Setting Standards: Strategic Advantages in International Trade
Among the most important technical barriers to trade are the different standards and certification measures for products and services.
Among the most important technical barriers to trade are the different standards, testing and certification measures for products and services. Efforts to co-ordinate these within Europe – including the EU’s increasing reliance on private sector standards bodies – are now underway.
The EU’s single market has not only integrated national markets, but has also shaped trading principles at the international level. The EU has exported its trade principles to third country markets and European companies have gained strategic advantages in influencing standards both internally within Europe and externally at the international and transatlantic level. Firms should invest resources and actively participate in setting standards to protect and increase their competitive advantage.
Standards are becoming “the new guns in global competition” (Cargill, former Standards Director of Netscape). Over 25,000 firms as well as consumer organisations, trade unions and others are involved in setting standards in the EU alone. The output of standards has increased – and firms have increasing responsibility in shaping them. They are important for business strategies and resource allocation (Table 1, overleaf). Yet they often get little attention even among public affairs or management units within companies, let alone from top management. Perhaps because they are often so technical, standards, certification and testing are usually handled by specialist middle managers: usually an engineering unit or R&D division.
Not only have EU firms become more engaged in standard-setting in Europe; they have also used this opportunity to exercise “first mover advantage” in shaping markets outside the EU. Trade disputes are driving demands for a deeper understanding of the relationship between standards and trade, and the approach employed in internal market harmonisation by the EU deserves greater attention as it has provided a driving force for other international agreements. Most standards used to be developed at the national level. But this is no longer the case. In the EU, new regulatory strategies have been adopted, especially since the 1980s (Falke 1996). When European standards are implemented or transposed to the national level, any competing national standards have to be withdrawn. Any firm outside the EU has to abide by EU standards as well as local national standards if it wants to access the EU market, as many a US company has discovered to its cost. The development of EU standardisation has particular implications for Central and Eastern European (CEE) countries planning to join the EU. US companies increasingly complain that the EU has too much influence on the standards-setting process worldwide.