25 December 2021

THE SHAPE OF THINGS TO COME: THE RACE TO CONTROL TECHNICAL STANDARDIZATION

Dr. Tim Rühlig

China’s rapidly growing footprint in international technical standardization is of particular significance given that its approach to standardization is distinct from European and international practice. This is one of several factors that is leading to increased politicization of technical standardization, which has raised
the risk of bifurcation, fragmentation and decoupling of standards internationally.

Domestically, China is undergoing standardization reform, which has seen its system go from being state-controlled to one that is state-centric. Standards that used to be negotiated exclusively within state institutions are now developed in both state and market tiers. While this is an improvement, it means that direct and indirect mechanisms of state influence continue to exist in standard setting, with China’s industrial policy exerting a strong influence over the direction that standards take.

In some respects, the reform has provided more opportunities for European firms to shape standard setting in the PRC, with a significant share of European firms already participating. This is particularly true for sectors such as civil engineering and construction, petrochemicals, and information and communication technology (ICT). However, opportunities continue to be relatively limited. China’s new standardization strategy, published in October 2021, might bring further positive developments, but whether it will precipitate fundamental changes remains to be seen.

A survey of European Chamber member companies and subsequent in-depth interviews with respondents indicate that, in order to influence domestic standard setting in China, a combination of the following is required: standardization expertise; investments in local research and development (R&D); good government contacts; a sound corporate reputation; Chinese language skills; reasonable market share and company size; early commercialization of innovation; collaboration with influential Chinese companies in joint ventures (JVs); efficient internal coordination; a long business history in China; knowledge of the Chinese standardization system; and openness to dialogue with Chinese actors.

While a foreign company's ability to be involved in and shape technical standard setting in China varies across different sectors of the economy, the following nine distinct challenges exist: 1) formal barriers to participation in domestic standards working groups; 2) informal rules restricting the share of foreigninvested enterprises’ (FIEs’) voting rights; 3) exclusion from information coordination; 4) restricted access to technical leadership positions; 5) lack of information and transparency; 6) high participation fees; 7) monopolistic market structures due to preferential treatment; 8) hidden political agendas that impact standardization; and 9) a lack of intellectual property (IP) protection.

Internationally, China has made considerable efforts to increase its influence in standard setting in recent years. While the country is not yet dominating international standardization, it has made significant advances. This can be quantified by six indicators: 1) China’s increased share of leadership positions in standardization organizations; 2) its participation in international standardization; 3) the number of contributions to standards by China / or the number of Chinese standards contributed; 4) its share of standard essential patents (SEPs); 5) qualitative descriptions from international standard experts; and 6) the increasing role of technical standards in Belt and Road Initiative (BRI) projects.

China’s growing footprint in international technical standardization is somewhat natural given its increasing economic power and gains in innovation capacity. The strategies China adopts to increase its influence are also not radically different from those of western states. Where China differs is that the systematic support of the authorities (not least material resources) has put Chinese actors in advantageous positions and helped them gain ground in international standard setting.

While the EU maintains a vital interest in China’s integration into international standard developing organiszations (SDOs), China’s growing influence presents challenges to the current predominant model of technical standardization, which is private, voluntary and self-regulatory in nature. As mentioned previously, one such challenge is the growing risk of a bifurcation of international standardization, not least in the context of the BRI. This divergence in approaches, the increased politicization of standard setting and the EU’s dwindling influence in standardization present the three main challenges for Europe and beyond, and require swift and determined action from the EU and European companies.

China’s recently published standardization strategy is indicative of the future direction the country will take in this realm. It outlines China’s ambition to engage even more in international standard setting. This includes raising the importance of participation in international SDOs and the promotion of Chinese standards abroad, as well as attracting international standard-setting consortia. The strategy also promises to further open domestic standard setting to FIEs. However, despite the market being allowed to play a stronger role, China’s state-centric approach to technical standardization will persist for the foreseeable future. Previous ideas to streamline the standardization system or to develop a Chinadominated international SDO—dubbed the ‘BRI Regional Standards Forum’ in a research project called China Standards 2035 (CS2035)—are not included in the strategy. However, this does not necessarily mean they will no longer be discussed and considered.

This report proposes the following actions to European governments, the Chinese Government and to European companies to address the three main challenges to standardization: politicization, bifurcation/decoupling, and the shift in power:

Recommendations for European governments

Respond to the Politicization of Technical Standardisation

Facilitate a three-layered strategic ‘foresight dialogue’ on standardization within the EU.

Engage in strategic coordination with like-minded partners.

Invest in standardization knowledge.

Incentivise international standards in connectivity initiatives.

Insist on transparency and the acknowledgement of fundamental values as benchmarks for standards.

Prevent the Bifurcation of Technical Standardisation

Advocate the European standardization approach to a diverse set of actors in China.

Continue offering support for a ‘Beijing’ and a ‘Shanghai’ agreement.

Insist on reciprocity in bilateral dialogues and explore concrete cooperation.

Impose sanctions in cases where a lack of standard reporting is identified with regard to the EU’s World Trade Organization (WTO) reform proposal.

Address challenges to certification.

Maintain the EU’s Influence in Technical Standardisation

Reform and strategically use Horizon Europe.

Support academic standardization training.

Facilitate the participation of small and medium-sized enterprises (SMEs) and civil society in standard setting.

Support conditions for ‘early mover’ advantage.

Improve conditions for innovation.

Recommendations for the Chinese Government

Respond to the Politicization of Technical Standardisation

Provide fair and equal treatment for all companies that want to engage in domestic standardization activities.

Increase inclusivity of association standards.

Simplify and streamline conditions for market access and certification.

Improve the protection and licensing of SEPs.

Ensure fair and transparent market surveillance.

Prevent the Bifurcation of Technical Standardisation

Accept the premise of the International Organisation for Standardisation (ISO) and the International Electrotechnical Committee (IEC).

Increase identical adoption of international standards.

Comply with WTO Technical Barriers to Trade (TBT) principles.

Avoid using standards as trade barriers.

Accept international testing and certification if standards are identical.

Consider China’s Influence in Technical Standardisation

Consider Europe’s public-private partnership (PPP) model when undertaking standardization reform.

Increase meaningful communication with Europe on standardization.

Deepen the current reform of standardization and increase harmonization of standards.

Push for further domestic reform and streamline the current standardization system.

Commit to the civilian use of technical standardization.

Recommendations for European businesses

Respond to the Politicization of Technical Standardisation

Make standard setting part of strategic considerations.

Prepare to cooperate with policymakers and business organizations on standardization.

Prevent the Bifurcation of Technical Standardisation

Increase investment in technical standard setting.

Prepare for sector-specific developments.

Maintain the EU’s Influence in Technical Standardisation

Upgrade the status of standards in employment processes.

Participate in the improvement of European coordination in standardization activities.

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