The Battle to Set Digital Technical Standards

US-China Rivalry and Digital Connectivity in the Indo-Pacific

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US-China rivalry in technology became overt in the dispute over 5G and Huawei. At the center of the dispute was standards underpinning the fifth generation of mobile network technology. A key trigger was the fact that China dominates in 5G standardization, overtaking the US, the traditional mastermind of the international standardization regime, particularly in information and communications technology. An indicator of China’s dominance is the overwhelming number of standard-essential patents (SEPs) held by Chinese companies (see Figure 1). Technical standards consist of many technological components, some of which are protected by intellectual property rights. An SEP is a patent that must be used to comply with a technical standard. China accounts for about one-third of the total 5G-related SEPs. This demonstrates that China’s 5G standardization is grounded on intellectual property rights-based standardization that is different from the previous generations of standardization based on the simple logic of China’s huge domestic market.1

 

Holding SEPs in 5G is increasingly important because 5G technologies will be used not only in conventional mobile communication sectors, but also in emerging technological sectors such as autonomous and connected cars, artificial intelligence (AI), smart factories and smart cities, to name just a few, where everything should be connected and implemented through 5G networks. 5G is the network infrastructure for all those industrial applications beyond personal communications. The more the standards concerned with 5G are adopted in many emerging services and industries, the more profits SEP owners earn. SEP owners have power over standards, even over the next generation of standards — in this context, 6G mobile communications. This is one of the reasons why the US takes so seriously China’s rise in international standardization, particularly in 5G standardization.

 

US Responses

 

In 2020, Donald Trump’s US administration published a document entitled “United States Strategic Approach to the People’s Republic of China.”2 The word “standards” appears 10 times throughout the document. Eight times it is used to mean “technology standards” or “industry standards.” It seems unprecedented that the word “standards” (to mean technical standards) would appear repeatedly in a top-level strategic document released by the White House. The document clearly shows the perceptions of the US regarding China’s standardization. It says that China’s Belt and Road Initiative (BRI) and other moves are “designed to reshape international norms, standards, and networks to advance Beijing’s global interests and vision, while also serving China’s domestic economic requirements” (emphasis added). They aim to expand “the use of Chinese industrial standards in key technology sectors, part of an effort to strengthen its own companies’ position in the global marketplace at the expense of non-Chinese firms.” The document shows a concrete policy direction against China’s international standardization. The US government also “promotes a set of common standards for secure, resilient, and trusted communications platforms.” It declares that the US continues “to lead in innovation and setting standards” for emerging industries and “to work with allies and partners to ensure that discriminatory industrial standards do not become global standards.” Needless to say, “discriminatory” standards mean standards made by China.

 

US vigilance regarding China’s rise in international standardization continues under the Joe Biden administration, and is even being strengthened. Even before the election, Biden published a paper that reveals his position on the issue.3 First of all, he emphasizes “rule making” by saying that the rules of the international economy should not be rigged against the US. “For 70 years, the United States … played a leading role in writing the rules,” he stresses. The US should continue to lead, not China. Second, he stresses US leadership in technology and innovation: “The United States is leading the charge in innovation. There is no reason we should be falling behind China or anyone else when it comes to clean energy, quantum computing, artificial intelligence, 5G, high-speed rail.” Biden also calls for co-operation with like-minded countries, saying “The most effective way to meet that challenge is to build a united front of US allies and partners to confront China’s abusive behaviors.” He further stresses the need to avoid a situation “where the rules of the digital age are written by China and Russia.”

 

What are the rules that Biden emphasizes so much? One of the pillars in global rules-setting is standards/standardization. Although Biden does not use the word “standards,” he sends the same message as Trump regarding technological challenges from China.

 

The measures and actions that the Biden administration has taken since the election show that the US is taking an even stronger position against China. The administration issued the “Executive Order on America’s Supply Chain” in February 2021 to conduct a 100-day review of supply chains for products of strategic significance. The ensuing report, “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth,”4 stresses standards along with data as “powerful tools that allow firms to differentiate their products and services on more than just price and create market ‘pull’ toward a ‘race to the top.’” The report aims to “identify key areas where government could play a more active role in setting standards and incentivizing high-road business practices. By establishing strong domestic standards or advocating for the establishment of global standards, the United States can support the private sector’s ability to create and adopt resilient practices” (emphasis added).

 

The Geopolitics of Digital Technical Standards

 

China’s rise in standardization and the US response illustrate that such standards are not just a tool for competition at technical, industrial and economic levels, they are also a geopolitical consideration. In business and economics, competition over incompatible formats (or standards) is often called “standards battles/wars.” We may call the current competition between the US and China a Standards World War, because it is taking place at a global level and may affect all countries regardless of their direct involvement.

 

For China, standards are not just a tool of competitive advantage in industrial and economic domains, but a strategic vehicle for setting a new geopolitical order in the world. For example, the Belt and Road Initiative emphasizes standards co-operation with the countries along the road. Fifty-two standards-co-operation agreements were signed with countries or regions through the BRI as of September 2019.5 “The United States Strategic Approach to The People’s Republic of China” reveals Washington’s stance on formalizing standards as a significant tool for innovation and technology competition with China.

 

This confrontation and its impact will become much stronger in the digital economy in emerging technological fields such as 5G, AI, data, digital trade and so on. It is reported that China is formulating a visionary plan for standardization called “China Standards 2035.” It is a sequel to “Made in China 2025” and an extended version of that earlier document. While Made in China 2025 pursues dominance in the production of goods, China Standards 2035 aims to control the rules and systems of production and transactions.6 It is a national strategy to set standards in emerging technologies in the context of the 4th Industrial Revolution and digital transformation. In the next generation of technologies, the person in charge of the project was reported to have said, “Global technical standards are still being formed. This offers the opportunity to realize the transcendence of China’s industry and standards.”7 For example, China aims to enhance its “discursive power” in setting international standards for AI.8

 

The latest document from China, “Outline for National Standardization Development,” announced by the State Council on Oct. 10, 2021, also includes the goal of leading international standardization in key technologies. Standardization is “to promote high-quality development and build a modern country in the new era, it is urgent to further strengthen standardization.”9 The document stresses the need “to strengthen research on standards in key technical fields. To carry out standardization research in the fields of artificial intelligence, quantum information and biotechnology.”10

 

State-centric approaches (or what we might call techno-nationalism) to standardization are also being demanded by the US side.11 The American approach to standardization is well known for its hands-off, market-based or industry-driven approach, but several recent reports emphasize the government role in both domestic and international standardization. For example, the US National Institute of Standards and Technology published “US Leadership in AI: A Plan for Federal Engagement in Developing Technical Standards and Related Tools.”12 Nowadays the issue of standards appears in high-level national/international strategy and policy documents. They all suggest recommendations that the government should play a role in standardization to overturn China’s dominance in emerging technologies.

 

Decoupling in Standards

 

Decoupling in global supply chains is often mentioned as a result of the US-China rivalry over technology. A recent report by the European Union Chamber of Commerce in China and the Mercator Institute for China Studies extends decoupling into four dimensions with nine layers: macro (political and financial), trade (supply chains and critical inputs), innovation (R&D and standards) and digital (data governance, network equipment and telecommunications services). The report recognizes decoupling of standards along with that of data as areas of “rapidly growing concern.”

 

Standardazation is “an essential tool to facilitate trade and interoperability.” While the domain of standardization has been considered as “highly technical,” it is now “politicized” even to the level of geopolitics, as I have demonstrated in this article. It causes concerns that “the global standardization system could become fragmented, resulting in disruptions to trade and innovation.”13

 

That is, the conflict between the US and China over technology and specifically technical standards may lead to decoupling in international standardization beyond decoupling in supply chains. This will create real difficulties for companies, which, in the worst-case scenario of fragmented standardization systems, would have to maintain and manage two separate global supply chains, each based on, and governed by, its own independent system of standards. In Northeast Asia, covering China, Japan and South Korea, global supply chains are the most advanced and sophisticated in the world trade system. For example, export-oriented companies in South Korea might have to comply with two separate systems of standards, including certification and conformity assessments. For this, they might have to maintain two different production lines that are regulated and governed by the US-based and China-oriented systems of standards, respectively. Given that the possibility of separating the Internet into the “splinternet” is being discussed,14 it is not inconceivable that we could be facing a decoupling of international standards. We have yet to see whether such a scenario will unfold. In order to ensure a sound global economy, this is a situation we should strive to avoid.

 


Notes

1 Mi-jin Kim, Heejin Lee and Jooyoung Kwak, “The changing patterns of China’s international standardization in ICT under techno-nationalism: A reflection through 5G standardization,” International Journal of Information Management, Vol. 54 (October 2020).

2 “United States Strategic Approach to the People’s Republic of China,” The White House, May 26, 2020.

3 Joe Biden, “Why America Must Lead Again: Rescuing U.S. Foreign Policy After Trump,” Foreign Affairs, March/April 2020.

4 “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth,” from the series 100-Day Reviews under Executive Order 14017, The White House, June 2021.

5 Xirui Li and Dingding Chen, “Should the West Fear China’s Increasing Role in Technical Standard Setting?” The Diplomat, April 15, 2021.

6 Emily de La Bruyere and Nathan Picarsic, “China Standards 2035: Beijing’s Platform Geopolitics and ‘Standardization Work in 2020,’ ” Horizon Advisory China Standards Series, April 2020.

7 ibid., p. 6

8 Jeffrey Ding, “China’s Growing Influence over the Rules of the Digital Road.” Asia Policy, Vol. 16 No. 2 (April 2021), pp. 36-37.

9 State Council of China, “Outline for National Standardization Development,” translated by Seconded European Standardization Expert in China (SESEC), October 2021, p. 1.

10 ibid., p. 4

11 See Ding, op. cit., and Stephen Olson, “China aims to strengthen its global influence through standards setting,” Hinrich Foundation, April 28, 2020, www.hinrichfoundation.com/research/article/tech/china-influence-strengthens/

12 “US Leadership in AI: A Plan for Federal Engagement in Developing Technical Standards and Related Tools,” National Institute of Standards & Technology, US Department of Commerce, Aug. 9, 2019.

13 “Decoupling: Severed Ties and Patchwork Globalisation, “European Union Chamber of Commerce in China and Mercator Institute for China Studies, Jan. 14, 2021, p. 51.

14 Stacie Hoffmann, Dominique Lazanski and Emily Taylor, “Standardising the splinternet: how China’s technical standards could fragment the internet,” Journal of Cyber Policy, Vol. 5 No. 2, pp. 239-264.

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