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Making Standards for the Global Marketplace

by Charles M. Ludolph

International trade presents great opportunities and some challenges. The standards development community is key to meeting these opportunities and challenges. Just as business and workers are adapting to globalization so must standards developers. As global demands grow and trade barriers disappear, the quality of U.S. standards must continue to meet the needs of the global marketplace.

The Demands of Globalization

Every hour of the day, more than $200 million of merchandise trade flows through U.S. airports and harbors. Almost 25 percent of our nation’s business is international and that percentage is growing. Some businesses and workers count on trade for more than 50 percent of their sales and wages. The U.S. competitive success in global markets reflects hard work, a solid currency, reliable laws, and, importantly, the success of the U.S. voluntary standards development community. Every dollar of that prodigious sum of hourly international trade reflects engineering decisions embodied in a standard that guarantees the free flow of goods by informing and safeguarding consumers worldwide.

Lessons in Standardization—It Can Happen to Anyone

The recent experience of a small Indiana company of 800 employees that makes steel drum closures provides a lesson in globalization and standards. This company was not a significant exporter and was not directly involved in international business. Instead, the company designed and sold their product in North America to multinational chemical companies and by that route their product circulated worldwide. The company contributed to the development of voluntary North American standards but took no international standards positions. Nevertheless, their product specifications met the international needs of their clients as chemicals were shipped in steel drums around the world and were compliant with government requirements for safe transportation of materials. If their specifications did not meet the requirements of a major market, it would be a major problem.

In 1996, this Indiana company’s only competitor, a European Union company, introduced a draft European Commission for Standardization (CEN) standard to be used for shipping requirements in the EU that included design specifications. These specs supported their own proprietary designs, but were incompatible with closure designs from the United States. Given the global nature of the market, if this standard prevailed in the EU, chemical companies would have to choose the standard required in the EU, putting the U.S. company out of business.

After two years of CEN committee work, this Indiana company prevailed in introducing their designs in the CEN standard and establishing recognition in the EU for their product line. Their competitiveness was restored. But that is not the end of the story. Having learned the effect of globalization, this Indiana company purchased EU drum and closure companies, including users of their EU competitors’ specifications. Today they still produce in Indiana but also in Italy, the United Kingdom, and Belgium. Their product catalog now includes EU-designed closures as well as their original North American product line.

This is a great story from which come three lessons. First, European standards developers took steps to correct a recognized problem. Next, the standards development process was the catalyst that enabled the U.S. company to be more globally competitive. Moreover, this story shows how the U.S. company dealt with competing standards that are broadly accepted internationally and through their efforts ensured that consumers still have product choice.

This is also a good way to introduce what support international trade needs from standards developers.

What Are the Expectations of U.S. Trade Policy?

In international trade, U.S. government expectations of the standards development community are forthright and simple. We expect that U.S. standards will inform the consumer worldwide and instill confidence in a product developed to that standard. In May 1982, former ASTM President Bill Cavanaugh summarized the right approach before the 51st general meeting of the National Board of Boiler and Pressure Vessel Inspectors. “ASTM’s method of procedure can be described really in four words ... due process, complete openness.” And they remain the key elements that provide for relevance to international trade.

There is no better way to expand trade and promote U.S. products than by ensuring that consumers have the technical information they need for a purchase. Many foreign consumers find it satisfactory to rely entirely on a North American approach to safety, cost, and engineering tradition, but increasingly U.S. standards developers are expanding their technical positions to take account of global customer needs. Global markets and the changing character of the North American market mean that standards must change to reflect this trend and maintain competitiveness. To Cavanaugh’s approach I would add an explicit effort on the part of standards developers to address international needs, such as the appropriateness of foreign material specifications, engineering safety margins, and the effect on costs of maintenance and manufacture.

How Does the WTO Come into This?

The role of standards development in international trade has become so important since the 1990s that the World Trade Organization established some fundamental principles to ensure that all WTO members support the expansion of trade through standards development. Because of the WTO Agreement on Technical Barriers to Trade, more than 160 countries agreed that governments shall apply standards on a non-discriminatory basis for all.

Moreover, all WTO members must maintain standards in such a way that they do not create unnecessary obstacles to international trade. This rule is intended as a discipline on government and its mandatory requirements. It means that foreign governments should not create an unnecessary obstacle to international trade in their use of mandatory specifications or by direct or indirect reference to voluntary standards. Governments of countries that are members of the WTO are aware that they should not be adopting or relying on technical positions that create unnecessary obstacles to trade.

This is a very important rule that standards developers and users of standards need to keep in mind. The force of this rule has already turned out to be very important. A standard is unnecessarily restrictive when it affects trade adversely more than is necessary to fulfill a legitimate objective, taking account of the risks from non-fulfillment. When any alternative standard is reasonably available, fulfills a need, and is less trade-restrictive, the government must give it consideration. Also, this leads to the general preference for technology-neutral performance-based standards rather than design-based standards to the greatest extent possible.

Of course, globalization and the increasing role of international trade mean more demand for standards that meet the needs of the stakeholders in most WTO member countries. In fact the WTO encourages, but does not obligate, increased development and use of “international standards” to expand trade particularly where governments intend to use technical specifications as a condition of market access. Governments have wide latitude in deciding the appropriateness of an international standard to meet their needs under the WTO. Ultimately, serious discussions on this subject come back to the need for standards that are reasonably available, widely recognized, relied upon globally, and that reflect broad market acceptance by virtue of a development process that includes balance of interests, openness, transparency, and consensus. The U.S. view is that this is where the WTO can make the most effective contribution to facilitating trade. This could reflect work achieved by the International Organization for Standardization (ISO), ASTM, or the Japanese Industrial Standards Committee (JISC). We are endeavoring to convince our trading partners that this is the best course.

A Plea

In closing, let me make a modest plea for continued national unity in the space where standards development and international trade meet. Everyone in the standards community knows the advantage of developing and sustaining a national technical position when negotiating an international standards position. I suggest that we maintain that same discipline in our public and private sector relations. The U.S. government will not enter into obligations with foreign countries affecting the interests of standards bodies and standards developers. By the same token, where possible, standards developers should avoid entering into international obligations substantially different from that established by your federal trade and technical agencies. The cooperation we have established to develop the best technical standards in the world and to ensure that these advance our global competitiveness will grow stronger in the coming months as we look to the challenges and opportunities of globalization. //

Copyright 2000, ASTM

Charles M. Ludolph is deputy assistant secretary, Market Access and Compliance, with the U.S. Department of Commerce. Ludolph is an economist with the department for 30 years and currently directs all commercial activities with Europe.