Ideology has always informed policy. With the Internet of Things (IoT) poised to reshape economies the world over, core beliefs about the role of the state remain front and center, particularly with regards to the standard setting processes facilitating the connectivity crucial to IoT’s growth. The five highest spenders on IoT— the United States, China, the European Union, Japan, and South Korea—  all vary in their approach to this issue. However, each governments’ plans for IoT standard development lack specific details on engagement with global standard setting organizations (SSOs), relying instead on platitudes of “increasing cooperation at the global level through SSOs.” International organizations like the International Organization for Standardization (ISO), the International Electrotechnical Commission (IEC), and the 3rd Generation Partnership Program (3GPP) create truly international markets for IoT applications, and governments would like to influence global standards in a manner that benefits homegrown companies from their jurisdiction. In this regard, a key question is how different perspectives on standard setting translate to global competitiveness via international SSOs. If the Institutional Complementarities Approach developed by Mattli and Buthe is any guide, orientations that favor higher consultation amongst domestic actors with clear hierarchal structures in domestic SSOs like the European Union and China, are more likely to dominate industrial standard setting for IoT in the long run.
Specifically, the Institutional Complementarities Approach argues that while significant economic resources and expertise are necessary, they are not sufficient when it comes to creating a first mover’s advantage in international SSOs. The real key is the degree of compatibility between national and international SSOs. For Mattli and Buthe, this compatibility depends on the level of consultation or coordination of domestic SSOs and the level of domestic organizational hierarchy: Higher levels of consultation amongst domestic actors and clear hierarchal structures are preferable for gathering and crystallizing distinct viewpoints by coordinating amongst various domestic actors and processing these viewpoints into a coherent position on the global stage that can be communicated directly to global SSOs.
Bringing the discussion of standard setting competition out of the abstract, it is helpful to look first at how various IoT policies suggest underlying ideological tendencies. In the United States, companies are largely responsible for standard setting, with government organs like the Department of Commerce playing a minimal role in directing IoT development. On the other hand, China is pushing a state-led initiative called China Standards 2035, which aims to target specific IoT related-industries that it sees as having high potential. In South Korea, the government has shaped its IoT standard setting policy around embracing an open platform that is developed both by the government and by the private sector. These three countries emphasize industrial standard setting, which can significantly impact the competitive positions of multi-national corporations.
In contrast, the European Union and Japan focus more regulatory attention on cybersecurity and privacy standards. In Europe, directives like the 2018 General Data Protection Regulation (GDPR) and the Network and Information Security (NIS) have set internet standards to protect consumer privacy and cybersecurity, while efforts are also underway to harmonize industrial standards across EU countries.6 In Japan, the government spearheaded the NOTICE project, an initiative that identifies vulnerable IoT devices and notifies users of potential weaknesses. Among key IoT markets, then, there is variation with regards to which standards are prioritized and how much coordination there is between regulators and the private sector. The following table summarizes these approaches:
|United States||Facilitate private-sector, consensus-based approach to standards development|
|China||High government participation to aid IoT sectors it deems strategically significant, including manufacturing, agriculture, and smart energy|
|South Korea||Open platform collaboration with private firms|
|European Union||Complex regulatory regime without a single framework for IoT regulation across the region. Focus on cybersecurity and privacy|
|Japan||Highly meticulous with a focus on developing shared understanding of IoT framework before working with private firms to develop the IoT sector|
Positioning these approaches in terms of which sector (public or private) leads IoT standards development and the degree of private-sector consultation that occurs during the standard-setting process likewise suggests variation in more overarching ideological proclivities:
Being in the bottom left of the graph suggests the embrace of a more state-led, strategic vision while being in the top right reflects an emphasis on laissez-faire principles and allowing companies to dictate standards with minimal government input. While the United States and China are on polar opposites of the graph, the European Union, Japan, and South Korea all show some combination of public-private cooperation on standard setting and varying degrees of private consultation work, though with a bias towards stronger government-led IoT standard setting.
The Institutional Complementarities Approach suggests that these ideological tendencies directly impact interactions in the global standard setting bodies that create global markets for IoT products. For instance, American SSOs have criticized ISO’s definition of an “international standard,” stating that the definition should be based on whether the majority of companies in a certain industry are utilizing a certain standard, thus emphasizing the private-sector approach. On the other hand, European SSOs have been content with the ISO definition, agreeing that international standards can only be adopted by global organizations that are open to national bodies from every country. Moreover, the American National Standards Institute (ANSI) often acts as the United States’ representative in global SSOs. However, it remains a weak institution, with few major players in U.S. standards community fully accepting it2, preferring instead a laissez-faire system that would allow them to maximize their revenues and maintain their autonomy. In contrast, the Standardization Administration of China (SAC) often acts as China’s representative in global SSOs. Consistent with an ideology favoring a state-led economy, the SAC was established as part of the Chinese government under the State Council and is heavily involved in developing and promoting national standards
With these factors in mind, it is possible to identify the sort of compatibility between domestic and international SSOs that Mattli and Buthe emphasize. The U.S. strategy of having a less coordinated approach towards standard setting lends itself to having weaker domestic SSOs, like the aforementioned ANSI, which in turn leads to a more diffuse voice in global SSOs. On the other hand, China’s SAC is in a position to lead a more coordinated effort in global SSOs, which may in turn enable greater Chinese influence over the international standards agenda. In this regard, it will be worth watching how calls for China to set the global rules in the industrial Internet of Things laid out in China’s “Standardization Priorities in 2020” will unfold as the China Standards 2035 plan is implemented.
To be sure, the Institutional Complementarities Approach is not new – it was developed in 2003. However, its insights still apply to the ongoing development IoT. While the United States has been able to succeed based on sheer technological dominance in the past, IoT is an emerging technology in which the gap is closing. First movers’ advantage may go to other countries that have stronger domestic SSOs like China. In the context of global superpower competition, new sectors like IoT are exactly where the consequential battles will take place, having important implications for not only the technological arena, but for global geopolitics as well. Indeed, IoT standard setting is set up to be a main battleground for economic and technological supremacy. Critically, the Institutional Complementarities Approach emphasizes that ideological tendencies have structural consequences. As it stands now, the battle for dominance in setting the next generation of IoT standards may already be tilted in favor of one side from the start, with the more free market approach of the United States facing an uphill climb against more coordinated, hierarchal, and government-inclusive approaches.
On this note, several other questions warrant attention. First, one must question why the United States has not attempted to change the structure of global SSOs in a manner that would better complement its laissez-faire approach or what proactive steps it might currently be taking to do so. Also, it is worth questioning what the influence of certain regions are if domestic SSOs are highly hierarchal but lack broad-based input from various actors, or vice versa. It is likewise fruitful to monitor if and how new actors who are in the process of developing their domestic IoT policies are tailoring their programs such that they are best positioned to exert influence in global SSOs. Most crucially, it begs the question of if the Institutional Complementarities Approach is correct in its predictions. For that answer, only time will tell.
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