A quick glance at the accelerating technological change over recent years, and the subsequent upheavals, could be enough to make us all fear for the future of the global economy. However, there are good reasons to be hopeful: the rapid changes in today’s interconnected world call for a renewed interest in international standards, making them more important than ever.
Change is nothing new. Bob Dylan sang that “the times they are a-changin’…” back in 1964. The difference today is the pace of change. In his book, Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations, Thomas Friedman sees the world at a turning point. He believes that technology, globalization and climate change are reshaping our institutions – and rapidly. As his subtitle notes, this is an “age of accelerations” and we all need to keep up or risk getting left behind.
Given Friedman’s thinking on “accelerations” in technology and the disruptions it can cause, it is tempting to consider the impact on the “institution of standardization”. First, what is the rightful place of international standards in today’s global economy? Second, does cross-organization collaboration offer any clues about the nature and impact of world trade?
To answer those questions, consider the simple fact that globalization is connecting economies and cultures throughout the world like never before. Globalization is one of Friedman’s forces in the “age of accelerations”. But globalization is meaningless if you don’t have international standards. What does it mean to globalize if you can’t fall back on standards when trading globally?
Erik Wijkström, Counsellor, Trade and Environment Division of the World Trade Organization (WTO) share about the impact these changes are having on international standards – and the role of international standards in our economic future.
“Made in the World”
Evidence of the radical changes Friedman describes in his book is all around us, in every part of our lives. Today, companies divide their operations across the world, from the design of the product and manufacturing of components to assembly and marketing, creating international production chains.
More and more products are “Made in the World” rather than “Made in the UK” or “Made in France”. Globalization is connecting economies and cultures worldwide. A car sold in Canada, for example, can be designed in France, with parts from Australia. A pair of pants sold in the United Kingdom can be made from South African cotton by factory workers in Thailand.
As successes or failures in one place affect people around the globe, this interdependency has profound consequences for international standards. However, the real breakthrough is coming about as their use is gaining traction in global trade.
Challenges and barriers
However, the picture is not all rosy. While trade liberalization has helped to lower tariffs to international trade, the importance of non-tariff measures in countries around the world has increased. Compared to tariffs, these measures are sometimes less transparent and often have ambiguous effects on trade. Nevertheless, government laws, regulations, policies or practices may be entirely justified – such as those limiting pesticide residues in food (food safety) or toxins in toys (child health). WTO rules strive to reduce as far as possible measures that unnecessarily impede market access while not undermining those that are effective in achieving their public policy objectives.
The recent focus in the WTO’s Committee on Technical Barriers to Trade (or TBT Committee) on how to demonstrate compliance with standards, says Wijkström, “underscores the difficulties with non-tariff barriers”. In practice, he adds, this might be about removing measures that involve too much red tape or time spent waiting at the border (Trade Facilitation Agreement), avoiding duplicative testing requirements (Technical Barriers to Trade Agreement), or ensuring that pesticide residue limits are not set arbitrarily but are based on sound science (Sanitary and Phytosanitary Agreement).
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But here’s the thing, Wijkström cautions: an inability to show compliance with requirements in standards and regulations may become a significant hurdle for companies wanting to participate in international trade, effectively “disconnecting” participants from value chains. “The smaller players (developing country SMEs) are particularly vulnerable,” he says; “ for them the cost of compliance or demonstrating conformity – or even simply getting information about requirements in foreign markets – can become disproportionately high”.
This is also why the WTO advocates the use of international standards. “Indeed, the use of relevant international standards is strongly encouraged in WTO disciplines because they can provide a sound basis for aligning government regulation, and, moreover, they often represent a high degree of consensus on how to deal with specific technical issues in an efficient (and often less trade-restrictive) manner,” Wijkström says.