By Sanjay Anandaram & Astha Kapoor
As competition on new technologies continues between the US and China, a new avenue for friction is opening up on technological standards. Traditionally, standards were agreed upon and adopted globally (such as de jure standards like the GSM standard for mobile communications); however, the fast-growing, pervasive digital economy is seeing the emergence of de facto competing standards (like BigTech ecosystems), thanks to national and geopolitical interests.
Technological standards and requirements across industries are critical to ensure desired performance while ensuring quality, security, safety and easy interoperability. Standards also enable cost efficiencies through economies of scale, allow for regulatory compliance, and enable market innovation.
Standard setting has historically been the forte of European nations, which continue to hold leadership positions across institutions such as the International Standardisation Organisation (ISO) and International Electrotechnical Committee (IEC), even though European contribution to the technological boom of the last decade has lagged behind that by the US, China, Korea and Japan. Institutions such as the European Telecommunications Standards Institute (ETSI), for example, believe that standards must be a significant part of the region’s digital strategy to ensure that Europe has a leadership role in the new digital economy. “Our competitors are very serious about taking the lead in digital transformation,” said Carl Bildt, Co-Chair European Council on Foreign Relations. “It is important that EU lawmakers put standardization at the centre of EU digital and industrial strategy. Otherwise Europe will become a rule taker, forever playing catch-up in the innovation, production and delivery of new digital products and services.”
Similarly, the US, home to some of the world’s most recognisable technology brands, with about 46% of platforms earning a revenue above $1 billion, is shaping standards through influence. Their experience shows market power leads to the wide voluntary adoption of standards. The more prevalent a technological standard, the greater are the number of additional devices, partners and users with a virtuous cycle emerging.
China, too, is investing in the digital economy. It has overtaken the US with the highest number of tech unicorns (companies valued at at least $1 billion); Chinese policy makers invoke the idea that “first tier companies” make standards instead of “third tier companies” that make products–China enjoys leadership in 5G, and is ambitiously pursuing AI, where it seeks to shape international standards based on its interests. China’s investments in, say, the International Telecommunication Union (ITU) are rising (it is the fifth largest financial contributor) even as it backs several new proposals. It submitted 830 technical documents on wired communications specifications to the ITU last year, the most of any country and more than the next three (South Korea, the US, and Japan) combined, according to an industry group. Such documents serve as a basis for deliberation on new standards, and more papers mean more of a voice. As the Pentagon’s Innovation Board bluntly put it: “The country that owns 5G will own many of these innovations and set the standards for the rest of the world … That country is currently not likely to be the United States.”
In parallel, China is also seeking bilateral, mutual recognition of standards with countries in the Belt and Road Initiative, fortifying its geopolitical power through technological cooperation and convergence by establishing a Digital Silk Road. Most significantly, China will soon release the blueprint for its “China Standards 2035”, a next step from the “Made in China 2025”. The document is likely to lay out China’s role in setting technological standards in AI, 5/6G, IoT, batteries, EVs etc. China as the world’s second largest payer of licensing fees in the world seeks to, in its. “China Standards 2035”, reverse this relationship and make China a net recipient of licensing fees by making its standards pervasive.
There is growing concern that standards are increasingly politicised and, over time, weaponised. We saw this recently in the case of climate change with the UNSC’s draft resolution attempting to securitise climate action by the developed countries and undermine the hard won consensus in Glasgow in November. The Swiss Association for Responsible Investments, that represents almost $1trillion in pension funds, has excluded four Indian companies in the nuclear weapons category, presumably for India not signing the NPT. The Swiss National Bank too has been advised of this development. The ramifications of this can be imagined.
The Russia-Ukraine war too has brought to bear the geopolitical dimensions of standards. GooglePay and ApplePay were made unusable in Russia as many banks were cut off from these systems. There were calls to “deplatform” the Russian internet while Russian banks were barred from the SWIFT financial messaging system—a de facto standard for banks to exchange information securely. There is thus a debate raging on technological standards.
(First of a two-part series)
The authors are Respectively, volunteer, iSpirt, and co-founder, Aapti Institute
