The interjection of nationalist politics into standards setting, particularly in areas where global technological coordination is important for increasing the supply of and access to public goods, is of considerable concern. Globalization of trade, investment and technology flows places increasing pressures on national regulations of all kinds, ranging from competition regulation to financial standards such as capital requirements. Whether and how these regulations should be subject to greater multilateral or global coordination is a central policy issue.
Technical standards are at the core of this question. In many markets (eg, foods, consumer items, basic machinery and inputs) the stipulation of safety and performance standards seems relatively straightforward: countries have a choice of adopting international, bilateral or national standards and consumers can react to that choice if informed. But in goods with significant network effects or technology-related market power the temptation of national governments can be to encourage use of exclusionary standards favoring domestic suppliers. This approach may characterize China’s policy in wireless technologies, for example.
There are some benefits from having countries compete in technical network standards if all comers can choose from them and the result is widespread adoption of a compatible and optimal standard. The difficulty comes where those standards are not interoperable and major markets hold to discriminatory regulations. The cumulative innovation built on these regionally fragmented and probably (globally) sub-optimal regulations can become increasingly inefficient and restrict competition.
I do not see a need yet for a global regulatory body to discipline governments; it seems possible to rely on diplomatic exchanges and commercial relationships to counter this tendency. But vigilance by national authorities and coordination among standards-setting bodies are components of a useful global approach.
