Manipulating Technology Standards to Impede Competition

posted by in Global Markets, Industry July 5, 2012
Jul 05

The point of having standards is to create a consistent set of rules, or models, for all parties to follow. That point seems to be lost, though, on governments in many emerging markets. When it comes to technology, countries like China and India are trying to create their own patchwork of unique standards — many specifically designed to bolster domestic firms at the expense of foreign ones.

BSA’s “Lockout” report, an in-depth examination of a new wave of IT-focused trade barriers, shows that manipulating technology standards is one of a handful of ways that governments, especially in emerging markets, are trying to impede free and fair global competition.

The Chinese government, for example, has pushed to develop unique domestic standards for Internet protocols, wireless local area networks, and encryption, among other things. To that end, foreign industry is restricted from participating in the Chinese standards-setting process in several ways — from outright exclusions to inadequate protections for patents and other confidential information that might be involved in a given technology.

The Indian government, too, has put in place measures to promote domestic industry via technology-standards practices. For example, the country’s policy on standards for e-governance aims to make standards-essential patents available on a royalty-free basis as opposed to on fair, reasonable, and nondiscriminatory terms. This denies patent holders (many of which are non-Indian companies) suitable compensation for their intellectual property and discourages participation in standard-setting processes.

Significantly, it’s not just foreign companies that benefit from globally consistent technology standards. Internationally recognized technical standards that are developed with industry participation spur innovation, generate efficiencies, and speed the development and distribution of new products and services. They give consumers faster and lower-cost access to new products, and they facilitate global trade. Discriminatory government-mandated standards, by contrast, tend to freeze innovation and force consumers and businesses into using products that might not suit their needs.

To protect the best interests of consumers, businesses who depend on technology, and the global economy at large, government manipulation of technology standards has to stop. This point was made clear by APEC leaders last November when they agreed to “[e]ncourage the use and participation in the development of voluntary, market-led, and global standards that promote innovation, competition, and create global markets for products and services.”

The US and other leading IT economies should press for rules that promote market-led technology standards through bilateral, regional, and multilateral trade agreements. These agreements should include clear disciplines that require transparency and adequate opportunity for participation by all stakeholders (foreign and domestic) in the standards development process. Governments should insist on trade provisions that prevent trading partners from manipulating technology standards to block foreign competition or protect domestic industry.

The market-led, consensus-driven approach for developing and using technical standards works well. It’s part of the reason why new technologies have been able to spread as broadly and as quickly as they have in the past decades. Now is hardly the time to stand in the way.

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