sometimes many reasons that such groups do not participate fully. They may have limited awareness of the importance of standards and other standard documents, they may lack technical knowledge, have little knowledge of the system and their resources are no match for those of more powerful players. 46 For more information: Establishing the United Nations Forum on Sustainability Standards) Source: Study for the European Commission, Access to Standardisation, Final Report, 2009: Koos van Elk, Rob van der Horst); EIM Business and Policy Research) 15

20 Chart 2: Trends in standard setting 2. Global vs. regional/ national Each country possesses its own standardisation system, which represents the country to regional and international bodies, and gain assistance from expert groups locally. DIN and BSI are significant players, and many of their national standards have been adopted worldwide. One of the best-known examples is the German national standard for paper adopted in 1922, which became ISO 216 in 1975 the A-series paper sizes. Industries worldwide and the World Trade Organisation recognise that to sustain global markets it is crucial to harmonise national standards with regional and international standards and for that reason the WTO includes an Agreement on Technical Barriers to Trade requiring countries to align their national standards with international standards. Information and communication technologies, electronic products, packaging, textiles, distribution of goods, energy production and utilisation, shipbuilding, banking and financial services all have established international standards. But in some areas a country s parochial interests will limit its desire to meet international standards. The existence of a single global standard for all technologies is desirable for all economic partners and the world is moving in that direction but it is a difficult process because of the great differences in various regions and countries. For instances: it took ISO 20 years after its inception in 1947 to come up with a standard for cargo containers. It is beneficial for companies to adopt standards that may become harmonised global standards. They can gain inkling of what is ahead by actively participating in standardisation technical committees. The participation in such activities will enable the companies to review their internal standardisation process and help them in the transition to standards likely to be adopted globally at a reasonable pace. In addition to achieving harmonised standards themselves, it makes sense to work toward using the same methods for developing and administering standards. One form to avoid and minimize duplication is the mutual recognition approach, which has been applied mostly to product standards, particularly for food and chemicals, and is meant to help promote trade. 47 Under mutual recognition products lawfully manufactured and sold in one country may enter other countries-broadly implying the mutual acceptance of one another's standards. Mutual recognition does not try to harmonise standards so much as it tries to ensure the free flow of goods across borders. Many 47 Source: 16