[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
CHINA, EUROPE, AND THE USE OF
STANDARDS AS TRADE BARRIERS:
HOW SHOULD THE U.S. RESPOND?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENVIRONMENT, TECHNOLOGY,
AND STANDARDS
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
MAY 11, 2005
__________
Serial No. 109-13
__________
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
______
U.S. GOVERNMENT PRINTING OFFICE
20-998 WASHINGTON : 2005
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COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas BART GORDON, Tennessee
LAMAR S. SMITH, Texas JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California LYNN C. WOOLSEY, California
KEN CALVERT, California DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland MARK UDALL, Colorado
VERNON J. EHLERS, Michigan DAVID WU, Oregon
GIL GUTKNECHT, Minnesota MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland RUSS CARNAHAN, Missouri
W. TODD AKIN, Missouri DANIEL LIPINSKI, Illinois
TIMOTHY V. JOHNSON, Illinois SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia BRAD SHERMAN, California
JO BONNER, Alabama BRIAN BAIRD, Washington
TOM FEENEY, Florida JIM MATHESON, Utah
BOB INGLIS, South Carolina JIM COSTA, California
DAVE G. REICHERT, Washington AL GREEN, Texas
MICHAEL E. SODREL, Indiana CHARLIE MELANCON, Louisiana
JOHN J.H. ``JOE'' SCHWARZ, Michigan VACANCY
MICHAEL T. MCCAUL, Texas
VACANCY
VACANCY
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Subcommittee on Environment, Technology, and Standards
VERNON J. EHLERS, Michigan, Chairman
GIL GUTKNECHT, Minnesota DAVID WU, Oregon
JUDY BIGGERT, Illinois BRAD MILLER, North Carolina
WAYNE T. GILCHREST, Maryland MARK UDALL, Colorado
TIMOTHY V. JOHNSON, Illinois LINCOLN DAVIS, Tennessee
DAVE G. REICHERT, Washington BRIAN BAIRD, Washington
JOHN J.H. ``JOE'' SCHWARZ, Michigan JIM MATHESON, Utah
VACANCY
SHERWOOD L. BOEHLERT, New York BART GORDON, Tennessee
ERIC WEBSTER Subcommittee Staff Director
MIKE QUEAR Democratic Professional Staff Member
JEAN FRUCI Democratic Professional Staff Member
OLWEN HUXLEY Professional Staff Member
MARTY SPITZER Professional Staff Member
SUSANNAH FOSTER Professional Staff Member
AMY CARROLL Professional Staff Member/Chairman's Designee
JAMIE BROWN Majority Staff Assistant
C O N T E N T S
May 11, 2005
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Vernon J. Ehlers, Chairman,
Subcommittee on Environment, Technology, and Standards,
Committee on Science, U.S. House of Representatives............ 10
Written Statement............................................ 10
Statement by Representative David Wu, Ranking Minority Member,
Subcommittee on Environment, Technology, and Standards,
Committee on Science, U.S. House of Representatives............ 11
Written Statement............................................ 12
Witnesses:
Dr. Hratch G. Semerjian, Acting Director, National Institute of
Standards and Technology
Oral Statement............................................... 13
Written Statement............................................ 15
Biography.................................................... 19
Mr. Robert W. Noth, Manager, Engineering Standards, Deere and
Company
Oral Statement............................................... 19
Written Statement............................................ 23
Biography.................................................... 26
Dr. Donald R. Deutsch, Vice President, Standards Strategy and
Architecture, Oracle Corporation
Oral Statement............................................... 26
Written Statement............................................ 28
Biography.................................................... 33
Mr. Joe S. Bhatia, Vice President and Chief Operating Officer,
Underwriters Laboratory
Oral Statement............................................... 33
Written Statement............................................ 35
Biography.................................................... 42
Financial Disclosure......................................... 43
Mr. David Karmol, Vice President, Public Policy and Government
Affairs, American National Standards Institute
Oral Statement............................................... 44
Written Statement............................................ 46
Biography.................................................... 54
Discussion....................................................... 55
Appendix 1: Answers to Post-Hearing Questions
Dr. Hratch G. Semerjian, Acting Director, National Institute of
Standards and Technology....................................... 76
Mr. Robert W. Noth, Manager, Engineering Standards, Deere and
Company........................................................ 85
Dr. Donald R. Deutsch, Vice President, Standards Strategy and
Architecture, Oracle Corporation............................... 90
Mr. Joe S. Bhatia, Vice President and Chief Operating Officer,
Underwriters Laboratory........................................ 94
Mr. David Karmol, Vice President, Public Policy and Government
Affairs, American National Standards Institute................. 99
Appendix 2: Additional Material for the Record
Statement of Donald E. Purcell, Chairman, The Center for Global
Standards Analysis............................................. 104
Deere Responses to Department of Commerce Workshop Questions..... 133
Statement of William Primosch, Senior Director, International
Business Policy, National Association of Manufacturers (NAM)... 137
CHINA, EUROPE, AND THE USE OF STANDARDS AS TRADE BARRIERS: HOW SHOULD
THE U.S. RESPOND?
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WEDNESDAY, MAY 11, 2005
House of Representatives,
Subcommittee on Environment, Technology, and
Standards,
Committee on Science,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:12 p.m., in
Room 2318 of the Rayburn House Office Building, Hon. Vernon
Ehlers [Chairman of the Subcommittee] presiding.
hearing charter
SUBCOMMITTEE ON ENVIRONMENT, TECHNOLOGY, AND STANDARDS
COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
China, Europe, and the Use of
Standards as Trade Barriers:
How Should the U.S. Respond?
wednesday, may 11, 2005
2:00 p.m.-4:00 p.m.
2318 rayburn house office building
Purpose:
On Wednesday, May 11, at 2:00 p.m. the House Science Committee's
Subcommittee on Environment, Technology, and Standards will hold a
hearing to review the increasing use by U.S. trading partners of
technical standards and other standards-related requirements as
barriers to trade, and what U.S. companies, standards development
organizations, and the Federal Government are doing, and could do, to
overcome or reduce these barriers.
Witnesses:
Dr. Hratch Semerjian is the Acting Director of the National Institute
of Standards and Technology (NIST).
Mr. Robert W. Noth is the Manager of Engineering Standards for Deere &
Company, headquartered in Moline, Illinois.
Dr. Don Deutsch is the Vice President for Standards Strategy and
Architecture for Oracle, headquartered in Redwood Shores, California.
Mr. Joe Bhatia is the Vice President for International Operations at
Underwriters Laboratory (UL). UL is a commercial laboratory company
that tests products against U.S. and international standards,
headquartered in Northbrook, Illinois.
Mr. David Karmol is the Vice President of Public Policy and Government
Affairs at the American National Standards Institute (ANSI).
Overarching Questions:
The Subcommittee plans to explore the following overarching
questions:
1. What are standards and why are they important to the global
competitiveness of U.S. companies?
2. How are standards developed in the U.S.? How is this
different from the way standards are developed in our major
trading partners such as Europe and Asia?
3. Is the U.S. system at a disadvantage in the global
standards arena? If so, what should the Federal Government,
states, U.S. standards development organizations, and companies
be doing to reduce their vulnerability to the use of standards
as trade barriers, and how could they promote the adoption of
non-exclusionary standards in the global marketplace? What are
the merits and drawbacks of these different systems?
Background:
What Is a Standard?
A standard is a technical specification for a product, process, or
service. Standards are used to ensure uniformity and inter-operability.
For example, standards make it possible for cellular phones made by
different companies to communicate with each other regardless of
location. Standards ensure that the electrical power grid provides
electricity to homes and businesses in the same way across the U.S.
Another example of a standard is the worldwide uniform electronic
standard that governs the format of credit cards, enabling them to
processed anywhere in the world where credit cards are accepted.
Standards are frequently referenced by or tied to government
regulations to describe or even dictate the technologies or processes
expected to achieve the goals of regulations, and to ensure compliance.
For example, the Federal Communications Commission (FCC) regulations
for the formats for black and white, color, and high-definition
television are based on technical standards.
Why Are Standards Important?
Standards play a powerful role in domestic and international
markets. If a standard achieves broad acceptance in a market, it may
lead to the abandonment of technologies supported by alternative
standards and the domination of a market by a specific technology. An
example is the gradual loss of market share by Sony's Betamax video
recording standard in the 1980s during the early years of video
cassette recorders (VCRs), as the Matsushita VHS standard became more
popular. Once the competition between the two standards had been
resolved by the dominance of one over the other, the uncertainty of
which technology to invest in disappeared, and the market for VCRs grew
rapidly.
Standards facilitate the growth of markets by assuring
predictability and inter-operability. For example, agreements between
manufacturers on communications standards provide certainty for the
entire cell phone market, ``telling'' designers and providers of
peripheral services such as e-mail, web services, and the ability to
take and send pictures what formats they need to use to provide
compatible add-ons to consumers. If there are multiple standards for a
type of product, the uncertainty about which standard will eventually
dominate can paralyze investments into related technologies, or result
in a fragmented market with multiple technologies that cannot work
together. International standards promote international trade by
ensuring that the same product can be sold and used anywhere,
regardless of origin, which is convenient for manufacturers and
customers alike.
How Are Standards Used as Trade Barriers?
Countries can use standards as trade barriers by setting domestic
standards that are different from those which foreign manufacturers
would have normally used. (This can happen inadvertently as well as
deliberately.) This increases the costs of exporting to the country in
question because the companies trying to export there must change their
product lines to meet the special standards requirements of that
country. The existence of unique standards is also a bureaucratic
disincentive for exporters to do business, particularly small and
medium-sized enterprises that do not have the resources to learn about,
understand, and work through often complex or obscure specifications.
For example, countries may require a different standard for safety
belts or emission controls in automobiles that must be tested for, or
institute a complicated testing procedure for imported
telecommunications goods.
Companies worldwide are worried that such measures could escalate
into ``standards wars,'' with countries closing their markets to
imports with technical requirements, rather than tariffs. This concern
was partly responsible for the creation of the World Trade Organization
(WTO), which includes the Technical Barriers to Trade (TBT) agreement,
a very detailed document that lays out the principles that countries
should not use technical standards as trade barriers, should adopt
international standards whenever possible or practicable, and should
work on harmonizing standards through international standards
organizations. However, the TBT includes fairly significant exceptions
for countries to exercise their authority in the areas of health,
safety, and national security, and it is these exceptions that are
often cited when a country sets a new standard to block imports. It is
important to note that although U.S. companies frequently complain
about technical standards as trade barriers abroad, our trading
partners frequently voice similar concerns about standards barriers in
the U.S. market, particularly with respect to telecommunications and
information technology equipment.
The following are some examples of standards-related problems U.S.
companies are beginning to report as presenting or potentially
presenting serious barriers to U.S. trade:
China: Wi-Fi versus WAPI
In an effort to promote an independent economy based on home-grown
technologies, China has stated in its standards strategy that it plans
to develop mandatory domestic technical standards based on Chinese
technology and intellectual property, rather than adopt existing
industry or international technical standards and having to pay license
fees for non-Chinese technology.
To this end, in 2004, the Chinese government announced that it
would require all wireless-enabled devices to meet a Chinese wireless
standard, beginning June 1 of that year. The Chinese standard is called
``WAPI''--Wireless Authentication and Privacy Infrastructure. The
Chinese cited the WTO TBT national security loophole, saying that the
WTO principles of non-discrimination did not apply in this case for
national security reasons. The globally accepted standard for wireless
internet (Wi-Fi) is IEEE (Institute of Electrical and Electronics
Engineers) 802.11i. The global semiconductor industry had been
manufacturing their silicon chips to meet this standard and a variety
of related electronics manufacturers were designing products to be
compatible with it. What was most distressing to non-Chinese
manufacturers, however, was China's requirement that a limited number
of Chinese companies would be licensed to build and certify products to
WAPI, and any foreign manufacturer who wanted to comply with the
standard and do business in China would have to partner with a Chinese
company.
Responding to vigorous lobbying by U.S. industry, in March 2004,
U.S. Secretary of Commerce Don Evans, U.S. Trade Representative Robert
Zoellick, and Secretary of State Colin Powell intervened, and in April
2004, the Chinese government agreed to postpone the implementation of
the standard indefinitely, and participate in the implementation of a
global standard.
Since then, China has been working to get the WAPI standard
accepted via the International Standards Organization (ISO) process in
order to make it an international standard. The ISO is a body made up
of representatives from 100 countries, and is a forum for the
development of global standards. Its deliberations are extremely formal
and process-oriented. WAPI was considered in February 2005, but when
the ISO voted to take the WAPI standard off its ``fast-track'' process,
China walked out of the negotiations, citing unfair treatment. Some
Chinese accused the U.S. of blocking the process. Meanwhile, IEEE's
802.11i standard was fast-tracked for approval by ISO. There have been
no significant developments since then, but China plans to manufacture
products for the Chinese market according to the WAPI standard, and
hopes that market forces and the size of its domestic market will cause
the WAPI standard to be widely adopted.
Standards experts say that, in spite of the apparent setback, China
will continue to try to promulgate unique, exclusionary standards for
its domestic market. They also say that China intends to increase its
presence within international standards bodies such as the ISO, and is
eager to assume a leadership role on several of ISO subcommittees in
order to better position itself to set standards-setting agendas in the
future.
Europe: Domination of International Standards Bodies
Some U.S. companies and industries are very alarmed that the
European Union, having harmonized most of its technical standards among
its membership, has exhibited a tendency to vote as a bloc at
international standards meetings. With 15-25 votes, the EU can exercise
significant influence in the 100-member ISO. More broadly, U.S.
companies that are active in international standards are concerned that
the U.S. commitment to and consistency of participation in
international standards processes is not as great as that practiced by
the Europeans, and the lack of a coherent strategy to guide U.S.
participation is impeding the U.S. ability to act forcefully in the
standards arena.
Europe: Standards Aid to Developing Countries
In contrast to China, the European Union has adopted a very
outward-looking, export-oriented standards strategy which is geared
towards developing new markets for EU-made goods. In addition to using
its national standards as barriers to foreign imports, the EU is
actively promoting its standards among developing countries as a way to
give an advantage to EU-made goods. U.S. manufacturers are worried
because the European Commission has an explicit policy on this issue,
provides significant financial support for these efforts, and sends
European delegations to developing countries to help them launch their
own standards initiatives, based on European standards and the European
system of standards development, which is a government-run and
supported process.
U.S. companies warn that, because the U.S. has not been actively
promoting its more de-centralized standards system in the emerging
markets of developing countries, these governments are unfamiliar and
thus less comfortable with that concept. As a result, they are less apt
to adopt the U.S. model, even though it is less bureaucratic, more
flexible, and more market-oriented. The U.S. system uses an open and
transparent process that solicits the opinion and permits the direct
participation of all interested firms and other entities. Instead,
these countries adopt centralized, government-controlled standards
development systems that are more likely to take an active,
interventionist role in creating standards specifically designed to
protect domestic industries. When they do adopt foreign standards,
these governments are more likely to adopt a European standard over a
U.S. one.
How Can the U.S. Respond?
Standards experts argue that the U.S. must take a more active role
in the international standards arena and take steps to increase its
support for domestic and international standards development,
negotiation, and technical assistance. There are several basic ways in
which the U.S. Government or U.S. companies could reduce the use of
standards as trade barriers to U.S. products:
National Standards Strategy
The American National Standards Institute (ANSI) is developing a
U.S. Standards Strategy document in collaboration with its membership,
independent standards consortia, and federal agencies, particularly the
Department of Commerce. This document, currently in draft form,
contains a number of recommendations on what steps ought to be taken to
reduce the incidence of standards-related trade barriers. This document
emphasizes that the current system of standards development in the U.S.
works well, but that government (both State and Federal) and industry
must work together in a more coordinated fashion and commit more
resources to ensure that the system is adequately supported. The
strategy also says that standards should be developed in as fair and
open a process as possible, and that the Federal Government should work
with its counterparts in other countries to prevent standards from
becoming trade barriers.
Department of Commerce Standards Initiative and Report
In 2003, the Department of Commerce launched a standards initiative
to bring more focus and resources to address the trade barriers
problem. The Department of Commerce in 2004 published a paper entitled
``Standards and Competitiveness: Coordinating for Results,'' which
included 57 recommendations. As a result, some efforts have been made
within the Department of Commerce to ensure that different agencies
that are involved in standards coordinate their activities and share
information, most notably NIST and the International Trade
Administration (ITA). Observers have commented that more funding is
needed to hire subject-matter experts and place them in strategic
locations around the world, and pay for standards training for existing
trade officers. Furthermore, they note that the Department of State and
U.S. Trade Representative's office and other agencies involved in trade
need to be brought into the process to address the issue most
comprehensively.
Standards Outreach to Trading Partners
Although the China-Wi-Fi case is cited as a victory by some, others
say that this incident should not become a model for how to resolve a
standards conflict, because the incident soured relations between the
U.S. and China in the standards arena at a time when standards experts
say the U.S. should be reaching out to China. U.S. industry groups have
urged the U.S. Government to work on improving interactions with China
in the standards arena, such as providing technical assistance to China
and other key Asian countries to help them meet their WTO TBT
obligations. Standards development organizations point out that the
standards development environment is often collegial and cooperative,
and provides many opportunities to settle technical differences before
they manifest themselves in standards wars. ANSI and other participants
in international standards negotiations say that a substantial effort
should be made by all U.S. participants in the standards development
process to build a constructive educational dialogue with the Chinese,
not just on standards themselves, but also on the process issues: how
the U.S. method of industry-driven standards development works, and
what its advantages are.
To counter the European Union's outreach to developing countries,
standards experts recommend that the Federal Government and/or U.S.
companies begin a similar campaign to tout the benefits of the U.S.-
style of standards development in emerging markets in South America and
Southeast Asia. Industry groups such as the National Association of
Manufacturers warn that the U.S. has a significant amount of catching
up to do in this area, and should increase funding for technical
assistance to these countries through such agencies as the U.S. Agency
for International Development (USAID), and ensure these programs are
promoting U.S., rather than European standards and standards-
development processes.
Domestic Standards Awareness and Education
U.S. industries, the Federal Government, and to a lesser extent
State and local governments, appear to be developing a greater
awareness of the importance of standards in international trade, and
their significance as an instrument of trade policy. However, academics
and industry experts together have pointed out that the subject of
standards and their relevance are not part of engineering or business
school curricula, and therefore are not ``baked in'' to the
fundamentals of running a business or designing products. These experts
suggest grant programs to encourage the development of standards
curricula for use in business and engineering schools, as well as a
broader effort to encourage these institutions to incorporate some kind
of standards education into their programs. Greater awareness should
also be cultivated within companies, particularly small and medium-
sized enterprises that are not as exposed to international trade
issues, but are increasingly becoming so.
Standards Assistance to Small and Medium-Sized Enterprises
Major corporations with an international presence are usually more
aware of standards issues, and can afford to hire standards experts or
create an office to manage, track, and participate in international
standards processes. Small businesses, however, are generally not as
knowledgeable about international trade, and do not have the resources
to hire experts and translators necessary to work through the complex
business of getting their products certified in a foreign country. The
ITA has begun to make some efforts to educate its own staff,
particularly the Foreign Commercial Service (FCS), on the standards
issues. In addition, ITA plans to place standards experts in several
countries, including a standards liaison in Beijing in the summer of
2005.
Standards Infrastructure Support
European Union members of international standards-setting bodies,
and increasingly China and other Asian countries, provide greater
levels of support (funding, logistics, technical resources, etc.) to
their standards representatives than does the U.S. Government.
Frequently, many of the delegates sent to international standards
setting organizations by other countries are not only subject matter
experts, but also government representatives. The U.S. participants in
these processes have suggested that more resources be provided by the
U.S. Government for technical support by NIST, whose representatives
participate extensively in international negotiations. They also
suggest that either U.S. companies or the U.S. Government should
provide funding to standards development organizations and ANSI to
boost representation in the international arena, since a more
consistent and forceful U.S. presence at the standards meetings would
lead to international standards that are more in line with U.S.
interests.
Additional Background:
How Does the U.S. Standards Development System Work?
Any standard is the product of a collaborative process. In the
United States there are hundreds of Standards Development Organizations
(SDOs) and Standards Consortia. They are known collectively as
Standards Setting Organization (SSOs). The membership of SSOs may
consist of companies, federal agencies, non-profits, and other
participants. SSOs develop and adopt standards acceptable to their
members through a consensus process.
The traditional U.S. SDOs support themselves by selling the
documents containing the standards to users. Many SDOs represent well-
established industries that over the years have developed highly formal
processes for the proposal, consideration, and acceptance of standards.
``Open Standards'' are a popular way of developing standards, where
the standards are developed in open forums and made available on a
royalty-free basis on the premise that the more inclusive and cost-free
the standard, the wider will be its adoption. This method of developing
standards is particularly common in the Internet-related hardware and
software industries.
``Global Standards'' are standards that are uniform around the
world. Internet protocols, for example, which govern how information is
organized and transmitted through the Internet, are global standards,
developed by the World Wide Web Consortium, or W3C. Another example is
the standardized dimensions for shipping containers. The field of
global standards can be a contentious one, for a global standard often
compromises between existing standards, or requires abandoning many
standards for a single one. The European Union has extensive experience
in this area from harmonizing the standards of its members. Global
standards are unusual, but there is a movement to try to develop and
promote them because of their convenience and growing necessity in an
increasingly interconnected world.
The American National Standards Institute (ANSI)
ANSI is a non-profit umbrella group for SDOs that accredits the
standards development procedures of its member organizations, helps
coordinate standards activities in the U.S., provides a forum for its
members to discuss standards issues, and is the U.S. representative at
two major international standards bodies: The ISO and the International
Electrotechnical Commission (IEC). ANSI's membership includes most of
the major U.S. manufacturers, as well as universities, government
agencies, testing laboratories, and other entities. About two hundred
SDOs in total are accredited by ANSI.
Although it represents the U.S. in the ISO and other international
groups, unlike its foreign counterparts, ANSI is a non-governmental
entity. Hence, ANSI's role as a coordinator of the U.S. is similar to,
but not exactly the same as the role that foreign governments play in
standards development abroad. In the U.S., the role of the government
is largely one of support, providing input where government input is
required, and providing some of the scientific and technical expertise
and research that is needed for any effective standards regime, mostly
through NIST, but also through other federal agencies that relate to
health and safety.
Testing Laboratories and Testing Procedures in Trade: Conformity
Assessment
Companies that decide to manufacture products based on a given
standard have to show that their products are compliant with it. This
is verified by having their products tested against the standard at a
testing lab, and the procedure is known as ``conformity assessment.''
These non-profit and for-profit laboratories test products to ensure
that they meet the specifications of the appropriate standards and
provide verification of this to consumers and other companies. There
are hundreds of testing laboratories in the U.S. and thousands world-
wide. The testing procedures can also constitute trade barriers through
the imposition of lengthy and complicated requirements for foreign
manufacturers. For example, China has instituted the China Compulsory
Certification Mark, which requires companies exporting in a wide range
of categories to have their products tested first. Often, national
standards require that the tests be performed in the laboratories of
the country in question, in some cases the government-run standards
laboratories there. This is also a cause for concern to U.S. companies
that fear possibility of having their intellectual property stolen
during the testing process.
As markets have become more global and more companies sell their
products out of their home countries, nations have started engaging in
Mutual Recognition Agreements (MRAs) which allow testing laboratories
in other countries to test products against foreign standards. The WTO
TBT agreement includes language encouraging the use of MRAs to
facilitate the testing process, but the use of MRAs worldwide is not
comprehensive.
How Are Standards Developed in Other Countries?
In Europe and Asia, the system of standards development is
different from that in the U.S. Although the standards development
processes in other countries is still a collaboration between companies
and other groups, the government play a much more direct role.
Governments provide secretariats to manage their domestic standards
development processes, publish the standards, and support the country
representation at international standards meetings. Moreover, the
standards developed are government-subsidized and are provided to the
user community for free. This makes the adoption of these standards
more attractive, and this policy is being pushed, particularly by the
European countries, into emerging markets which may not necessarily
have standards of their own. This approach to standards development is
more top-down, although companies still participate heavily in the
processes.
National Standards Strategies
In recognition of the importance of standards to their domestic
economic development and ability to penetrate markets abroad, several
countries have developed and published national standards strategies
which outline how they will promote their standards in the global trade
system. They believe that standards are an effective strategic tool in
the world trade arena, and these opinions are borne out in these
standards strategies. Standards strategies are being developed to help
focus the resources and management of countries' standards
infrastructures as a way of extending specific standards regimes to
emerging markets and thus ensure access to these markets for their
products.
These governments see participation in international standards
activities as a way to promote their economic interests. Recently, the
Europeans have been promoting their standards development system in
other countries to enable access to these markets by European goods.
For example, the German Standardization Strategy states:
In the face of increasing market globalization and growing
competition, the international standardization system needs to
be strengthened as the basis for uniform regional and national
standards. Alliances should be created to support the
introduction of the European model. . .this approach could
effectively promote the goals of German industry in accessing
global markets. Given the importance of establishing German
industry in emerging economies and in the markets of the new
and future EU member states, appropriate action must be taken
to gain an early market presence. A vital task in this context
is to communicate an appreciation of the benefits of the
European standardization system and to offer assistance in its
adoption.
Questions for the Witnesses:
Dr. Hratch Semerjian, Acting Director, National Institute of Standards
and Technology (NIST)
Briefly describe how NIST supports standards development and answer
the following questions:
1. What is NIST's role in the international standards arena?
2. Describe the Department of Commerce's standards document
``Standards and Competitiveness: Coordinating for Results'' and
the status of the implementation of its recommendations. What
remains to be done?
3. How would NIST's FY 2006 budget request improve the U.S.
position with respect to standards development? Describe any
other NIST standards initiatives that would contribute to the
competitive position of U.S. industry.
Mr. Robert W. Noth, Manager of Engineering Standards, Deere & Company;
Dr. Don Deutsch, Vice President for Standards Strategy and
Architecture, Oracle; Mr. Joe Bhatia, Vice President for
International Operations, Underwriters Laboratory
1. What has been the experience of your company with Chinese
and European technical standards, and how do you work with
these countries in this area? What are your concerns regarding
the technical standards and standards practices of other
countries?
2. For your industry, how are standards developed in the U.S.?
How is this different from the way standards are developed in
our major trading partners such as Europe and Asia? What are
the merits and drawbacks of these different systems? Is the
U.S. system at a disadvantage in the global standards arena,
and if so, why?
3. What should the Federal Government, States, U.S. standards-
setting organizations, and companies be doing to reduce your
vulnerability to the use of standards as trade barriers, and
how could they promote the use of non-discriminatory standards
in the global marketplace? How should these efforts be
coordinated?
Mr. David Karmol, Vice President for Public Policy and Government
Affairs, American National Standards Institute (ANSI)
Briefly describe ANSI's role in national and international
standards development and answer the following questions:
1. What has been China's and Europe's approach to the
development and use of standards? How is this approach changing
international standards development in organizations such as
the International Standards Organization, and through bilateral
relations with other countries? What are the implications for
U.S. trade with China and the rest of the world?
2. Based on the U.S. Standards Strategy that ANSI has been
developing, what should the Federal Government, States, U.S.
standards development organizations, and companies be doing to
reduce their vulnerability to the use of standards as trade
barriers, and how could they promote the adoption of non-
exclusionary standards in the global marketplace? How should
these efforts be coordinated?
Chairman Ehlers. Good afternoon, and welcome to today's
hearing entitled ``China, Europe, and the Use of Standards as
Trade Barriers: How Should the United States Respond?''
I apologize for the delayed start. We are waiting for the
Ranking Member to arrive, but he has been delayed, and so, with
the permission of the staff, the Minority staff, we will begin.
I also want to apologize ahead of time. We may be able to
keep things rolling here, but I am in a committee that is
having votes today, and they--I was told they desperately need
my vote, even though they don't know how I am going to vote
yet. Maybe if I cast one wrong vote, they will send me back.
But we have someone who will be here in a bit to substitute for
me in the event that that happens. If I get called for this
vote before that happens, we will have to recess momentarily
while I go vote.
So I apologize ahead of time if that happens.
This hearing is an opportunity to examine some of the most
serious problems facing U.S. companies as a result of other
nations using standards as trade barriers. We will also learn
what the U.S. Federal Government, U.S. companies, and U.S.
standards-setting organizations can do to reduce, avoid, or
eliminate these barriers.
A standard is a technical specification for a production,
process, or service. Standards are used to assure uniformity
and inter-operability. For example, standards make it possible
for cellular phones made by different companies to communicate
with each other, regardless of location in the United States.
But, because Europe and many other nations have different
standards, our U.S. cell phones generally don't work in those
areas. When they do, it is generally at considerable extra
expense.
It is estimated that 80 percent of the total value of
global trade, $7.3 trillion in 2003, is affected by standards
and related technical regulations and testing procedures. Thus,
this issue has enormous implications for U.S. companies.
U.S. companies and standards-setting organizations are
concerned that our trading partners are using technical
standards as trade barriers to U.S. products to protect their
own domestic industries. This practice seems to be increasing
as traditional tariff barriers are being lowered.
A recent example comes from China's attempt last year to
use a different standard for wireless computer chips, which
would have required all companies to make two sets of chips:
one for China, and one for the rest of the world. Fortunately,
the U.S. Government was able to pressure China to back down.
But China will continue to attempt to use standards to favor
Chinese manufacturers to the detriment of U.S. companies.
This hearing will help us to better understand these
complex problems and find ways to help U.S. companies. We also
hope it will enable us to stave off any ``standards wars.''
[The prepared statement of Chairman Ehlers follows:]
Prepared Statement of Chairman Vernon J. Ehlers
Good afternoon and welcome to today's hearing entitled ``China,
Europe, and the Use of Standards as Trade Barriers: How Should the U.S.
Respond?''
This hearing is an opportunity to examine some of the most serious
problems facing U.S. companies as a result of other nations using
standards as trade barriers. We will also learn what the U.S. Federal
Government, U.S. companies, and U.S. standards-setting organizations
can do to reduce, avoid, or eliminate these barriers.
A standard is a technical specification for a product, process, or
service. Standards are used to ensure uniformity and inter-operability.
For example, standards make it possible for cellular phones made by
different companies to communicate with each other regardless of
location in the U.S. But, because Europe and many other nations have
different standards, our U.S. cell phones generally don't work in those
areas. When they do, it is generally at considerable extra expense.
It is estimated that 80 percent of the total value of global trade
($7.3 trillion in 2003) is affected by standards and related technical
regulations and testing procedures. Thus, this issue has enormous
implications for U.S. companies.
U.S. companies and standards-setting organizations are concerned
that our trading partners are using technical standards as trade
barriers to U.S. products to protect their own domestic industries.
This practice seems to be increasing as traditional tariff barriers are
being lowered.
A recent example comes from China's attempt last year to use a
different standard for wireless computer chips, which would have
required all companies to make two sets of chips, one for China and one
for the rest of the world. Fortunately, the U.S. Government was able to
pressure China to back down. But, China will continue to attempt to use
standards to favor Chinese manufacturers to the detriment of U.S.
companies.
This hearing will help us to better understand these complex
problems and find ways to help U.S. companies. We also hope it will
enable us to stave off any ``standards wars.''
Chairman Ehlers. With great pleasure, I now recognize the
Ranking Member, the gentleman from Oregon, Mr. Wu, for his
opening statement. Good timing.
Mr. Wu. Thank you very much, Mr. Chairman.
Standards and timing are everything.
Good afternoon, and I want to join Chairman Ehlers in
welcoming everyone to this afternoon's hearing.
I will be brief in my remarks, because I am here to learn
from you all.
While standards support the development of new technology
and form the basis of commerce, their role and importance is
not well understood by either the general public or policy-
makers. I welcome the opportunity we have today to learn more
about the role of standards in an increasingly global
marketplace.
I have some understanding of the importance of standards
from my prior experience as an attorney representing high-tech
companies in international trade issues in both India and
China. While standards can support commerce, they can also be
used as non-tariff barriers to trade and to promote one
technology over another. We need to ensure that there is a
level playing field to ensure that standards are used to
promote rather than hinder trade.
I realize that we can't force other countries to adopt the
standards system that is used in the United States. However, we
can ensure that the Federal Government is using its resources
to support U.S. standards, businesses, and industry.
What I hope to learn today is: How can the Federal
Government do a better job in supporting U.S. standards and be
responsive to our industry's concerns about standards or abuses
of standards by other countries in the form of non-tariff trade
barriers? How can coordination among federal agencies dealing
with standards be improved? If countries violate standards
provisions in the WTO, is the Federal Government currently
sufficiently vigorous in its prosecution of these violations?
And finally, how do the witnesses see U.S. standards
development organizations evolving over the next five, 10, or
20 years?
I applaud the development of a National Standards Strategy
under the direction of the American National Standards
Institute; however, I want to gain a better understanding of
the actions and resources required for its implementation.
While the National Standards Strategy lays out a series of
ambitious goals, we need to also lay out a plan on how to
achieve these goals.
I want to thank our witnesses for taking the time to appear
before the Subcommittee today, and I want to assure them that I
consider today to be the first step in a continuing dialogue on
how to best improve the competitiveness of American industry.
I yield back to the Chairman.
[The prepared statement of Mr. Wu follows:]
Prepared Statement of Representative David Wu
Good Afternoon and I want to join Chairman Ehlers in welcoming
everyone to this afternoon's hearing.
I will be brief in my remarks, because we are really here to learn
about the problems facing industry and what role the government can
support them.
While standards support the development of new technology and form
the basis of commerce, their role and importance is not well-understood
by the public or most policy-makers. I welcome the opportunity we have
today to learn more about the role of standards in an increasingly
global marketplace.
I have some understanding the importance of standards from my prior
experience as a lawyer representing high-tech companies on
international trade issues in both India and China. While standards can
support commerce, they can also be used as barriers to trade and to
promote one technology over another. We need to ensure that there is a
level playing field to ensure that standards are used to promote trade
not hinder it.
I realize that we can't force other countries to adopt the
standards system that is used in the United States. However, we can
ensure that the Federal Government is using its resources to support
U.S. standards and industry. What I hope to learn today is:
How can the U.S. Government a better job in
supporting U.S. standards and being responsive to industry's
concerns about standards abuses by other countries?
How can coordination among federal agencies dealing
with standards issues be improved?
If countries violate standards provisions in the WTO,
is the Federal Government vigorous in its prosecution of these
violations?
And how do the witnesses see U.S. standards
development organizations evolving over the next five to ten
years?
I applaud the development of a National Standards Strategy under
the direction of the American National Standards Institute, however I
want to gain a better understanding of the actions and resources
required for its implementation. While the National Standards
Strategies lays out a series of ambitious goals, we need to also lay
out a plan on how to achieve these goals.
I want to thank our witnesses for taking the time to appear before
the Subcommittee today. And I want to assure them that I consider today
to be a first step in a dialogue on how best to improve the
competitiveness of U.S. industry.
Chairman Ehlers. I thank the Ranking Member.
If there is no objection, all additional opening statements
submitted by the Subcommittee members will be added to the
record. Without objection, so ordered.
At this time, I would like to introduce our witnesses. I am
pleased that we have a distinguished panel, which will help us
zero-in on the problems that we are discussing today.
The first person is Dr. Hratch Semerjian. He is the Acting
Director of the National Institute of Standards and Technology,
better known as NIST. Next is Mr. Robert Noth. He is the Manger
of Engineering Standards for Deere and Company, ``Nothing runs
like a Deere,'' headquartered in Moline, Illinois. And I grew
up to the--as I told him earlier, I grew up to the sounds of
the putt-putt of the two-cylinder John Deere tractor, which is
a mainstay in the community where I grew up. Third is Dr. Don
Deutsch. He is the Vice President for Standards Strategy and
Architecture for Oracle, headquartered in Redwood Shores,
California. Every hearing should have an ``oracle'' present.
Next is Mr. Joe Bhatia. He is the Vice President for
International Operations at Underwriters Laboratory,
headquartered in Northbrook, Illinois. And the final witness is
Mr. David Karmol. He is the Vice President of Public Policy and
Government Affairs at the American National Standards
Institute, better known as ANSI.
As our witnesses presumably know by now, spoken testimony
is limited to five minutes each, after which the Members of the
Committee will then have five minutes each to ask questions. If
your testimony is longer than five minutes, we will
automatically enter all of your testimony into the record, so
you can just give an oral summary and conclude that way.
I am pleased to call on Dr. Semerjian.
STATEMENT OF DR. HRATCH G. SEMERJIAN, ACTING DIRECTOR, NATIONAL
INSTITUTE OF STANDARDS AND TECHNOLOGY
Dr. Semerjian. Thank you, Mr. Chairman and Ranking Member
Wu. Thank you for the opportunity to testify today on the topic
of the role of standards in international competitiveness.
We need to take seriously the challenges posed by the
growing impact of standards on market access, so that we can
better position the United States and the U.S. companies to
compete in the global market. There is much work to be done to
ensure that the U.S. standards interests have fair opportunity
to be reflected in standards used globally and that these
interests are more effectively promoted in our most important
markets, such as China.
The decentralized private sector demand-driven U.S.
standards system has many strengths. U.S. companies derive
significant advantage from the system's flexibility and
responsiveness. The government also derives great benefit, both
as a customer and user of standards.
The system serves the country well, but there is room for
improvement. In particular, the growing importance of standards
to international competitiveness dictates that the United
States, both private and public sectors, move quickly to
strengthen the interface between the U.S. standards system and
the international system. This need was pointed out clearly two
years ago by industry in response to questions by the
Department as our Standards Initiative, launched by then-
Secretary Donald Evans. The Standards Initiative was bolstered
last year with a comprehensive report on ``Standards and
Competitiveness: Coordinating for Results,'' which contains
some 50 recommendations for moving forward, including
intensifying Departmental efforts in China and in collaboration
with the private sectors in international standards
organizations.
The Department's May 2004 report also noted the importance
of Department representatives participating in the revision of
the U.S. Standards Strategy. NIST is an active participant in
the work being done by ANSI and the U.S. Standards Strategy
Committee to pull together a diverse set of stakeholders to
update and revise this strategy.
In the United States, standards are typically developed in
response to specific concerns and constituent issues expressed
by both industry and government. Department agency supports
standards through direct participation in standards development
activities of ANSI and standards-developing organizations. More
than 3,200 staff from 26 federal agencies participate in
private sector standards development activity. Government
agencies are also major users of some 13,000 standards. Both
the U.S. Government and private sector participate in
international standards development in numerous venues. We need
to make effective use of our participation in each of these
venues to ensure that U.S. interests are advanced.
NIST has a variety of roles in the U.S. standards system.
We are frequently looked to for research and measurements that
provide the technical underpinning for standards. NIST is
tasked with promoting the efficiency of the U.S. standards
system by coordinating federal agency use of non-government
standards and participating in the development of relevant
standards and through promoting coordination between the public
and private sector in both the standards and conformity
assessment arenas.
NIST is also directed by law to develop specific standards,
cryptographic standards and applications for federal IT
security, biometric, and voting system standards, and to help
industry develop enterprise integration standards.
By the way, Mr. Chairman, you will pleased to know that
NIST and the Technical Guidelines Development Committee,
submitted the initial set of voluntary voting system guidelines
to the Election Assistance Commission last Monday in timely
compliance with the legislation.
NIST's technical programs support global recognition of
U.S. standards. These programs take advantage of synergies with
related Department of Commerce programs and with the private
sectors and are critical to U.S. manufacturers' access to
export markets. They include our Standards and Trade Workshop
program, maintaining good working relationships with foreign
standards officials, leadership in key standards-development
activities that impact trade, and notifying U.S. exporters of
proposed technical regulation standards in key foreign markets.
NIST's fiscal year 2006 budget proposal addresses the need
pointed out by the Committee to strengthen the scientific and
technical infrastructure needed to support the U.S. standards
base. The proposal supports advances in manufacturing,
combining activities to help U.S. manufacturers meet
measurement, integration, and international standards
challenges. It includes activities relating to standards for
manufacturing enterprise integration, nano-manufacturing, and
expanding access to global markets.
In fact, to understand the global standards arena fully,
you need to consider not only documentary standards, but also
measurement standards. Manufacturing and measuring are two
sides of the same coin. If you can't measure, you can't
manufacture. And if you can't assure those measurements to
other companies and consumers, here and abroad, you probably
will lose them to competitors.
So I am very pleased to announce today that NIST is
launching a comprehensive effort to roadmap America's
measurement needs. The Nation's measurement system is a vital
element of our innovation infrastructure. The goal of this very
important initiative is to ensure that the Nation's highest
priority measurement needs are identified and met. The
initiative recognizes the growing importance of both the
international measurement system and its intersection with
international standards.
In summary, we recognize the global challenges posed to
U.S. competitiveness in both the documentary and measurement
standards arenas. Now, more than ever, in an environment of
increasingly scarce resources and many competing demands, we
need to create and implement mechanisms that will enable the
public and private sectors to make informed choices about how
best to invest resources to achieve the greatest impact. NIST
is committed to the success of this effort.
Thank you, again, for providing a forum for discussion of
these important issues for the U.S. economy.
[The prepared statement of Dr. Semerjian follows:]
Prepared Statement of Hratch G. Semerjian
Mr. Chairman and Members of the Committee, thank you for the
opportunity to testify today on the topic of the role of standards in
international competitiveness. Standards impact an estimated 80 percent
of world trade and are a significant factor in competitiveness
worldwide. We need to take seriously the challenges posed by the
growing impact of standards on market access so that we can better
position the United States and U.S. companies to compete in the global
market. There is much work to be done to ensure that U.S. standards
interests have fair opportunity to be reflected in standards used
globally and that these interests are more effectively promoted in our
most important markets, such as China. This need has become more real
and apparent as more countries become active in the global market and
the global standards arena.
To understand the global standards arena, you need to look at two
types of standards--measurement standards and documentary standards.
Measurement standards, which are the technical forte of the National
Institute of Standards and Technology, are generic tools that are
widely used by industry to support efficiency in the marketplace. These
measurements are vital to international trade. For example, the way
that I measure electromagnetic compatibility (EMC) or flow rates may
not be the same way that a European or Chinese lab measures EMC or flow
rates. Differences in measurements and lack of equivalency among
national measurement systems can delay, and sometimes block, entry into
foreign markets.
Documentary standards--standards embodied in written documents and
promulgated by Standards Development Organizations (SDOs)--establish
the fitness of a product for a particular use. These standards may
address product features, performance, quality, compatibility, or other
product attributes. Examples include the dimensions of lumber, rules
for the construction and operation of steam boilers and pressure
vessels, and specifications for film speed. There also are documentary
standards that set specifications for the function and operation of a
device or system, covering everything from elevators and refrigerators
to handicapped access. There are thousands upon thousands of standards
like these that are invisible to most consumers but play a vital role
in facilitating global trade.
The United States is a demand-driven, highly diversified economy
and society, and its standards system reflects this framework. Our
decentralized, sector- and technology-based standards system is diverse
and inclusive. The system is based on a strong private-public
partnership. In the United States, standards are typically developed in
response to specific concerns and constituent issues expressed by both
industry and government. This demand-driven approach contrasts with
that of many of our trading partners, who favor a much more top-down,
government-driven approach.
The U.S. standards system is highly decentralized and naturally
partitioned for most applications into industrial sectors that are
supported by numerous independent, private-sector standards development
organizations (SDOs)--currently more than 450 such organizations, with
at least 150 more consortia standards development activities underway.
Approximately 20 SDOs develop about 80 percent of standards in the
United States.
Without any central authority or direction from government, a wide
variety of U.S. voluntary standards activities have proceeded very
successfully along sector-specific lines for over a century. Although
U.S. decisions about standards authority and responsibilities were not
made deliberately with a view to providing support for U.S. efforts in
international trade, they work well to support the domestic goals of
protection of health, safety and the environment as well as
specification of products, processes and systems.
The American National Standards Institute (ANSI), a private sector,
non-profit organization founded in 1918 by several SDOs and U.S.
Government representatives, including the Department of Commerce,
functions as a central clearinghouse and coordinating body for its
member organizations, which in turn develop standards on a
decentralized, consensus basis. ANSI is composed of more than 700
company members; 30 government agencies; 20 institutions; and 260
professional, technical, trade, labor and commercial organizations.
Government agencies support standards through direct participation
in standards development, as well as through participation in policy
activities of ANSI and specific standards developing organizations in
which they have a direct interest. Many agencies are active
participants in standards development, at both the national and
international levels. This participation is encouraged by both law and
policy. More than 3200 staff from 26 federal agencies participate in
private sector standards development activities. At NIST, there are
more than 350 participants, more than a quarter of our technical staff.
Government agencies are also major users of standards, to support
regulation of health, safety, and the environment, as well as for
procurement of products and services for federal use. We currently
count more than 13,000 private sector standards in use by the Federal
Government. This substantial federal agency reliance on private sector
standards reinforces the importance of globally recognized standards
that facilitate the seamless flow of products and services across
borders.
Both the U.S. Government and private sector participate in
international standards development in a variety of ways: through
private, voluntary organizations whose membership is on a national body
basis; through treaty organizations (governments are members); through
professional and technical organizations whose membership is on an
individual or organizational basis; and through consortia, whose
membership is typically company and industry-based. We need to make
effective use of our participation in each of these venues to ensure
that U.S. interests are advanced.
Our decentralized, private sector and demand-driven U.S. standards
system has many strengths. U.S. companies derive significant advantage
from the system's flexibility and responsiveness. The government also
derives great benefit from the system, both as a customer and user of
standards. Government agencies play an important role in the U.S.
standards system as advocates for the national interest, both here at
home and globally.
The system serves the country well, but there is room for
improvement. In particular, the growing importance of standards to
international competitiveness dictates that the United States--both
private and public sectors--move quickly to strengthen the interface
between the U.S. standards system and the international system. This
need was pointed out clearly two years ago by industry in response to
questions posed by the Department of Commerce as part of its Standards
Initiative.
The Department of Commerce's Standards Initiative was launched in
March 2003 by then-Secretary Donald Evans specifically to address U.S.
industry concerns that issues relating to standards and assessment of
conformity to those standards in foreign markets were among the
greatest barriers to expanding exports. U.S. businesses want a fair and
equitable standards playing field and Secretary Evans directed the
Department to assist them in achieving that balance where standards
would ideally be judged not only on their technical merits but also on
their developers' adherence to the principles of openness,
transparency, balance or interests, due process and consensus. The
Secretary's Standards Initiative was bolstered last year with a
comprehensive report on Standards and Competitiveness: Coordinating for
Results, which contains some 50 recommendations for moving forward.
These recommendations respond in part to specific industry requests to
the Department for action in key areas.
Examples of industry requests of the Department on standards issues
include a desire for the Department to focus on China as the primary
market where the United States should attempt to influence standards
development and trade policy relating to standards; counter the
aggressive promotion of European standards throughout the world; limit
the potential for EU block voting on standards in international
standards development organizations; increase pressure on countries to
implement their World Trade Organization (WTO) or Free Trade Agreement
(FTA) obligations; and coordinating more closely interagency on
standards issues.
In close collaboration with industry, the Department is pursuing an
active multi-pronged strategy with respect to standards-related issues
in China. This strategy includes continued engagement at the policy and
technical levels to deal with specific issues as they arise, providing
grant support where appropriate to U.S. standards developing
organizations to open offices in China, posting a standards attache to
the U.S. Embassy in Beijing this summer, and sponsoring an ongoing
series of both general and sector-specific workshops involving Chinese
officials and relevant U.S. private and public sector interests.
Regarding the issue of EU influence in standards on the international
level, the Department is working with ANSI and industry to define and
address these concerns at the policy level and also on a case-by-case
basis.
The Department's May 2004 report also noted the importance of
Department representatives participating in the revision of the U.S.
Standards Strategy, which was first created in 2000 under the auspices
of ANSI. The purpose of the strategy is to strengthen the U.S.
standards system and to establish a framework for achieving goals
related to both the competitiveness of U.S. industry and achieving a
balanced global trading system. ANSI initiated the first effort to
develop a national standards strategy in 1998, in response to a
challenge from Ray Kammer, then Director of NIST. The strategy was
published in August 2000.
The Strategy, currently under revision to reflect the new global
environment, provides an excellent framework for strengthening the
interface between the U.S. standards system and the international
system. The purpose of a standards strategy for the United States is to
establish a framework that can be used by all interested parties to
further advance trade issues in the global marketplace, enhance
consumer health and safety, meet stakeholder needs and, as appropriate,
advance U.S. viewpoints in the regional and international arena. The
U.S. Standards Strategy provides both a statement of the purpose and
ideals that underlie the U.S. system and a vision for the future of the
U.S. standards system in a more globally competitive economy.
The revised U.S. Standards Strategy is being developed in an open,
balanced, transparent and participatory process. More than 100
representatives of industry; small, medium and large enterprise;
standards developers and consortia; consumer groups; and Federal and
State governments have participated in the development and review
process. The Strategy highlights key strategic imperatives that will
maximize the strengths of the U.S. system and minimize weaknesses. NIST
, and the Department as a whole, are strong supporters of the work
being done by the American National Standards Institute and the U.S.
Standards Strategy Committee to pull together a diverse set of
stakeholders in the future of the U.S. standards system to update and
revise the strategy.
A sectoral approach recognizes that there is no simple prescription
that can be handed down to fit all needs. Sectors must develop their
own plans; the purpose of the U.S. Standards Strategy is to provide
guidance and coherence without constraining creativity or
effectiveness. The Strategy consists of a set of strategic initiatives
having broad applicability which will be applied according to their
relevance and importance to particular sectors. Stakeholders are
encouraged to develop their own tactical initiatives where needed and
this strategy suggests some which have widespread applicability.
The Strategy addresses opportunities for improvement in getting the
message out about the principles and policies that both underlie the
U.S. system and are key to the development of globally relevant
standards, whatever venue stakeholders choose for their work. The
Department will work closely with key players in the U.S. system to
implement relevant elements of the Strategy. We will also continue our
strong partnership with ANSI to support its role of coordination of the
U.S. system and as member body of the International Organization for
Standardization (ISO) and the International Electrotechnical
Commission. U.S. membership in the IEC is coordinated by the U.S.
National Committee to the IEC, through ANSI.
NIST has a variety of roles in the U.S. standards system. As the
national measurement institute, NIST is frequently looked to for
research and measurements that provide the technical underpinning for
standards, ranging from materials test methods to standards for
building performance, and for a range of technologies, from information
and communications technologies to nano- and biotechnologies. Under the
provisions of the National Technology Transfer and Advancement Act and
OMB Circular A-119, NIST is tasked with promoting the efficiency of the
U.S. standards system, by coordinating federal agency use of non-
government standards and participation in the development of relevant
standards, and through promoting coordination between the public and
private sectors in both the standards and conformity assessment arenas.
NIST is also directed by law to develop specific standards--
cryptographic standards and applications, as well as guidelines,
procedures and best practices for Federal IT security; biometric and
voting system standards--and to help industry develop enterprise
integration standards.
NIST technical programs support global recognition of U.S.
standards, where relevant, as well as harmonization of standards to
avoid barriers to trade. These programs take advantage of synergies
with related Department of Commerce trade-related programs and with the
private sector, and are critical to U.S. manufacturers' access to
export markets. Two key outcomes of these programs are an expanded
network of foreign officials knowledgeable about the U.S. system, and
wider use and acceptance by foreign governments of U.S. products and
standards that incorporate U.S. technology.
NIST's proposed FY06 initiative on standards in support of global
trade addresses specific needs of U.S. businesses seeking to compete
successfully in global markets. The initiative supports U.S.
competitiveness by ensuring that innovative U.S. businesses are
equipped to satisfy global as well as U.S. measurement and standards
requirements, thus enabling rapid response to changes in technologies
and early identification of new and non-traditional measurement and
standards needs. Specific activities include targeted measurement
inter-comparisons with national measurement institutes in key markets,
leadership in key documentary standards development activities in new
technology areas, and expanded standards-related information relevant
to key markets.
With this year's National Export Strategy, the U.S. Government is
also making improvements on the trade promotion front. U.S. Government
agencies, led by the Secretary of Commerce under the Trade Promotion
Coordinating Committee (TPCC), are collaborating to improve the
government's standards-related trade promotion efforts. We are
currently developing a strategy through which we can--working with the
private sector--do a better job of promoting U.S. standards interests
in our most important markets, such as China.
We intend to partner with U.S. industry and standards developers to
more effectively promote the virtues of an open, transparent and
impartial approach to standards development and implementation. Both
U.S. standards interests and policy objectives will be served when the
governments of our most important export markets are convinced of the
strengths of this approach versus alternatives that are less open and
transparent, and more subjective.
We recognize that the government and private sector must each
leverage our scarce resources. The TPCC strategy endeavors to develop
an ambitious partnership with U.S. manufacturers and service providers,
and the U.S. standards community, to better promote U.S. standards
interests in our most important markets.
NIST plays a major role in maintaining the measurement
infrastructure necessary to advance U.S. interests in international
trade, commerce and regulatory affairs. Manufacturing and measuring are
two sides of the same coin. If you can't measure, you can't
manufacture, at least not up to the expectations of increasingly
demanding customers. And if you can't assure those measurements to
other companies and consumers here and abroad, you probably will lose
them to competitors.
So I am very pleased to announce today that the National Institute
of Standards and Technology is launching a comprehensive effort to
roadmap America's measurement needs. The Nation's measurement system is
a vital element of our innovation infrastructure. The goal of this very
important initiative--which will be undertaken in close cooperation
with the private sector and other agencies--is to ensure that the
Nation's highest priority measurement needs are identified and then
met. Working with others, NIST will develop and publish a U.S.
Measurement System roadmap on a regular basis. We will report to our
customers and stakeholders on what needs to be done by NIST--and
others--to address American's measurement needs. NIST will hold
workshops in specific areas and encourage others to also hold workshops
to identify priority needs. NIST then will sponsor a summit in January
2005 to focus discussions on how to meet those needs. We need to be
certain that the U.S. measurement system is robust so that it can
sustain America's economy and citizens at world-class levels in the
21st century. The initiative recognizes the growing importance of both
international measurement system and its intersection with
international standards.
We recognize the global challenges posed to U.S. competitiveness,
in both the documentary and measurement standards arenas. Now more than
ever, in an environment of increasingly scarce resources and many
competing demands, we need to create and implement mechanisms that will
enable both the public and private sectors to make informed choices
about how best to invest resources to achieve the greatest impact.
Together, stakeholders in the U.S. standards system are collaborating
to lay out a comprehensive strategic approach, implemented through
effective private-public partnership, to better position the United
States and U.S. companies to compete in the global market. Progress
will require communication, cooperation, planning, and a commitment to
action. NIST is committed to the success of this effort. Thank you for
allowing me to testify today, and I would be happy to answer any
questions.
Biography for Hratch G. Semerjian
Hratch G. Semerjian is the Acting Director of NIST. NIST's former
Director, Arden Bement, Jr., began serving a six-year term as Director
of the National Science Foundation in November 2004.
Dr. Semerjian has served as the Deputy Director of NIST since July
2003. In this position, Dr. Semerjian is responsible for overall
operation of the Institute, effectiveness of NIST's technical programs,
and for interactions with international organizations. NIST has a total
budget of about $858 million, and a permanent staff of about 3,000, as
well as about 1,600 guest researchers from industry, academia, and
other national metrology institutes from more than 40 countries. Most
of the NIST researchers are located in two major campuses in
Gaithersburg, Md., and Boulder, Colo. NIST also has two joint research
institutes; the oldest of these is JILA, a collaborative research
program with the University of Colorado at Boulder, and the other is
CARB (Center for Advanced Research in Biotechnology), a partnership
with the University of Maryland Biotechnology Institute.
Dr. Semerjian received his M.Sc. (1968) and Ph.D. (1972) degrees in
engineering from Brown University. He served as a Lecturer and Post
Doctoral Research Fellow in the Chemistry Department at the University
of Toronto. He then joined the research staff of Pratt & Whitney
Aircraft Division of United Technologies Corp. in East Hartford, Conn.
In 1977, Dr. Semerjian joined the National Bureau of Standards (now
NIST), where he served as Director of the Chemical Science and
Technology Laboratory (CSTL) from April 1992 through July 2003. Awards
he has received include the Fulbright Fellowship, C.B. Keen Fellowship
at Brown, the U.S. Department of Commerce Meritorious Federal Service
(Silver Medal) Award in 1984, and the U.S. Department of Commerce
Distinguished Achievement in Federal Service (Gold Medal) Award in
1995. In 1996, he was elected a Fellow of the American Society of
Mechanical Engineers. In 1997, he received the Brown Engineering Alumni
Medal. Dr. Semerjian was elected to the National Academy of Engineering
in 2000.
Chairman Ehlers. Thank you very much.
Mr. Noth.
STATEMENT OF MR. ROBERT W. NOTH, MANAGER, ENGINEERING
STANDARDS, DEERE AND COMPANY
Mr. Noth. Good afternoon.
Chairman Ehlers. Turn on your microphone, please.
Mr. Noth. Thank you, Mr. Chairman.
My name is Bob Noth, and I am the Manager of Engineering
Standards for Deere and Company. I have been involved with
standards now for about 15 years, so I have a little
experience.
For those of you who may not know us, we are a U.S.-based
manufacturer of machinery and equipment for the ag and
construction, forestry and turf care commercial markets, and
our products are sold in 160 countries around the world
currently, and we have more than 50 manufacturing operations
located in 17 countries.
We consider it both an honor and a privilege to share our--
--
Chairman Ehlers. Excuse me. We will have to go into recess
briefly, and I will be back as soon as I can.
[Recess.]
Chairman Ehlers. I apologize to everyone, including--
especially Mr. Noth, for interrupting the proceedings, but my
presence was demanded elsewhere. And since we did not have an
alternative Chair, I had little choice.
You may proceed, Mr. Noth.
Mr. Noth. Thank you, again, Mr. Chairman.
As I was just concluding, we consider it an honor and a
privilege to share our experiences regarding standards today.
John Deere products, and those of our competitors in the
markets we serve, are not heavily regulated compared to some
other products in other industries. Active participation in the
development of and compliance with voluntary standards has been
a long-standing John Deere, and in fact, off-highway industry
practice. We involve John Deere employees as subject matter
experts on relevant standards committees in the markets we
serve. We have been involved in Europe since the 1960s, and the
level of engagement has escalated significantly since 1992 to
keep pace with standards development for the European Common
Market. We are not as heavily engaged in China, but we
anticipate a growing involvement as the Chinese market develops
and we learn our ways through the Chinese standards-development
system.
This has worked effectively for us, but we do have concerns
for the future based on recent experience and anticipated
changes in the global market. Specifically, the European top-
down, all-encompassing approach to regulation, as opposed to
the U.S. approach, which is based more on addressing specific
needs, coupled with their linking of regulatory compliance to
voluntary standards through what they call the ``presumption of
conformity'' and the ``best available technology'' mindset that
they have has dramatically increased regulatory coverage and
voluntary standards development and had a significant increase
in the cost of delivering product in the European market.
In addition to that--excuse me. I got something out of
order. I am sorry.
The Europeans are aggressively exporting their system and
their standards to the other countries and developing markets
around the world. The EU itself and member-states are providing
millions of Euros in technical assistance in exchange for
agreements to prefer European-based standards, technology, and
of course, European producers. Countries like Brazil, Mexico,
Russia, and Israel are making such agreement, even when their
markets show clear preferences for U.S. goods and services.
Many countries within the WTO and signatories to the TBT
agreement continue to be slow in implementation of the
provisions and mechanisms within the agreement. This includes
their failure to recognize standards set according to the TBT
principles as ``international'' and thereby creating potential
problems for the acceptance of U.S. goods exported into those
markets.
And an even larger concern for our industry beyond the
proliferation of country-unique or regionally-unique standards
and regulatory requirements is the issue of compliance,
otherwise known as Conformity Assessment. Most countries
outside the U.S. and Europe insist on conducting their own
assessments of conformity before products can enter their
markets. For our products and our industry, these requirements
represent a huge redundant and unnecessary cost that must be
passed on to the consumer with no additional value. Based on
the methods employed by some countries, it appears that some of
these requirements are more motivated by technology transfer
than by consumer protection.
The demand for John Deere products grows globally and the
cost of configuring products to unique local standards,
especially those required by governments and not valued by the
consumers, becomes prohibitive for both the manufacturer and
the customers. The need for globally-recognized and accepted
standards that minimize the need for unnecessary expensive
product variation increases. As a result, the off-highway
equipment industry has gravitated to the development of a
portfolio established under the auspices of the International
Organization of Standards. This, of course, has forced some
changes in how we deal with our American-based standards-
developing organizations, like SAE and ASAE, and over the past
few years, we have been morphing them to a different business
model for our particular standards and changed some of the
funding that we provide in order for them to provide the
appropriate infrastructure. It also makes ANSI a more strategic
player for us, and that is why we have been engaged with ANSI
so aggressively.
The off-highway industry prefers the ISO process, because
it offers broad political acceptance to our standards, and we
have a good argument for the international recognition of those
standards when we build product to them. We can have a seat at
the table, and our delegation includes subject matter experts
from our companies. And any dependence on alternative
international processes leaves the door open for competing
standards to be developed and gain political acceptance in
competition with the standards we may be using.
The primary drawbacks, of course, are that the process--the
U.S. can be disadvantaged by the ``one country-one vote''
principle if there are not enough ``P'' members, or
participating members, at the table to represent the full
extent of the global market. And when many stakeholders are at
the table, of course, it can take longer to reach a consensus
on what ultimately becomes a standard, as you have to debate
the issues.
However, up to this point, we feel the advantages outweigh
the disadvantages, and we know that the--that you can, in fact,
by the basis of early involvement, the quality input, and
because we have been able to deliver excellent products and
support services where we do business, we have been successful
in this process, not to say we haven't had setbacks.
However, as governments that control access to markets
outside of the developed world start to move toward more
regulation, unique and sometimes unjustified standards
requirements and insist on mandatory but redundant testing,
regardless of brand recognition and excellent product
experience. We believe better communication between the private
sector and government and better alignment between the private
sectors and the multiple departments and agencies of government
is essential to maintaining a level playing field for U.S.-
based industry.
First of all, the Federal and State governments need to
educate themselves on issues relating to standards and trade,
because, like other issues before Congress, they are complex
and will not yield to simple fixes. Hearings, such as this one
today are a good start, and John Deere applauds the Chairman's
initiative on scheduling it, but while one hearing is
necessary, it is not sufficient, given the magnitude of the
challenge.
In this vein, we seriously urge Congress to consider
endorsement of the United States Standards Strategy that is
currently being developed by a large cross-section of U.S.
industry, standards-developing organizations, standards-
developing consortia, government agencies, consumer groups, and
conformity assessment organizations under the auspices of ANSI.
It highlights and takes advantage of the inherent strengths of
the U.S. standards system and recommends activities that, if
undertaken and executed effectively, may neutralize much of
what is currently perceived by some as the disadvantage to U.S.
interests.
Beyond endorsing the strategy, though, we believe that the
Federal Government also needs to put a higher priority--a high
priority on providing technical assistance to our trading
partners and into the promotion of U.S.-based standards and
technology as an alternative to the European approach.
We believe that we do not have to match the European Union
dollar for Euro, but a great percentage of the funding
currently going to facilitating development, through
organizations like USAID or the Trade Development Agency,
should be allocated to technical assistance with due
consideration to priorities based on trading volumes and
strategic relationships with our partners.
One of the things that these organizations need is a
checklist that includes standards-related infrastructure and
issues. They often get input on what they should fund based on
in-country input, but because that in-country input often
doesn't know what it doesn't know, we need something that
ultimately puts some priority on standards for our agencies.
Similarly, we need consistent and predictable funding of
the standards and trade activities in the Department of
Commerce, NIST, the International Trade Administration, USTR,
and the Department of State, Energy, and other agencies, but
with the assurance that more effective coordination between
these agencies and more interaction with the private sector
occur. The existing Interagency Council on Standards needs
broader participation from some departments and agencies, like
State. What is missing, though, is a policy-level council
responsible for coordination at a strategic level. To this end,
we respectfully suggest Congress might consider amending the
National Technology Transfer Act of 1996 to put more emphasis
on that policy-level communication, coordination, and alignment
with consideration of creating a standards ``czar'' to provide
appropriate accountability.
In 1992, we were very much where we are with China today,
and things have improved a great deal. We need to, I think,
share that we use the lessons learned in what we did with
Europe and apply that to China and the other countries of the
developing world as the market changes.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Noth follows:]
Prepared Statement of Robert W. Noth
Introduction
Deere & Company is a U.S. based manufacturer of machinery and
equipment for the agricultural, construction, forestry, and turf care
commercial markets. John Deere products are currently sold in 160
countries around the world and we have more than 50 manufacturing
operations located in 17 countries around the world. We consider it
both an honor and privilege to share our experiences regarding
standards and trade with this subcommittee here today.
We have been asked to provide testimony addressing questions in
three areas of interest:
1. What has been the experience of your company with Chinese and
European technical standards, and how do you work with these countries
in this area? What are your concerns regarding the technical standards
and standards practices of other countries?
John Deere products and those of our competitors in the markets we
serve have not been heavily regulated compared to some other
industries. Active participation in the development of and compliance
with voluntary standards has been a long standing John Deere and in
fact, industry practice. Primary reasons for this include:
Demonstrating social responsibility by addressing
health, safety and environmental concerns regarding our
products and their use.
Avoiding unnecessary regulation
Managing risk regarding product liability
Creating a supply base of affordable & readily
available components
Maintaining a level playing field for competition
Documenting the ``state-of-the-art''
To these ends, we have involved John Deere employees who are
``subject matter experts'' on relevant standards development committees
in the markets we serve. We've been involved in Europe since the 1960s
and the level of our engagement has escalated significantly since 1992
to keep pace with standards development for the European Common Market.
We are not yet as heavily engaged in China but we anticipate a growing
involvement as the Chinese market develops.
Standards are a form of product specification for build and test.
The cost of compliance is reflected in the market price for our
products. However, as the demand for John Deere products grows
globally, the cost of configuring product to unique local standards,
especially those required by governments but not the consumers, becomes
prohibitive for both manufacturer and the customers. The need for
globally recognized and accepted standards that minimize the need for
unnecessary and expensive product variation increases. As a result, the
off highway equipment industry has gravitated to the development of a
portfolio established under the auspices of the International
Organization for Standards (ISO).
This ``strategy'' has worked effectively for us up to now but we do
have concerns for the future based on recent experience and anticipated
changes in the global market.
In establishing the Common Market, the European top
down, all encompassing approach to regulation, (as opposed the
U.S. approach, based on addressing specific needs) coupled with
linking regulatory compliance to voluntary standards through
the ``presumption of conformity'' and a ``best available
technology'' mindset has dramatically increased regulatory
coverage and voluntary standards development.
The European approach often results in horizontal
type standards proposals setting requirements on broad,
dissimilar types of off highway equipment. Examples include
Environmental type standards (and Regulations) on Engine
Emissions, Fuels, Environmental Noise, and ``End of Life''
standards that place additional burdens on manufacturers. While
we are not opposed to goals and objectives of some of these
initiatives, we have concerns that some proposals will not
yield the desired results while timetables put our industry at
risk of survival in terms of our abilities to recover the cost
of the R&D investment while remaining competitive in the
marketplace. The impacts, already being felt, are substantially
higher product costs to the consumer with little direct value
perceived by the customer. We would prefer a more vertical,
product oriented approach to standards and regulation so the
solutions can be more effectively tailored to product use and
more effectively deployed in global markets consistent with
developing demand.
The Europeans are aggressively exporting their system
and their standards to other countries and developing markets
around the world. The EU itself and individual member-states
are providing millions of Euros in technical assistance in
exchange for agreements to prefer European based standards,
technology and EU producers. Countries like Brazil, Mexico,
Russia and Israel are making such agreements, even when their
markets show a clear preference for U.S. goods and services.
Many of the governments that control access to
markets outside of the U.S. are skeptical of products complying
with ``voluntary'' standards, no matter how broadly used,
accepted and successful. Some have declared their intentions to
regulate all aspects of the products entering their markets. In
some cases, even products built to internationally recognized
and accepted standards from ISO or IEC are not immediately
acceptable.
Many countries within the WTO and signatories to the
TBT agreement continue to be slow to implement the provisions
and mechanisms within the agreement. This includes their
failure to recognize standards set according to the TBT
principles as ``international'' thereby creating potential
problems for the acceptance of U.S. goods exported to those
markets.
An even larger concern for our industry beyond the
proliferation of country or regionally unique standards and
regulatory requirements, is the issue of compliance, otherwise
known as Conformity Assessment. Most countries outside the U.S.
and Europe insist upon conducting their own assessments of
conformity before products can enter their markets. For our
products and our industry, these requirements represent a huge
redundant and unnecessary cost that must be passed on to the
consumer with no added value. Based upon the methods employed
by some countries, it appears some of these requirements are
more motivated by technology transfer than by consumer
protection.
2. For your industry, how are standards developed in the U.S.? How is
this different from the way standards are developed in our major
trading partners such as Europe and Asia? What are the merits and
drawbacks of these different systems? Is the U.S. system at a
disadvantage in the global standards arena, and if so, why?
The primary players in developing standards for our industry
include our trade associations where we can legally collaborate with
our competitors on needs for new or revised standards requirements. For
Agricultural, Construction and Forestry equipment we work through the
Association of Equipment Manufacturers (AEM); Turf care equipment, the
Outdoor Power Equipment Institute (OPEI) and for Engines, the Engine
Manufacturers Association (EMA). Standards proposals are then worked
either through the American Society of Agricultural Engineers (ASAE)
for Agricultural and Turf care, or the Society of Automotive Engineers
(SAE) for Construction, Forestry and Engines where the U.S. Technical
Advisory Groups for the relevant ISO committees are administered. The
U.S. developed proposals and positions are then introduced in their
relevant ISO committees with the ultimate objective of obtaining an
internationally recognized and accepted document so that machines made
to comply have the broadest possible market access. To ensure the
broadest acceptability of U.S. positions we also encourage our U.S.
Trade Associations to coordinate with European, South American and
Asian Trade Associations where we maintain membership and ``socialize''
our proposals and address any expressed concerns from the global
stakeholders.
In the past, ASAE and SAE often published their own versions of
Standards. As the industry has become more globally focused, we have
evolved to using ISO as our primary development mechanism and have
moved to eliminate the need for redundant documents. This has forced
some changes in how the industry funds ASAE and SAE for executing their
role in the process and elevated the strategic importance of ANSI as
the U.S. member body of ISO. That is why John Deere and some of our
competitors are active participants in ANSI.
Because of our industry commitment to ISO, the differences between
the U.S. process and those in other countries are not as great as they
are for some other industry sectors. The primary difference is that
many participants in ISO Technical Committees are not ``subject matter
experts'' who have a working knowledge of the industry, the products
and technologies, but are National Standards Body bureaucrats or even
government representatives who do not contribute to the technical
debate, but do have a vote in the final outcome. This brings an element
of international politics into the process that is often frustrating.
For the Off Highway Industry the ISO process is preferred to the
national or regional alternatives for the following reasons.
It offers broad political acceptance of the
standards.
We can have a seat at the table and our delegation
can include ``subject matter experts.''
Any dependence on alternative ``international''
processes leaves the door open for competing standards to be
developed and gain political acceptance.
Compared to most U.S.-based standards developing organizations,
National or Regional Standards Bodies are more closed to outside
participation, less transparent regarding what is being considered and
often less balanced and occasionally biased against industry
participation. Europe is now somewhat more participative and open than
it was in 1992 but still not up to U.S. expectations. China is just
starting to emerge as a significant international force in standards
but at this point, does not appear to be quickly embracing open
participation.
The primary drawbacks to the ISO process are:
The U.S. can be disadvantaged by the ``one country--
one vote'' if there are not enough ``P'' members at the table
to represent the full extent of the global market.
When many stakeholders are at the table it can take
longer to reach consensus.
Up to this point in time, John Deere does not believe our industry
has been seriously disadvantaged in the global standards arena because
of our early involvement, the quality of our input and because we've
been able to deliver excellent products and support services wherever
we do business. We have not often seen the need to appeal to government
for assistance, preferring instead to work the challenges ourselves.
However, as the governments that control access to markets outside
of the developed world start to move toward more regulation, unique and
sometimes unjustified standards requirements and insist on mandatory
but redundant testing regardless of brand recognition or excellent
product experience, we believe better communication between the private
sector and government and better alignment between the private sectors
and the multiple departments and agencies of government is essential to
maintain a level playing field for U.S. based industry.
3. What should the Federal Government, State governments, U.S.
standards-setting organizations, and companies be doing to reduce your
vulnerability to the use of standards as trade barriers, and how could
they promote the use of non-discriminatory standards in the global
marketplace? How should these efforts be coordinated?
First of all, the Federal and State governments need to educate
themselves on the issues relating to standards in trade because, like
other issues before Congress, they are complex and will not yield to
simple fixes. Hearings such as this one today are a good start and John
Deere applauds the Chairman's initiative in scheduling it, but while
one hearing is necessary, it is not likely sufficient given the
magnitude of the challenge. While we believe most if not all U.S.
standards setting organizations are already well aware of the issues,
many companies are just starting to understand the implications and
many small- and medium-size manufacturers and service providers remain
unaware.
In this vain, we seriously urge Congress to consider endorsement of
the United States Standards Strategy (USSS), currently being developed
by a large cross-section of U.S. industry, standards developing
organizations, standards developing consortia, government agencies,
consumer groups and conformity assessment organizations under the
auspices of ANSI. It highlights the inherent strengths of the U.S.
Standards system and recommends activities, if undertaken and executed
effectively may neutralize much of what is currently perceived by some
as a disadvantage to U.S. interests.
Going beyond endorsing the strategy, we believe that Federal and
State governments need to put a high priority on providing more
Technical Assistance to our trading partners and into the promotion of
U.S.-based standards and technology as an alternative to the European
approach. Specific activities funded by the industries like ours have
helped in some sectors but are not sufficient given the scope of the
European effort. We do not believe we have to match the European Union
dollar for Euro, but a greater percentage of the funding currently
going to facilitate development through organizations like USAID,
should be allocated to Technical Assistance with due consideration to
priorities based on trading volumes and strategic relationships.
Similarly, we need consistent and predictable funding of the
Standards and Trade activities in the Department of Commerce, NIST, the
International Trade Administration, USTR, the Departments of State,
Defense and Energy and other agencies but with the assurance of more
effective coordination between these agencies. The Interagency Council
on Standards already exists but needs broader participation from some
Departments and Agencies and a higher level of visibility to its
recommendations. To this end, we respectfully suggest Congress might
consider amending the National Technology Transfer Act of 1996 to put
more emphasis on such communication, coordination and alignment with
consideration of creating a Standards ``czar'' to provide appropriate
accountability.
Biography for Robert W. Noth
As Manager of Engineering Standards for Deere & Company, Bob Noth
is responsible for overseeing the development, deployment, utilization
and administration of standards affecting the Deere product line
worldwide. This includes responsibility for development and
implementation of strategies and processes that effectively avoid
redundant and/or unnecessary parts and components from entering Deere's
products and product support system.
Bob joined Deere in 1965 as an Industrial Engineer at the Dubuque
Works. Over his 40-year career at Deere he has held a variety of
positions in Manufacturing Engineering, Value Analysis, Production
Supervision and Management at Deere units in Dubuque, Iowa, Horicon,
Wisconsin and at Corporate Headquarters. He assumed his current
position in July of 1992.
Bob is active on a global scale in professional societies, trade
associations and standards development organizations. His past service
includes Chairman of the SAE Technical Standards Board, the SAE Board
of Directors, and Committee PM 03 of the American Society of
Agricultural Engineers (ASAE). He became involved with the ANSI Company
Member Council Executive Committee in 1991 and has since served ANSI in
a variety of capacities including Vice Chairman of the Standards and
Data Services Committee (SDSC) where he was involved with development
of ANSI's National Standards System Network (NSSN). Appointed as
Chairman of the ANSI Regional Standing Committee on Europe, the Middle
East and Africa, in 1999, he has presided over three annual bilateral
discussions with the European Commission, CEN, CENELEC and ETSI. He
also served on the Drafting Committee for the National Standards
Strategy.
He is currently on the ANSI Board of Directors where he was elected
to the position of Vice Chairman in 2002 and in that role, chairs their
International Policy Committee.
Other current responsibilities include representing Deere & Company
on ICSCA, the International Cooperation on Standards and Conformity
Assessment and IFAN, the International Organization of Standards Users.
Chairman Ehlers. Thank you.
Dr. Deutsch.
STATEMENT OF DR. DONALD R. DEUTSCH, VICE PRESIDENT, STANDARDS
STRATEGY AND ARCHITECTURE, ORACLE CORPORATION
Dr. Deutsch. Thank you, Mr. Chairman.
Mr. Chairman, Ranking Member Wu, Members of the
Subcommittee, my name is Don Deutsch. I am Vice President of
Standards Strategy and Architecture at Oracle.
I am here today as Chair of the Standardization Policy
Committee of the Information Technology Industry Council, ITI,
a trade association of 31 global and market-leading high-tech
companies. In addition to personally participating in a variety
of standards-setting organizations, I am responsible for
orchestrating my company's participation in standards and
consortia forums. More than 200 Oracle engineers are involved
in 100-plus working groups and over 70 consortia and formal
standards bodies around the world. All ITI member companies, as
well as the entire technology industry, have comparable levels
of investment and standards body participation.
ITI appreciates the Committee's focus on standards and your
understanding of the critical impact on the continued
competitiveness of the U.S. high-tech industry. Many of the
most pressing policy issues before the Congress today have
significant inter-operability in its standardization
components, such as ensuring our national security, improving
access to and quality of medical care, and protecting the
environment.
My remarks today will cover three areas: the diverse
worldwide IT standardization process that has served the U.S.
industry well, international trends that are at odds with the
U.S. approach, and the use of standards advocacy to stimulate
openness in trade and market.
In the technology industry, a focus on how standards are
developed in the United States misses the mark. Our industry
designs and builds products for global markets, and we develop
globally-relevant standards in multiple venues and
organizations around the world. Standards are at a foundation
of the new global technology economy. The growth and success of
the U.S.-led global IT industry is attributable, in large part,
to the development and use of market-led, voluntary standards.
To frame our perspective, I would like to highlight a
recent experience, which the Chairman mentioned in his opening
remarks, that our industry had in China. You may have heard of
this issue referred to by its popular acronym, ``WAPI.'' This
example highlights the many challenges the industry is facing,
not only in China, but also around the globe. Last year, the
Chinese government proposed a mandatory standard for Wireless
Local Area Network products in China, mandating the specific
technology incompatible with international standards and
requiring local Chinese production of that technology. U.S.
technology companies faced a major dilemma. They could either
be forced to collaborate with a select few Chinese competitors
or abandon the Chinese market and its opportunities altogether.
After facing coordinated pressure from the highest levels
of the Administration and Congress, the Chinese government
agreed to indefinitely suspend implementation of ``WAPI'',
revise the specification based on comments from foreign and
domestic firms, and participate in international standards
bodies. By standing firm, we avoided a terrible precedent that
would have encouraged China and other countries to follow
similar paths of discrimination against foreign firms through
the standards process.
While we may attribute the Chinese approach to standards-
setting to their status as an emerging and rapidly-developing
economy, the EU and other regions of the world are increasingly
using top-down approaches to standardization driven by
regulatory interests rather than by market-led requirements.
We believe that the best role for the Federal Government in
standardization is in partnership with industry. Specifically,
we look to the U.S. Government to promote the voluntary,
market-driven standards process that has served industry well
and to stimulate openness in trade and markets by helping to
defend against the use of standards as barriers to innovation
and market access.
Moving toward these items, ITI recommends that the U.S.
Government strengthen current standards liaison and attache
programs of the Department of Commerce, including additional
staff and resources to ensure effective coordination and
promotion of standards, technical, regulatory, and market
access activities across all relevant government agencies,
redouble advocacy efforts to promote global, market-led,
voluntary standards that support innovation and inter-
operability. In this role, the U.S. Government should directly
engage with other governments about how internationally-
recognized market-led technology and standards can grow
economies and benefit all parties.
And finally, Mr. Chairman, we must, together, look at how
to develop metrics to provide much-needed standards impact
analyses. For example, there would be real policy and
commercial use for analyses of global economic impact of
standards. With this information, we can promote together
global, market-led, voluntary standards that benefit consumers'
industry economies around the world.
Again, Mr. Chairman, Members of the Subcommittee, thank you
for the opportunity to discuss these important issues with you
today.
[The prepared statement of Dr. Deutsch follows:]
Prepared Statement of Donald R. Deutsch
Mr. Chairman, Ranking Member Wu, Members of the Subcommittee, my
name is Don Deutsch, and I am Vice President, Standards Strategy and
Architecture at Oracle. For over 25 years I have chaired the INCITS H2
Technical Committee that defines the SQL language standard that all
relational database system products, including Oracle's, support. I am
responsible for orchestrating and coordinating my company's
participation in standards and consortia forums across all business
units and geographies. In that capacity I represent Oracle at the
policy level in various consortia as well as in formal standards
bodies, including the INCITS Executive Board, the Executive Committee
for the Java Community Process, and the American National Standards
Institute (ANSI) Board of Directors. I also serve as President of the
Enterprise Grid Alliance, a consortium focusing on accelerating the
application of Grid technology in commercial and public sector data
centers. In many respects the diversity of the bodies in which I
participate is reflective of the nature of standards development in the
technology industry.
I am honored to appear before this subcommittee today in my
capacity as Chairman of the Standardization Policy Committee for the
Information Technology Industry Council. ITI is an elite group of the
Nation's top high-tech companies and is widely recognized as the tech
industry's most effective lobbying organization in Washington. ITI
helps member companies achieve their policy objectives through building
relationships with Members of Congress, Administration officials, and
foreign governments; organizing industry-wide consensus on policy
issues; and working to enact tech-friendly government policies.
ITI would like to address three very important issues:
1. The Chinese and European approaches to standardization;
2. The U.S. approach to standardization; and
3. The U.S. Government's role in promoting the recognition of
industry-led, voluntary standards, as well as in preventing
standards from being used as barriers to market access.
ITI appreciates your focus on standards and their impact on the
competitiveness of the U.S. high-tech industry. Technology standards
are directly and critically related to innovation and the creation of
competitive global markets. Many of the most pressing policy issues
before the Congress today have a significant standardization component,
such as ensuring our national security, improving access to and quality
of medical care, and protecting the environment.
Background
Let me begin by emphasizing the critical importance of standards to
the technology sector. Standards are at the foundation of the global
information and communications technology (ICT) economy. They create
value and aggregate markets. They facilitate technology diffusion,
promote production efficiency, product compatibility, inter-
operability, and enhanced competition. They help drive down costs for
consumers, facilitate communication among buyers and sellers of
important commercial information. In many cases, they advance the
public welfare, through the adoption of product safety standards, for
example.
Industry recognizes that standards are not only the domain of the
technical and business communities. Policy makers in the U.S. and
abroad are increasingly interested in and actively influencing a range
of standards and technical regulatory issues. Governmental interest and
activity plays a critical role in today's global economy and influences
the competitiveness of the ICT industry. Representatives of the
technology industry work very hard to carefully frame our discussions
with policy makers as we work cooperatively to address critical
standards policy matters and define appropriate roles. As important as
these issues are, they are not simple. There is often a need for
nuanced understanding of standardization policy issues as the
objectives of different interests, both domestically and abroad, are
not always aligned.
One way to help clarify matters is to explain what the high-tech
industry means when we talk about ``standards.'' In our sector, the
majority of ICT standards are developed in a variety of open,
international standards development processes and are adopted and
implemented on a market-driven, voluntary basis. In few cases is the
adoption of ICT standards mandated by governments.
Chinese and European Approaches to Standardization
China's approach to and use of standards is a complex set of
issues. It is a well-publicized fact that the Chinese Government wants
to develop a robust domestic high-technology industry. This is not
unique to China, as many governments around the world, including our
own, want to see healthy and competitive domestic industries. The use
and promotion of national or regional standards is one mechanism that
some governments use to achieve their industrial policy objectives.
Perhaps I can best illustrate this point with a recent experience that
our industry had, one that we believe highlights many challenges the
industry is facing, not only in China, but also around the globe.
The Chinese Government proposed the mandatory adoption of a
Chinese-developed Wireless Local Area Network (WLAN) standard, best
known by its acronym, ``WAPI.''
In May of 2003, The Chinese Government issued compulsory ``WAPI''
security standards that were set to go into effect on June 1, 2004, and
were incompatible with the international standards upon which most WLAN
products are based. Moreover, China only provided the technology
underlying this mandatory technical standard to several of its domestic
producers of wireless equipment, and designated these companies as the
obligatory production partners of any foreign manufacturers willing to
license the mandated technology and seeking to market these products in
China.
Thus, in order to comply with the proposed regulations, U.S.
technology companies faced a major dilemma: either collaborate with a
select number of their Chinese competitors to co-produce products for
the Chinese market, and thus potentially be forced to share valuable
intellectual property with their Chinese competitors and run afoul of
U.S. export control regulations, or abandon the Chinese market and its
opportunities altogether.
These regulations also would have effectively excluded China from
the world market because WLAN products made outside China would not
have worked, essentially segmenting the world market for these
products.
ITI worked very closely with our industry colleagues around the
world, and also brought together the various groups in the U.S., to
closely collaborate and maintain a strong industry voice on this issue.
ITI worked hard to keep our government informed and to make sure this
issue was on the agenda of both the Administration and the Congress.
After considerable dialogue culminating in the April 2004 meeting of
the Joint Commission on Commerce and Trade, the Chinese Government
agreed to indefinitely suspend implementation of this mandatory
standard, revise the standard based on comments from foreign and
domestic firms, and participate in international standards bodies.
Yes, this was an important result for U.S. industry, but it was an
equally important precedent for global competition. ICT is a leading
U.S. export to China, accounting for 26 percent of all U.S. exports to
China in 2002. This amounts to several billion dollars per year of U.S.
tech exports to China. Many of these current and as yet to be designed
U.S.-made products and components would have been affected by this
standard, jeopardizing high-end U.S. jobs. By standing firm against
WAPI, the U.S. Government has ensured that the fast growing wireless
market in China (forecast to grow by 25 percent per year) remains open
to global competition. Additionally, the U.S. high-tech industry
avoided the precedent that would have encouraged China's bad behavior,
and, potentially encouraged other countries that might choose to
similarly discriminate against foreign firms through the standards
process.
This example illustrates the concerns that many industrial sectors,
particularly the U.S. high-technology sector, are currently facing in
China. The damaging precedent that could have been set with WAPI, in
which a government--a signatory to the WTO agreement--mandates a
technology and forces domestic production of that technology, would
have had significant, negative implications for technological
development and global economic growth.
I would like to shift now to Europe. As a global industry, the IT
sector recognizes that the European standards infrastructure--which
includes the national and European standards organizations (ESOs) and
the European Commission (EC) and member state governments--is
sophisticated, complex, and effective. The European standards
infrastructure has demonstrated a considerable ability to set a single
standard for the internal European market, drive it through the ISO/IEC
system and promulgate it globally by leveraging its market power and
Commission-funded trade promotion efforts.
The impact of European standards activity reaches well beyond the
EU. Many developing countries in Asia and the Americas look to Europe
for leadership on standards and regulatory processes. For example, the
European Commission funds, with more than 60m Euro, an alliance for the
Information Society with Latin America. This initiative includes a
specific standards component, with the stated objective of promoting
the European system of standardization and creating medium- and long-
term partnerships between the EU and Latin America. This is an explicit
strategy targeted directly at our industry with the objective of
extending European influence to the standards and regulatory bodies in
third markets.
Let me briefly speak to one very costly example of this dynamic. It
involves standards related to Electromagnetic Compatibility (EMC) for
high-tech products.
In 1989, the European Commission issued the EMC Directive requiring
that the electrical system in the EU be protected from unacceptable
disruption from radio frequency and harmonic interference. The
directive was based upon the precautionary principle. The resulting
harmonic emissions standards have no technical justification. There is
a complete absence of data demonstrating any widespread unacceptable
levels of harmonic interference from consumer electronic products. As
this standard is now implemented, it places the burden of mitigating a
potential and undocumented EU electrical grid issue on manufacturers
with no corresponding mitigation measures on the utility companies. The
standards (EN 61000-3-2 and EN 61000-3-3) are overly restrictive, apply
to every piece of equipment produced, and increase the consumer cost of
products by over $1B annually in Europe.
Unfortunately, despite the lack of technical justification for this
standard and the fact that it has been created under irregular
procedures, we now see other countries, including China, Indonesia,
India, Russia, and potentially others in Africa, Asia, and South
America, considering the adoption of these standard. This is a concern
to product manufacturers, and for an obvious reason: the growth of this
standard will drive a significant increase in unwarranted additional
costs and technical requirements for the impacted equipment.
ITI's view is that the objectives for technical regulations should
be to ensure safe and legal products. Technical regulations should
never be more trade-restrictive than necessary and governments should
consider alternatives whenever possible. This one European example
demonstrates the impact on the marketplace of technical regulations.
Governments should reference standards as the basis for technical
regulations under certain, limited circumstances. When standards are
intended for use by governments in regulations, the content of the
standard and the process for developing it are critically important.
Governments should reference only those standards that meet the test of
real usage (i.e., they are responsive to real world conditions,
performance (not design) based, and technically sound and relevant to
the regulation). Additionally, we believe governments should limit the
use of standards in regulations to only those standards that are
developed through a process that is truly open and global.
The U.S. Approach to Standardization
For our industry, the focus is not on how domestic standards are
developed ``in the U.S.,'' but rather on creating global technical
standards that support the growth of the worldwide ICT market. Because
our industry designs and builds single products for a global market, we
actually develop international, globally relevant standards in
different venues and organizations around the world--not simply
American National standards in a U.S. standardization infrastructure.
We need that flexibility, because the ICT sector depends on standards
today more than ever. The rapid pace of change in our sector, with
product cycles measured in months, not years, requires companies and
their suppliers constantly to modify, improve, and re-develop their
technologies, products, and services in order to satisfy worldwide
consumer demands. Standards and their development process must stay
relevant and keep pace with this fast changing, global marketplace.
That being said, of course it is a reality that governments do have
a perspective on standardization. How governments act on that
perspective can and does affect global commerce and competitiveness. I
have spoken a bit already about perspectives and approaches in Europe
and China. Now I would like to say a little bit about the situation
here.
We believe that the growth and success of the global IT industry
(much of which is based here in the U.S.) is built in large part upon
the development and use of market-led, voluntary standards that provide
customer value and facilitate market development. Voluntary standards
are completely market and consumer-driven. They are not mandated by
government regulations, though public sector input as technical experts
and consumers is valuable. In almost all circumstances, the development
and use of voluntary standards are a key means to create and expand ICT
markets and maximize benefits to societies, consumers, and companies.
Industry responds to consumers as the ultimate arbiters when it is
developing and using voluntary standards.
We firmly believe that a shared commitment in the U.S. by industry,
consumers, and government to this kind of voluntary and market driven
approach to standardization benefits the entire marketplace by creating
real customer value through consumer choice, lower costs, etc., and by
facilitating market development by promoting innovation, product inter-
operability and the voluntary adoption of open industry standards.
We think this approach to standardization is clearly the optimal
one. The success of the global IT industry demonstrates that. However,
we do believe that this approach to standardization is not simple to
explain, particularly in developing economies, where a more top-down
and government-influenced approach is more readily understood and
accepted. Explaining the strengths of our perspective and approach to
standardization is a real challenge that we face in markets around the
world.
The U.S. Government's Role
When asked what should be the role of the Federal Government in
standardization, we are always very careful. We believe there is indeed
a role. It is a limited and clearly defined role that is responsive to
industry needs and performed in partnership with industry. It is an
increasingly important role. Specifically, we look to the U.S.
Government to perform two functions related to standardization--to
promote the creation and use of voluntary, market-driven standards and
to stimulate openness in trade and markets by helping to defend against
the use of standards as barriers to innovation and market access.
We can point to important and useful examples of how the USG has
effectively played that role. As we've seen with WAPI, positive results
were achieved without the delays associated with the lengthy legal
process of the WTO dispute settlement procedures. The well-executed
cooperation and coordination at a variety of levels within and among
U.S. Government agencies and the Congress was highly impressive and
crucial to the success of this issue. We believe exactly this type of
continued coordination will be necessary going forward. With WAPI, we
may have struck at the symptoms, rather than the underlying cause
itself, which means we could very well see similar attempts by China
and other countries to utilize standards to force the creation of their
own domestic industries, and we must be prepared, as industry and
government, to address and resolve them.
We can also point to three specific initiatives that can help the
U.S. Government to play that role--two that exist to a degree and one
that does not exist as yet. In 2002, ITI released its Vision for
Standards and Technical Regulations and presented a Recommended
Standards Action Plan to the Department of Commerce. I will talk first
about the initiatives that were the focus of that Action Plan. The
Commerce Department has taken some actions on these initiatives since
2002. We are now in the process of evaluating progress against that
Action Plan and suggesting steps for the future.
In 2002, we recommended that the Commerce Department create a high-
level standards and technical regulatory policy function to work with
industry to identify and address both immediate and more long-term
commercial policy issues in countries and regions around the world. The
Commerce Department has taken steps through a Standards Liaison
function to coordinate standards-related activity within the
International Trade Administration and, to an extent, across the
Department. The Department has worked to understand the global
standards objectives of the IT industry and to assist, including by
coordinating Commerce Department resources, in pursuing those
objectives. Moving forward, we will recommend that the Department take
additional steps to strengthen the Liaison function, including with
additional staff and resources, in order to ensure the most effective
standards, technical regulatory, and market access activity across all
its agencies. ITI is committed to working with the Commerce Department
to continue making progress in this area.
In our 2002 Standards Action Plan for the Commerce Department, we
also recommended that it strengthen the existing Standards Attache
Program. In particular, we sought a program expansion to include
attaches for China, the rest of Asia, and Geneva to supplement existing
attaches in Brussels (to deal with European standards issues) and in
Brazil. Because of the strategic utility of this program, we also
recommended that the Commerce Department take necessary steps to ensure
that it is both managed and located within the Department to retain an
exclusive focus on standards and technical regulatory issues around the
world. We are pleased to learn that we will likely see a standards
attache in China very soon. We appreciate the Department's efforts in
making that happen. Moving forward, we would like to position the
program for ongoing effectiveness, and we recommend that the Department
support a formal assessment of the Attache program's results, its
training program, location within the department, and budgetary needs.
ITI is committed to working with the Commerce Department to continue
making progress on these recommendations.
Finally, I would like to speak briefly about another potential
activity for the USG and the Commerce Department that we believe is
critically important moving forward and one that should be given
serious consideration. In our 2002 Standards Action Plan for the
Commerce Department, we recommended that it provide much-needed
standards impact analysis. For example, there would be a real policy
and commercial use for some analysis of key policy issues (e.g.,
defining what is the global economic impact of standards, developing a
comparison of government support and promotion of standards,
forecasting global standards participation trends, etc.). Related to
this analysis, we also recommend that the Department create an early
warning system to detect and alert industry to global standards and
technical regulatory issues that could impact market access.
Since 2002, the Commerce Department has worked with ITI and others
to create, on a pilot basis, an ICT Standards Dialogue between the U.S.
Government and the European Commission (EC) as a form of ``early
warning system.'' The ICT industry has used this Dialogue to work with
the Commerce Department (and other agencies) on important ICT
accessibility standardization issues in Europe.
Moving forward, we think that the Commerce Department can work with
industry to continue strengthening and examining the pilot U.S.-EU ICT
Standards Dialogue. Additionally, we see today even more clearly than
in 2002 a critical opportunity to support industry's standardization
policy and market access objectives around the world by working with
industry to develop a standards and market access research and analysis
program to better understand the key issues that we have been
discussing at this hearing today. The Commerce Department has existing
staff expertise that could be valuable in designing and implementing
this research and analysis program. ITI is committed to working with
the Commerce Department to continue making progress on these
recommendations.
Finally, Mr. Chairman, I would like to conclude by saying that from
our various experiences with standards policy issues in markets around
the world, we have learned that our industry needs to engage in an
ongoing basis at the policy level directly with our government and
other governments, particularly in emerging markets, about how
technology and standards can help grow their economies and why it is in
their interest to adopt and deploy internationally-recognized,
voluntary, market-driven standards. We need to redouble our already
considerable efforts promoting processes that support such standards
since they address user needs and promote innovation and inter-
operability. We need to encourage market access so that consumers,
industry, and economies around the world can benefit from innovative
technological advancements.
Again, Mr. Chairman, Members of the Subcommittee, thank you for the
opportunity to discuss these important issues with you today.
Biography for Donald R. Deutsch
A 30-year veteran of the Information Technology industry, Don
Deutsch is currently Vice President, Standards Strategy and
Architecture for Oracle Corporation in Redwood Shores, CA. For over 25
years he has chaired the INCITS H2 Technical Committee on Database that
defines the standard that all relational database management system
products support. In addition to continuing to lead H2's development of
database language SQL specifications, Don represents Oracle at the
executive/policy level in various consortia as well as in formal
standards bodies including: the INCITS Executive Board, the Executive
Committee for the Java Community Process, and the American National
Standards Institute (ANSI) Board of Directors.
Don was recently named President of the Enterprise Grid Alliance, a
consortium focusing on accelerating the application of Grid technology
in commercial and public sector data centers, and is serving as
Chairman of the JTC 1 Web Services Study Group. ANSI recognized Dr.
Deutsch for his leadership of national and international information
technology standardization as the 2002 recipient of the Edward Lohse
Information Technology Medal.
Prior to joining Oracle he held senior software engineering
management positions with Sybase and the Information Services Division
of General Electric Co. Before working in industry Don managed the
database management systems standards and supporting research program
at the U.S. National Bureau of Standards (now the National Institute
for Standards and Technology/NIST), held a full-time faculty
appointment in the Information Systems Management Department of the
University of Maryland, and worked as a consultant for an international
public accounting firm.
Dr. Deutsch earned a BS from Miami University in Oxford, OH, and
MBA and doctorate degrees from the University of Maryland, College
Park. He has published numerous articles and papers, and co-authored an
undergraduate textbook on Database Concepts; the National Bureau of
Standards published his doctoral research on Modeling and Measurement
of Database Management Systems.
Chairman Ehlers. Thank you. And it is interesting, we have
problems ranging from two-cylinder tractors to large
earthmovers down to tiny transistors.
Mr. Bhatia, let us hear from the Underwriters.
STATEMENT OF MR. JOE S. BHATIA, VICE PRESIDENT AND CHIEF
OPERATING OFFICER, UNDERWRITERS LABORATORY
Mr. Bhatia. Good afternoon, Mr. Chairman.
Thank you and the distinguished Members of the Committee
for this opportunity to appear before you.
In addition to being affiliated with Underwriters
Laboratories, I am also the Chairman of I-Tech 16, which is the
advisory committee to U.S. Congress, USTR, and Department of
Commerce on issues related to trade, technical barriers, and
standards. I am also the current Chairman of the U.S. Standards
Strategy Committee. The U.S. Standards Strategy that has been
discussed by several panel members is in the purview of our
Committee and working fast and furiously to develop that and
finalize it.
UL is pleased to see the increased attention being given to
standards and technical regulations in trade. We believe that
your focus and the U.S. Government's support on these issues
will help U.S. industry competitiveness. I would note, though,
that testing and certification, in other words, conformity
assessment, is as critical for product market access and market
acceptance as the standards themselves, so the two issues must
be addressed simultaneously.
But the standards and conformity assessment systems
currently operating in the global market are not harmonized.
Compare this with the trade liberalization that is going on and
that is opening up markets and prompting manufacturers to
globalize their production processes and their supplier
networks to remain competitive worldwide.
In the brief time we have to present oral comments, I would
like to highlight the following themes.
On the standardization front, I would like to suggest that
the U.S. system actually does work. Though decentralized, it
effectively serves the needs of all stakeholders. It promotes
comprehensive expertise by encouraging participation of all
public and private sector experts in bringing all of the
affected parties to the table.
The U.S. Government is an active participant and a true
partner. Many U.S. SDOs produce internationally-recognized and
relevant standards, which are used all over the world. As we
look ahead and see ISO and IEC standards gain greater use and
acceptance globally, it is critical that all affected U.S.
organizations participate in these forums to ensure that U.S.
safety systems and principles are not compromised and that U.S.
products and technologies are not excluded.
There is much opportunity for U.S.-China collaboration in
developing standards and technical regulations. U.S. Government
can help open up additional venues. UL, and other organizations
like NFPA, have been working for a long time with China on
standards development, specifically in the areas of fire
protection and signaling. There is a lot of room to enhance
cooperation and participation in each other's standards
committees and panels on an ongoing basis.
Now shifting to the conformity assessment arena, we all
recognize that manufacturers must demonstrate that their
products comply with the requirements and standards in local
markets. Local governments often, though, exclude non-domestic
entities from conducting the necessary testing and
certification. This impedes all manufacturers' ability to
streamline the certification process, which is necessary to
obtain the necessary certification marks to sell in those local
markets. This ultimately increases the costs associated with
compliance. National treatment, which I will talk about more in
the later comments, for conformity assessment organizations is,
perhaps, the most effective approach to providing manufacturers
with a seamless certification program where services can be
bundled and streamlined to facilitate simultaneous, multiple-
market access when necessary.
UL, and other U.S.-based testing and certification
organizations, seek recognition from U.S. trade negotiators as
a viable business whose services can help enhance market access
for U.S. exporters.
Moving forward and looking ahead, the advancement of
standards and conformity assessment interests of U.S.
stakeholders would require a much stronger public and private
partnership. For its part, the U.S. Government should consider
several initiatives.
Let me outline a couple: ensuring that trade partners'
compliance with obligations that they have signed in existing
trade agreements are honored, especially in countries like
China, Mexico, and Europe; linking standards and conformity
assessment to broader dialogue with trade partners; negotiating
new commitments and trade agreements, which enable certifiers
to gain acceptance to offer domestic marks in their markets;
and adequately funding U.S. Government-supported outreach,
promotion, and technical assistance programs all over the
world.
In the end, globalization will place pressures on standards
and conformity assessment system to streamline and harmonize.
But doing so needs to be done in a way that does not sacrifice
the high levels of product safety enjoyed in the U.S. today.
The U.S. Government has a real and meaningful role to play.
We look forward to working with them to advance U.S. interests
and to minimize the adverse impact of standards on trade
activities.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Bhatia follows:]
Prepared Statement of Joe S. Bhatia
Chairman Ehlers and distinguished Committee Members, thank you for
this opportunity to appear before you, to offer Underwriters
Laboratories (UL) Inc.'s insights on the impact of voluntary standards
and mandatory technical regulations on global trade, and to recommend
ways in which the United States government not only can enhance but
also supplement private sector efforts. UL is pleased to see the
increased attention being given to standards and technical regulations
in trade and believes that U.S. Government support on these issues will
help U.S. industry competitiveness and therefore create jobs. The
following testimony is intended to address the specific questions posed
by the Committee, as well as to offer targeted recommendations to
improve the U.S. position in the global market place moving forward. My
testimony will further discuss the standards and conformity assessment
nexus, which is as critical for products' market access (regulated) and
market acceptance (voluntary) as the standards themselves.
Underwriters Laboratories in Brief
Underwriters Laboratories (UL) Inc. is an independent, not-for-
profit product safety certification organization that has been testing
products and writing safety standards for more than a century. It was
founded in 1894 with a mission of testing for public safety, as defined
by its Articles of Incorporation, and strives to ensure that public
health and safety is protected through its standards development
activities and product conformity assessment services. UL has developed
and maintains more than 850 product-based Standards for Safety, 80
percent of which have achieved American National Standards (ANS)
status.\1\ And UL is a global company, with more than 25 affiliates
world wide, serving more than 71,000 manufacturers in nearly 100
countries.
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\1\ ANS is a designation conferred by the American National
Standards Institute (ANSI) upon standards submitted by ANSI-accredited
Standards Development Organizations (SDO). The ANS designation is
awarded after the opportunity for public review and comment, and a
certification by the SDO that due process was followed in the
development of the standard.
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UL in China and Europe:
UL entered the China market in 1980, when it established a
cooperative relationship with the China Certification & Inspection
(Group) Co., Ltd. (CCIC) to carry out on-site follow-up inspections at
Chinese factories whose products had already been certified as meeting
UL's rigorous safety requirements. Growing demand for product safety
testing and certification services prompted UL and CCIC to negotiate a
joint venture in 2001. The joint-venture testing facility located in
Suzhou became fully operation in the Fall of 2003 and performs safety
tests according to UL's Standards for Safety in the most popular
product categories, including such small home appliances as lighting
fixtures and lamps, fans, rice cookers, toasters, and electric tools.
The facility's capabilities will expand over time to perform tests on
just about anything exported from China.
Though in the 1920s UL had agreements with inspection companies in
England and Germany, it was not until 1956 that UL began testing in
earnest European-made products according to U.S.-based standards,
initiating a major new international activity. The on-site factory
follow-up service inspections in Europe rapidly grew and so UL
contracted with additional European-based testing and inspection
authorities. In 1996 UL acquired the Danish government-owned testing
and certification laboratory DEMKO A/S (est. 1928) and formed it into a
wholly owned affiliate of UL Inc. UL has since been represented in
Europe via its own facilities, and has grown to include operations in
the United Kingdom, Italy, Sweden, Germany, France, Spain, Switzerland,
Poland, and the Czech Republic.
Seeking Increased Collaboration With China. . .
Though well versed in providing testing and certification services
in China and Europe for decades, UL's engagement on standards
development issues largely has been the most extensive at the
international level--in the International Electrotechnical Commission
(IEC) and the International Organization for Standardization (ISO). The
level of engagement at the national and regional level through our
affiliates is poised to increase. As UL's customers manufacture more
products in China, they are seeking to incorporate the traditional
elements of U.S. requirements in (or influence the direction of)
Chinese and EU member states' standards.
China Collaboration--Present:
UL's active collaboration with China on standards development has
been most evident in the fire protection and signaling (e.g., fire
alarms) arenas. Discussions have intensified over the past 18 months,
in part because of UL's engagement with Chinese regulators through the
National Institute of Standards and Technology (NIST)'s Standards in
Trade workshops and the U.S. Department of Commerce-sponsored U.S.-
China Standards and Conformity Assessment workshops. UL perceives
China's interest in collaboration as stemming from a desire to improve
safety in the built environment, particularly as China ramps up for the
2008 Olympics, as well as enhancing the competitiveness of Chinese
manufacturers' products around the world.
China Collaboration--Future:
In recent years, China has demonstrated a commendable interest in
enhancing its participation in international standards development and
in upgrading its standards system to comply with WTO obligations, among
other things. The American National Standards Institute (ANSI)'s
testimony speaks to China's recently concluded assessment of its
national standards system. Among the strategic tasks presented were
China's wish to ``improve the market adaptability and competitiveness
of Chinese technical standards,'' as well as ``develop independently
self-proprietary technical standards through effective measures, so as
to improve international competitiveness of China's technical standards
and therefore increase the international market share of Chinese
products.'' With China setting a 2010 deadline for overhauling its
technical standards system, the time certainly is ripe for increased
U.S.-China collaboration, with the impact extending to the
international stage (ISO and IEC).
China has shown some interest in adopting UL Standards for Safety.
The National Electrical Manufacturers Association (NEMA) has suggested
that China consider adopting the tri-national (United States, Mexico,
and Canada) fuse and fuse-holder standards. These talks very much
remain in the preliminary stages, however.
UL also is considering the possibility of seeking observer status
on select PRC standards technical panels, with the aim of encouraging
the adoption of tried and true U.S. requirements as appropriate. This
collaboration would serve not only to enhance market access for U.S.
products designed around and certified to comply with such U.S.
requirements, but also to forge a partnership that will transfer to
international standards development and harmonization efforts. UL may
also actively seek to engage Chinese experts for participation in UL's
own standards development processes.
New technologies also pose an opportunity for collaboration with
China, including radio frequency identification (RFID) and renewable
energy.
. . .And Looking for Solutions to U.S.-EU Tensions on the International
Stage
The development of standards and technical regulations in Europe
occur at two levels--the individual member-state level, and the
European Commission level. At the regional level, there are voluntary
``European Norms (ENs)'' and New Approach ``directives'' that set
essential requirements for regulated products. UL has engaged somewhat
in the development of European Norms (EN), but has been more actively
involved with Europe in standards development at the international
level.
UL has been an active participant in IEC and ISO standards
development and harmonization activities for decades. In addition to
participating in numerous IEC and ISO Technical Committees and related
U.S. Technical Advisory Groups (TAGs), UL also adopts international
standards (such as IEC and ISO) with National Differences (only when
needed) to co-exist with current UL requirements and unique safety
needs in the United States based on its infrastructure and traditional
expectations. If necessary, existing UL Standards for Safety can be co-
maintained with the internationally harmonized standard for a limited
time frame for those manufacturers only marketing products in North
America. UL also promotes international harmonization by encouraging
adoption of basic North American safety principles in standards
developed by international standards bodies to reduce the need for
National Differences in UL and ANSI/UL Standards.
UL believes that some progress has been made to incorporate U.S.-
based requirements in the development of new international standards or
with harmonization of existing standards. However, there is room for
improvement, particularly as the United States utilizes more IEC-based
standards. Some sectors within the United States believe that the IEC
process is a violation of the World Trade Organization's Technical
Barriers to Trade (TBT) Agreement because it results in requirements
that are most favorable only to Europe. The European Union's well-
financed and coordinated technical assistance program for developing
countries serves only to further disadvantage U.S. interests. The
degree to which different sectors are adversely affected varies, but
some sectors are particularly frustrated with the IEC process and the
difficulty in incorporating U.S. infrastructure and climatic essential
differences in requirements (EDRs)\2\ into IEC standards to make them
truly more global. At this time, these sectors are committed to working
within the IEC to affect the needed changes.
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\2\ Criteria for Essential Differences in Requirements include
needs of major segment of the global market; differences in technical
infrastructure--frequencies, voltages, currents, earthing systems, and
differences in climatic conditions.
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Recognizing the Merits of the U.S. Standards System. . .
The United States relies heavily on the private sector for
voluntary standards development. Under the auspices of the 1996
National Technology Transfer and Advancement Act (NTTAA), U.S.
Government agencies are encouraged to rely on voluntary consensus
standards (VCS) whenever applicable and appropriate. While our
government generally has not driven the standards development process,
it has been an active participant and partner. Federal, State, and
local governments develop and issue procurement specifications and
mandatory codes, rules, and regulations. Openness, balance, consensus,
and due process are the fundamental principles of the American National
Standards process.
The U.S. system, although decentralized, effectively serves the
needs of all stakeholders. It promotes comprehensive expertise by
encouraging participation of all public and private technical experts.
Stakeholders' needs are reflected because the process is open to all
interested parties, from manufacturers, users/consumers, the
government, utilities, material suppliers, regulatory agencies,
educators, code organizations, and any other interested party. The
process produces a ``balanced'' standard because all stakeholders are
able to participate; the standards users' interests are protected while
at the same time meeting needs of industry that the standard will
affect. Standards are based on market-driven needs, not mandate. From
time to time, issues and redundancies emerge as a result of the
decentralized system, but careful coordination among interested parties
works to rectify that. In UL's opinion, this openness is unique. How
many other countries around the world invest their time and resources
to get all the interested parties at the table to consider health and
safety requirements?
Many U.S. standards are international in scope and application and
currently are accepted in other countries. In some cases, however, a
number of developing countries have adopted a policy of accepting only
IEC/ISO standards. This is increasingly an issue in China, parts of
Latin America, and Southeast Asia. EU enlargement presents related
issues. The end result, if left unchecked, could lead to lost market
share for some U.S. exports that comply with valid and internationally
accepted U.S. standards and that are certified under reputable U.S.
programs.
. . .And Promoting Standards Harmonization Internationally
UL has long recognized the need for increased harmonization with
IEC standards and has recently adopted a more aggressive policy toward
standards harmonization. U.S. manufacturers are realizing that the
``world is their oyster'' for their innovative and creative products.
UL's harmonization priorities are largely driven by what industry
perceives as priority areas for harmonization. When harmonizing UL's
standards at the regional or international level, however, it is
paramount that essential U.S. safety principles are protected, even if
this means developing National Differences. National Differences are
not unique to the United States. In international standards meetings,
however, the United States is singled out whereas in many European and
Asian countries, the National Differences are undeclared and out-of-
country testing is not permitted. In such cases, the United States is
not the barrier to trade. The barrier is the country to which U.S.
manufacturers desire to exports their products. On the other hand, UL
makes every effort to avoid mutually exclusive requirements when
National Differences are necessary.
UL's approach to standards harmonization incorporates several
guiding principles:
Ensure that the harmonized standards preserve, at a
minimum, the current level of safety expected by the U.S.
public,
Coordinate and collaborate with other SDOs to avoid
duplicate documents or requirements,
Consider the merit(s) of harmonizing existing
standards, whether by acceptance of IEC requirements or by
advocating a UL standard or its essential requirements as the
basis of the harmonized standard, and
Develop ``globally'' relevant standards in areas
where standards do not exist.\3\
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\3\ Globally relevant standards: ISO defines global relevance as
``the required characteristic of an International Standard that it can
be used/implemented as broadly as possible by affected industries and
other stakeholders in markets around the world.'' Globally relevant
standards therefore effectively respond to regulatory and market needs
(in the global marketplace); respond to scientific and technical
developments in various countries; do not distort markets; have no
adverse effects on fair competition; do not stifle innovation and
technological development; do not give preference to characteristics or
requirements of specific countries or regions when different needs or
interests exist in other countries or regions; and should be
performance based rather than design prescriptive.
The result of this approach is that standards differences are
minimized, standards are streamlined, a more international approach to
standards development (consistent with WTO TBT principles) is promoted,
and unique locally developed standards without justification are
discouraged.
As ISO and IEC standards gain greater use and acceptance globally,
it is critical that all affected U.S. private and public organizations
participate in these forums to ensure that U.S. safety principles are
reflected and that U.S. products and technologies are not excluded.
Enhancing relations and promoting cooperation with like-minded
countries in these international forums is critical to promoting U.S.
interests.
The Standards-Conformity Assessment Nexus
Many national, regional and international standards and conformity
assessment systems around the world all share a common goal of
minimizing the hazards associated with and ensuring the inter-
operability of products in the marketplace. But the standards and
conformity assessment systems currently operating often times are not
harmonized. Contrast this with trade liberalization opening markets and
prompting manufacturers to globalize their production processes and
supplier networks to remain competitive. With roughly 80 percent of the
global trade (of the $7.3 trillion in 2003) affected by standards and
related technical regulations for conformity assessment, the potential
economic impact of meeting requirements in multiple markets is
staggering.
Manufacturers must demonstrate that their products comply with
requirements through domestic conformity assessment processes, where
applicable, to sell products in those markets. In many cases,
certification by an independent third party is required, but the local
governments often preclude non-domestic entities from providing those
services. This impedes a manufacturer's ability to streamline the
number of testing and certification organizations it engages (on global
basis) to obtain the necessary certification marks, and ultimately
increases costs associated with compliance--from the number of internal
staff required to oversee the different compliance processes to actual
dollars expended for testing. It also impedes U.S. testing and
certification organizations' ability to provide global compliance
solutions for their customers.
UL believes that national treatment for conformity assessment
organizations is the most effective approach to eliminating many trade
barriers that emerge from technical regulations and standards. National
treatment enables conformity assessment bodies in one country to
provide testing and certification to another country's requirements by
being recognized or accredited through the same process applied to
domestic bodies. Different standards and technical requirements can
result in multiple testing and certification requirements for
manufacturers seeking to sell products into multiple markets. But
national treatment across markets would enable UL and other conformity
assessment organizations to provide customers with a seamless
certification program where services are bundled and streamlined to
facilitate timely, simultaneous, and effective market access for
manufacturers.
From time to time, governments have turned to government-to-
government Mutual Recognition Agreements (MRAs) to address the issue of
market access for U.S. conformity assessment bodies. With a few
exceptions like the APEC telecom MRA, MRAs have created unnecessary
bureaucracies, have proven very difficult to implement, and have
reduced attention on national treatment as the preferred conformity
assessment solution. Negotiations for the U.S.-EU MRA lasted more than
six years, with only two of six sectoral annexes operational, and at
least one annex suspended. For all of this effort, only a handful of
products have utilized the MRA. Implementation of the medical device
MRA remains troublesome, as the European Union has yet to approve the
U.S. organizations designated by the U.S. Food and Drug Administration
(FDA). FDA, in contrast, approved the EU designated counterparts
several years ago and they are already competing for business in the
United States.
Where National Treatment Has Gone Right. . .
In some countries, like Japan, the government has introduced
regulatory reforms that permit non-domestic entities to seek
accreditation and provide domestic testing and certification services.
We would like to see more countries introduce similar regulatory
reforms.
The North American Free Trade Agreement (NAFTA) introduced national
treatment for testing and certification bodies. Shortly after its
introduction manufacturers began working with a single certifier,
having their product tested once and accepted in both Canada and the
United States. Required factory audits for certification have been
combined into a single system thereby lowering the cost of compliance
for products sold in Canada and the United States. Certifiers
accredited under both the Canadian and U.S. systems compete for
manufacturers' business. This competitive environment has led to
increased efficiency and value in testing and certification programs.
Because national level systems for accreditation of testing and
certification continue in force, the high level of safety and national
acceptance for products in both markets has been maintained.
. . .And Where Problems Remain:
Under NAFTAA, the Mexican government committed to market access/
national treatment for testing and certification organizations
domiciled in the United States and Canada. Even after the four-year
transition period ended (in 1998), Mexico has failed to implement
directly its commitments. In January 2005, Mexican authorities finally
issued the document that permitted organizations to apply for
accreditation. The application documentation requirements present a
challenge, however, and no entity, including UL, has yet been able to
submit an application. UL has been working both with Mexican
authorities and through the auspices of the Office of the U.S. Trade
Representative (USTR) and the U.S. Department of Commerce (DOC) to
resolve matters, and is hopeful that a resolution will soon be found.
UL has been able to facilitate customers' product certification
applications for China's CCC mark through its ``agent'' status. This
means making sure that all necessary documentation is in compliance
with the CCC mark certification requirements. However, UL's joint
venture cannot perform related tests or authorize the use of the CCC
mark; the government currently restricts such activities to domestic
entities. Ultimately, UL-CCIC would like to be accredited to provide
testing and certification services for the CCC mark.
China's WTO accession commitments obligated them to provide
National Treatment to non-domestic testing and conformity assessment
organizations. Paragraphs 194 and 195 of the Working Party Report (WPR)
reference these market access obligations for conformity assessment
organizations. However, unlike the services schedule that outlines a
timeline for testing services, the WPR does not outline a specific
timeline for implementing market access for conformity assessment
organizations. Regulations introduced in 2003 and early 2004 appeared
to address testing and conformity assessment obligations in the
Commodity Inspection and Appraisal Institution Regulations (Order No.
58, effective January 2004) and PRC Regulations on Certification and
Accreditation (effective November 2003). However, when pressed for
clarification by USTR in January 2004, PRC authorities indicated that
the scope of work did not include testing and certification for the CCC
mark.
China has made commendable strides in bringing its product
certification system into compliance with WTO requirements and
participates in international schemes, including the CB scheme for
safety testing.\4\ In some cases, however, China has opted not to
participate in international schemes to which most all other trading
partners belong. One such example relates to electromagnetic
compatibility (EMC) testing. China opted out of the scheme for EMC,
requiring in-country testing instead of accepting reports generated by
other participating members. Manufacturers in general perceive this
practice as creating unnecessary and duplicative testing requirements.
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\4\ The IECEE CB Scheme is the world's first truly international
system for acceptance of test certificates and test reports dealing
with the safety of electrical and electronic products. It is a
multilateral agreement among over 43 participating countries and their
associated member certification organizations. A manufacturer utilizing
a CB Test Certificate and CB Test Report issued by one of these
organizations can obtain national product certification from other
participating member organizations without the need for re-testing. UL
is an active member in the CB Scheme with participating certification
bodies in Canada, Denmark, Japan and the United States. The CB Scheme
applies IEC based standards in 18 categories of electrical and
electonic products from office equipment and electronics to household
and similar equipment to installation assessories. The CB Scheme
includes safety testing, EMC testing and performance testing. It has
recently expanded into photovoltaics.
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In Europe, UL continues to face market access issues under the New
Approach, which inherently lacks national treatment for conformity
assessment organizations.\5\ Under the New Approach, Member States are
responsible for the notification of Notified Bodies and may only notify
bodies within their territory. Therefore, U.S. conformity assessment
organizations cannot provide cross-border conformity assessment
services in the European system. A soil-based presence is required.
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\5\ The New Approach consists of more than 25 directives that
specify safety, health and environmental ``essential requirements.''
European harmonized standards, developed by the European standards
organizations, provide the technical answer to addressing these
requirements. Technical, the use of New Approach harmonized standards
is voluntary, but companies using other standards must prove how they
are equivalent to the EU standards.
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What Can Be Done?
Advancing the standards and conformity assessment interests of U.S.
stakeholders will require a stronger public-private partnership. For
its part, the private sector--working through the auspices of ANSI and
with input from U.S. Government stakeholders--is making a concerted
effort to develop a meaningful U.S. Standards Strategy (USSS) that
``can be used by all interested parties to further advance trade issues
in the global marketplace, enhance consumer health and safety, meet
stakeholder needs and, as appropriate, advance U.S. viewpoints in the
regional and international arena.'' \6\ As the ANSI testimony notes, a
``key aspect of the Strategy is reference to the requirements of the
WTO's Technical Barriers to Trade as related to standards practices.''
The following are some priority considerations that fall within the
twelve broad USSS initiatives:
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\6\ United States Standards Strategy Notice of Public Review and
Comment, issued March 7, 2005. Copy of the draft is available online at
www.ansi.org/usss.
U.S. stakeholders should take the lead in submitting
standards development proposals and requesting recognition of
U.S. documents at the international level in such emerging
national priority areas as homeland security and
nanotechnology. Radio Frequency Identification (RFID) is
another such area where the impact of standards on trade is
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potentially staggering.
Government and private sector stakeholders alike
should work toward enhanced protection of intellectual property
rights (IPR) of standards development organizations, especially
in countries like China where general enforcement of IPR has
been uneven.
U.S. stakeholders should work to ensure that trade
partners comply with WTO principles of openness, transparency,
and advance notice.
UL proposes that the U.S. Government consider initiatives that
focus on negotiating new commitments in trade agreements, incorporating
standards and conformity assessment technical assistance elements into
all future U.S.-negotiated bilateral free trade agreements (FTAs),
ensuring trade partners' compliance with obligations under existing
trade agreements, linking standards and conformity assessment to
broader dialogues with trade partners, adequately funding the office of
the Standards Liaison within the U.S. Department of Commerce, and
increasing funding for existing government standards programs from
which the private sector derives important benefits.
Negotiating New Commitments in Trade Agreements:
UL and other U.S.-based testing and certification organizations
seek recognition from U.S. trade negotiators as a viable business
sector whose services can help enhance market access for U.S. exports.
We welcome a partnership with the Office of the U.S. Trade
Representative (USTR) and other U.S. Government agencies to define and
refine relevant provisions in FTAs and future WTO negotiating rounds.
To that end, USTR has recently engaged the testing and certification
community in negotiating such commitments for the WTO Doha Round.
Within the WTO Doha negotiations and U.S.-negotiated bilateral/
regional FTAs, U.S. testing and certification organizations seek
commitments from U.S. trade partners--whether through enhancements to
the current Technical Barriers to Trade Agreement or the market access
for services schedule--to permit non-domestic testing and certification
providers to apply for accreditation to offer domestic certification
marks. Those applications would be conducted in accordance with
domestic accreditation requirements.
Providing Technical Assistance in U.S.-Negotiated FTAs:
UL recommends that technical assistance provisions for standards
and conformity assessment systems be incorporated into all FTAs that
the United States negotiates moving forward and that Congress
appropriates adequate funding for execution of the technical assistance
programs. Such technical assistance provisions in the Central American
Free Trade Agreement (CAFTA) proved helpful in educating CAFTA
countries about the U.S. standards and conformity assessment system. We
would expect this education to influence CAFTA countries to establish
and refine their own systems in a way that (ideally) aligns with the
United States, or at a minimum, refrains from introducing elements that
unduly restrict market access for U.S. exporters.
Enforcing Existing Trade Agreement Commitments:
For Mexico, we ask that the United States incorporate a regulatory
dialogue into the recently announced Security and Prosperity
Partnership agenda (under the Manufactured Goods Working Group) and
specifically address increased access for non-domestic testing and
certification organizations.
For China, we seek increased dialogue under both the WTO accession
Transitional Review Mechanism and the Joint Commission on Commerce and
Trade to develop a timeline for implementation of national treatment
commitments referenced in Paragraphs 194 and 195 of China's Working
Party Report.
For Europe, we seek increased U.S. Government pressure on the
Europe Union to implement fully its obligations under the EU-U.S. MRA
for medical devices by approving the U.S. FDA-designated entities,
including UL.
Incorporating Standards and Conformity Assessment Issues in Dialogues:
One of the key recommendations to emerge from the DOC Standards
Initiative focused on enhanced dialogues with foreign governments. A
more active standards dialogue between and among countries and regions
could help prevent standards from becoming trade barriers. To that end,
UL welcomes the inclusion of standards and conformity assessment issues
as a mainstay component of such bilateral and regional dialogues as the
Security and Prosperity Partnership of North America, EU-U.S.
Regulatory Dialogue, the Transatlantic Business Dialogue, and the U.S.-
China Joint Commission on Commerce and Trade. Such dialogues provide a
meaningful forum to address emerging concerns as well as identify areas
of mutual interest where collaboration is ripe.
With respect to the IEC process and related issues, UL believes
that the United States should work first to identify solutions, to the
maximum extent possible, within the international standards development
processes. There are several initiatives underway within the standards
community that allow for the exchange of ideas and the introduction of
change. Within the IEC these initiatives are carried out through the
United States National Committee to the IEC. Only if these mechanisms
fail to achieve resolutions should the United States consider raising
IEC-related issues in government-to-government dialogues.
Funding the DOC Standards Liaison Office:
The office of the DOC Standards Liaison has done a commendable job
of improving coordination across departments within DOC in a very short
time. Collaborating with other DOC colleagues has also enabled pilot
training programs for U.S. Government officials on standards and
conformity assessment issues as they affect trade. Such training is
paramount as the intersection between standards and trade is
increasing.
But a lot of work remains undone, and UL would like to see more
meaningful funding for execution of the Standards Liaison's mandate.
The pilot training programs indeed are commendable, but a more
comprehensive and regular program is needed to ensure that the ever
evolving and rotating cadre of U.S. trade officials become proficient
in standards and trade issues.
Careful consideration should also be given to funding of additional
Standards Attaches in overseas posts. Such attaches have played pivotal
roles in facilitating resolution of standards and conformity assessment
issues faced by manufacturers and conformity assessment providers
alike. Their ability to track trends and report on them makes it easier
for industry to uncover signs of emerging problems and to address them
earlier rather than later.
Increasing Funding for Existing Government Standards Programs:
NIST Standards in Trade (SIT) Workshops: UL has been
a longstanding active participant in the NIST SIT workshops.
These workshops prove a valuable venue through which interested
U.S. private sector organizations can educate foreign
government officials on the U.S. standards and certification
system and build bridges for future cooperation. These broad
and specific programs are especially important when they target
countries/regions in which systems/structures currently do not
exist or are in their infancy, and in which there is a
perceived receptivity to U.S. principles and practices. We
believe that the impact of these workshops could be
strengthened through increased funding that would enable NIST
to continue offering new programs while providing a mechanism
to sustain momentum of previous programs.
Commercial Law and Development Program (CLDP):
Funding for standards and conformity assessment related
programs under the auspices of the CLDP program are also
valued. Having participated in a number of these programs over
the years, UL believes that these programs also help advance
U.S. commercial and public safety interests over the long-term.
Sustained funding is warranted.
Preserving Safety and Facilitating Trade
In the end, globalization will place pressure on standards and
conformity assessment systems to streamline and harmonize. The merits
of such harmonization are real, but doing so needs to be executed in a
manner that does not sacrifice the high level of product safety enjoyed
in the United States today.
Standards should continue to be driven by market needs and
developed through open processes. At the international level, U.S.
stakeholders need to find ways to inject greater balance into the IEC
process, working through its technical committees and governance
bodies.
Encouraging trading partners to provide national treatment to U.S.-
domiciled testing and certification organizations helps U.S.
manufacturers reduce costs of compliance by minimizing duplicative
testing requirements and enables a global approach to conformance.
Reduction of manufacturers' costs will help U.S. exporters remain
competitive abroad and address some pressure points that drive U.S.
companies to shift production overseas.
In all of these areas, the U.S. Government has a real and
meaningful role to play. UL and other private sector stakeholders look
forward to working with all divisions of the U.S. Government to advance
U.S. interests and minimize the adverse impact of standards, technical
regulations, and conformity assessment processes on trade.
Biography for Joe S. Bhatia
Prior to his recent retirement from UL on May 1, 2005, Joe Bhatia
served as the Executive Vice President, International for Underwriters
Laboratories Inc. (UL). Mr. Bhatia had held a variety of increasingly
complex and demanding executive positions during a 35-year career at
UL, one of the world's largest and most visible providers of safety
standards and technical certification services. Specific areas of
involvement include engineering and technical management; governmental
and congressional liaisons; P&L responsibility, customer service; and
global business expansion and development. Mr. Bhatia directed all day-
to-day activities of 2300 employees in UL's 26 international subsidiary
operations in Europe, Middle East, Africa, Asia-Pacific, Canada and
Latin America, reporting to the UL chief executive officer. Currently,
Mr. Bhatia is serving UL as a Consultant--Strategic Projects.
Mr. Bhatia is the chairman of the U.S. Department of Commerce and
U.S. Trade Representative's Industry Technical Advisory Committee 16--
Standards and Technical Barriers to Trade. This committee advises the
U.S. Government on international trade and market access matters. He is
a member of the Board of Directors the National Fire Protection
Association (NFPA) and the American National Standards Institute. Mr.
Bhatia has also been the Educational Foundation Director of Oakton
Community College (Des Plaines, Ill.) since 1999. Mr. Bhatia has a
Bachelor's degree in electrical engineering and a Master's degree in
business management.
Chairman Ehlers. Thank you.
Mr. Karmol.
STATEMENT OF MR. DAVID KARMOL, VICE PRESIDENT, PUBLIC POLICY
AND GOVERNMENT AFFAIRS, AMERICAN NATIONAL STANDARDS INSTITUTE
Mr. Karmol. Thank you, Mr. Chairman, Ranking Member Wu, and
Representative Biggert. I am pleased to be here.
I am David Karmol. I am Vice President of Public Policy and
Government Affairs for the American National Standards
Institute.
As you know, ANSI is the coordinator of the U.S. private
sector-led and public sector-supported voluntary consensus
standards and conformity assessment system. We share the
concerns of industry and this committee about the ramification
of standards and regulatory activities on American businesses
competing in the global marketplace.
In our testimony, ANSI will suggest actions that can be
taken by the Congress to help mitigate concerns related to the
standardization policies and practices of China and the
European Union.
My first point will address considerations with respect to
the People's Republic of China. As the world's largest contract
manufacturer and the world's largest single market, it is
critical that China be persuaded to participate in
international standards forums and to embrace the globally-
accepted principles of standardization endorsed by the World
Trade Organization.
Events of the past few years indicate that China may have
been considering a strategy of using national standards as
trade barriers to shelter its growing industries. China must be
encouraged to adopt existing and globally-recognized voluntary
standards rather than develop unique standards for use only in
that country.
To avoid future ``WAPI'' situations, companies in China
should be urged to consider offering the inclusion of
intellectual property in globally-recognized standards under
reasonable and non-discriminatory terms and conditions in the
same manner as they are used in the United States' standards.
Finally, China should be encouraged to adopt the WTO TBT
agreement definition of ``international standard'' that
includes documents that have been developed by a consensus-
based organization that follows transparent policies that are
balanced, reasonable, and non-discriminatory.
The Chinese government recently completed an investigation
of its standards system, identifying problems and suggesting
solutions. ANSI has praised these efforts and continues to
support Chinese leaders to adopt a standards process that is
marketplace-driven.
My next point will address considerations with respect to
the European Union and the European standards organizations.
European standards are often developed to meet specific
regulatory requirements or procurement policies. A standard
that is adopted by the European Union must also become the
normative document for each EU member nation. With few
exceptions, the three European regional standards organizations
restrict participation on their standard-setting committees to
entities that have a physical presence in an EU member state.
ANSI believes that the European standards organizations
should allow U.S. stakeholders to participate in the
development of EU standards that will ultimately impact their
ability to trade in the European market. We have had bilateral
discussions annually with representatives of the European
Commission and European standards organizations, and we
encourage them, and continue to encourage them, to open their
doors to U.S. stakeholders.
Recently, the EU and its member nations have begun
expending millions of Euros annually to provide technical
assistance to developing and emerging nations, including China.
These efforts often include providing free standards and even
translations of standards in return for commitments by the
recipient nations to adopt or otherwise use the EU standards.
To date, the U.S. standardization community has not had the
resources to offset this aggressive effort.
The strengthening of U.S. Federal Government support of and
cooperation with the private sector is needed for standards
education and outreach activities, technical support and
assistance, and resources to assure adequate U.S.
representation at international standards meetings. To
facilitate stronger U.S. coordination, ANSI recently offered
its Regional Standing Committee for Europe, the Middle East,
and Africa as a focal point to improve coordination between
government agencies and the private sector in the areas of
representation, technical assistance, and outreach and other
related aspects of trade and regulatory policy.
My last point will address coordinating public and private
sector strategies.
The policy considerations put forth in this testimony are
aligned with high-level strategies developed by the U.S.
Department of Commerce, as expressed in former Secretary Evans'
``Standards in Competitiveness--Coordinating for Results''
document. They are also aligned with the latest edition of the
draft ``United States Standards Strategy,'' which is now being
developed by members of the U.S. standardization community in a
process that ANSI is managing.
Mr. Joe Bhatia to my right chairs the U.S. Standards
Strategy Project. The other witnesses here today have also
provided valuable input throughout the development of this
strategy. We would be pleased to respond to your questions
about it.
In summary, the strategy provides a framework to address
the cross-border trade of goods and services as well as key
national priorities, such as homeland security and emerging
technologies. Congressional recognition and endorsement of the
strategy would provide valuable support to the private sector
as it engages with Europe and China. ANSI asks you, as members
of the House Science Committee, to offer a resolution endorsing
the U.S. Standards Strategy when it is finalized. Such a
resolution would demonstrate to other nations that the U.S.
speaks with one voice on standards issues, even though our
development of standards takes advantage of a decentralized and
sector-based approach.
I thank you for your consideration, welcome your questions,
and ask that my full statement be made a part of the record.
[The prepared statement of Mr. Karmol follows:]
Prepared Statement of David Karmol
Introduction
``If you control an industry's standards, you control that industry
lock, stock, and ledger.'' That prophetic statement was made more than
ten years ago by Dr. W. Edwards Deming, father of the quality movement
that has transformed the ways companies do business both here and
abroad.
Today, standardization\1\ has become the key to market access. When
standards and conformity assessment related policies and practices
differ from country to country, or when standards are used as barriers
to trade, businesses are unable to compete effectively in the global
marketplace. These challenges are being faced around the globe--country
by country--on a daily basis.
---------------------------------------------------------------------------
\1\ ``Standardization'' encompasses a broad range of considerations
such as which (whose) standards will be used, laboratory accreditation,
certification of products, services, and personnel, metrology and
measurement, testing and sampling.
---------------------------------------------------------------------------
The United States Department of Commerce reports that many
businesses now view standardization and regulatory issues as their
major impediment to increasing exports. Of particular concern are the
standards-related activities of the People's Republic of China
(hereinafter referred to as either ``PRC'' or ``China'') and the member
nations of the European Union (EU), each of which have significant
ramifications for American firms that wish to export to those markets
or who wish to source manufacturing there.
As administrator and coordinator of the United States' private
sector-led and public sector-supported voluntary consensus
standardization system, the American National Standards Institute
(ANSI) shares the concerns of industry and this committee vis-a-vis our
nation's ability to compete effectively in world economies. A key
element of ANSI's mission is focused on enhancing the global
competitiveness of U.S. business by facilitating voluntary consensus
standards (VCS) and conformity assessment systems, and safeguarding
their integrity.
In this testimony, ANSI will explain many of its relevant
standardization activities related to China and the EU and will
recommend actions that can be taken by Congress to assist in mitigating
many of the concerns identified. ANSI will also call for Congressional
endorsement of the United States Standards Strategy\2\ (USSS) as a
framework that effectively addresses the cross-border trade of goods
and services; key national priorities such as homeland security;
emerging technologies--such as nanotechnology--and their significant
related commercial and business applications; consumer health and
safety, and more.
---------------------------------------------------------------------------
\2\ The United States Standards Strategy (draft second edition) is
an update of the National Standards Strategy for the United States
(first edition--August 2000). It is being developed by representatives
of various industry sectors, including small, medium and large
organizations, consortia, professional societies, trade associations,
labor unions, consumer and consumer representative organizations,
educational institutions, Federal and State government regulators, and
legislators and staff.
---------------------------------------------------------------------------
Mr. Joe Bhatia, who is appearing here today on behalf of
Underwriters Laboratories, chairs the USSS project. Robert Noth, Donald
Deutsch, and Dr. Hratch Semerjian and his staff at the National
Institute of Standards and Technology (NIST) all provided invaluable
input and leadership throughout the development process of the
Strategy. All of us will be pleased to respond to your questions about
it.
In addition, ANSI will call for strengthened federal support of,
and cooperation with, the private sector for activities such as
research, education, and technical support, and resources to assure
adequate U.S. representation at international standards meetings. These
actions will help to level the playing field for U.S. businesses
competing in the international marketplace.
Considerations with Respect to the People's Republic of China (PRC)
Events of the past few years indicate that stakeholders within the
PRC may have been considering a strategy of using national standards as
trade barriers to shelter the Nation's growing industries. However, the
role of the PRC as the world's largest contract manufacturer makes it
critical that China be persuaded to continue its participation in
international standards forums, rather than develop unique national
standards. This is especially important in those instances where the
intellectual property rights that are often incorporated into standards
are not made available on the basis of reasonable and non-
discriminatory terms.
During 2004, the PRC government completed its own investigation of
its standards system, identifying problems and suggesting solutions.
The issuance of these strategy reports and the seemingly positive
content identifying internal changes to be made to the PRC
standardization system has been applauded by ANSI.
ANSI has offered its support in reforming the PRC standards system
and will encourage support of a process that is driven by marketplace
demand where standards are developed in response to specific concerns
and needs expressed by industry, government, and consumers (see Annex
B).
To assist in the mitigation of concerns about the Chinese
standardization policy, ANSI offers the following policy considerations
for review and deliberation by the Science Committee of the United
States House of Representatives and for consideration by stakeholders
in the PRC:
The global economy will be best served if the PRC
joins with the United States and other nations in embracing the
globally accepted principles of standardization endorsed by the
WTO (see Annex C). In particular, support should be given to
open and inclusive participation in standardization activities;
balancing the interests of all stakeholder groups so that the
outcomes are representative and broadly supported; and
maximizing the participation of, and value to, both
intellectual property rights (IPR) holders and implementers.
Voluntary consensus standards enable industry growth,
promote vendor differentiation and allow for adaptation to meet
unique consumer and stakeholder needs. To the extent that the
PRC adopts existing and globally recognized voluntary
standards--rather than developing unique standards for use only
in China--the Nation and its growing export market will
benefit.
The inclusion of intellectual property, under
reasonable and non-discriminatory (RAND) terms and conditions,
in voluntary consensus standards provides benefit to the
contributor of that intellectual property via licenses and/or
recognition and to implementers of the standard via the reduced
need to support multiple specifications. Companies in China are
encouraged to consider offering intellectual property for
inclusion in globally recognized standards.
The global landscape is rich with entities, systems
and processes that support regional and international
standardization activities. These include treaty organizations
where governments are members; non-treaty organizations whose
membership is comprised of national representatives;
professional and technical organizations whose membership is on
an individual or organizational basis; and through consortia
whose membership is typically company and industry based.
-- The PRC will benefit by broadening its definition
of ``international standard'' to include documents that
have been either developed or ratified by any
consensus-based organization pursuant to transparent
policies that are reasonable and non-discriminatory.
China's current definition is limiting in that it
applies only to standards that have been approved by
the International Organization for Standardization
(ISO), International Electrotechnical Commission (IEC),
and the International Telecommunication Union (ITU).
-- As a means of fostering both competition and
innovation, governments in all nations should allow
stakeholders, particularly companies, to choose among
the different voluntary standards that may be
applicable.
Considerations with Respect to the European Union and the European
Standards Organizations
Similar to the United States, the European Union and its member
nations have increased their reliance on standards developed under a
voluntary consensus process. Unfortunately, the similarities often end
here.
In the U.S., a standard is generally developed in response to
market demand or need. Standards in Europe are often developed to fill
a government need for a specific set of regulatory requirements or
procurement policies of government agencies. A standard that is adopted
by the EU must become the normative document for each of the EU member
nations. With few exceptions, the three European Standards
Organizations--the European Committee on Standardization (CEN), the
European Committee on Electrotechnical Standardization (CENELEC), and
the European Telecommunications Standards Institute (ETSI)--restrict
participation on their standards-setting committees to entities that
have a physical presence in one of the EU member nations.
To assist in the mitigation of concerns about the EU
standardization policy, ANSI offers the following policy considerations
for review and deliberation by the Science Committee of the United
States House of Representatives and for consideration by stakeholders
in Europe:
Some access to the ESOs is available via the role of
ANSI and its U.S. National Committee of the International
Electrotechnical Commission (USNC/IEC) as the U.S. member of
the ISO and IEC, respectively. An ANSI delegation engages
regularly with representatives of the European Commission and
the ESOs to raise strategic standards issues from the U.S.
perspective. ANSI will continue to pursue an expansion of the
ESO's participation requirements to provide for the ability of
U.S. stakeholders to influence the development of EU standards
that will ultimately impact their ability to trade with the
European market.
At the same time that the EU and its member nations
have become more aggressive in producing standards that serve
EU producers, they have also begun expending millions of Euros
annually to provide technical assistance to developing and
emerging nations, including China. These efforts often include
providing free standards, and even translations of standards,
in return for commitments by the recipient nations to adopt or
otherwise use the EU standards. While some U.S. standards
developers and companies have aggressively promoted their
catalogues of standards to emerging nations, to date neither
U.S. industry nor government has been willing or able to make
contributions that will offset this imbalance.
-- The U.S. standardization community does not have
the resources to match the large investment being made
by the Europeans. Federal Government support of, and
cooperation with, the private sector is needed for
activities such as research, education, and technical
support, and resources to assure adequate U.S.
representation at international standards meetings.
-- These U.S. outreach and promotion efforts must be
well coordinated. ANSI offers its Regional Standing
Committee for Europe, the Middle East and Africa (RSC-
EMEA) \3\ as a focal point to improve coordination
between private sector interests, and governmental
interests in the areas of trade and regulatory policy,
which involve different government agencies and
participants.
---------------------------------------------------------------------------
\3\ ANSI established the RSC-EMEA to broaden the participation of
U.S. stakeholders in the development of policy positions regarding
regional standards and conformity assessment activities, and to
coordinate U.S. activities, respond to initiatives and advise ANSI on
matters relating to the European, Middle Eastern and African regions.
---------------------------------------------------------------------------
Coordinating Public and Private Sector Strategies
The above policy considerations for China and Europe are aligned
with high-level strategies developed by the U.S. Department of Commerce
following the issuance in May 2004 of ``Standards and Competitiveness--
Coordinating for Results,'' a report acknowledging the growing
awareness of standards as a key trade issue. These considerations are
also aligned with the latest edition of the draft United States
Standards Strategy (USSS) (www.ansi.org/usss). A key aspect of the
Strategy is reference to the requirements of the WTO's Technical
Barriers to Trade as related to standards practices.
As referenced in the Introduction of this testimony, the USSS is a
guidance document that is being developed by members of the U.S.
standardization community, including representatives of industry,\4\
government, consumers, academia and more. It is a perfect example of
the U.S. public-private sector partnership approach to standardization.
---------------------------------------------------------------------------
\4\ Representatives of the National Association of Manufacturers
(NAM) have been actively involved in the process of updating the U.S.
Standards Strategy; William Primosch, NAM's senior director of
international business policy, headed the working group drafting the
international section of the Strategy.
The U.S. Standards Strategy is expected to be
finalized in late 2005. Implementation of its strategic
initiatives and tactics will be strengthened by Congressional
recognition and endorsement. This endorsement will also provide
valuable support to the private sector as it engages with
---------------------------------------------------------------------------
Europe and the various standards organizations in China.
-- ANSI encourages the Science Committee to offer a
resolution or other legislative vehicle to enable the
Congress to formally endorse the U.S. Standards
Strategy.
Summary
The American National Standards Institute is proceeding with its
plans to assist in reforming the PRC standards system, working with
Europe in establishing a level playing field for U.S. stakeholders, and
finalizing and implementing the United States Standards Strategy.
On behalf of its members, constituents, and the U.S.
standardization community, the Institute will continue to serve as an
advocate for an open, balanced and transparent global standards system
that is driven by marketplace demand. ANSI will also encourage China,
the EU and its members, and all other nations to pursue the
development, endorsement and adoption of globally recognized standards
that respond to specific concerns and that meet the needs expressed by
all stakeholders.
ANSI welcomes the opportunity to continue to work in partnership
with this committee, Congress, and other U.S. public sector
representatives to achieve these goals.
Annex A
Background on the U.S. Standardization System and the Role of the
American National Standards Institute (ANSI)
The U.S. private sector-led, voluntary standardization system has
been in existence for more than 100 years. It is a highly decentralized
system and naturally partitioned into industrial sectors that are
supported by numerous independent, private sector standards developing
organizations (SDOs). It is a system that is demand-driven by the
marketplace with standards typically developed in response to specific
concerns and needs expressed by industry, government, and consumers.
Since 1918, this system has been administered and coordinated by
the American National Standards Institute (ANSI) with the cooperation
of the private sector and the Federal, State and local governments.
ANSI does not develop standards. Rather, it functions as a central
clearinghouse and coordinating body for its member organizations. The
Institute is a unique partnership of industry, professional, technical,
trade, labor, academic and consumer organizations, as well as
government agencies. These members of the ANSI federation actually
develop standards or otherwise participate in their development,
contributing their time and expertise in order to make the system work.
ANSI ensures the integrity of the U.S. standards system by:
1. establishing a set of due process-based ``essential
requirements'' that SDOs may follow in order to manage the
consensus standards development process in a fair and open
manner,
2. accrediting SDOs who adhere to these requirements,
3. approving candidate standards from ANSI-accredited SDOs as
American National Standards (ANS), and
4. conducting regular audits of the ANS activities of ANSI-
accredited SDOs to ensure ongoing compliance with ANSI's
essential requirements.
ANSI has accredited hundreds of SDOs across a range of industry
sectors. These industries include (but certainly are not limited to)
telecommunications, medical devices, heavy equipment, fire protection,
information technology, petroleum, banking and household appliances.
There are now approximately 10,000 ANSI-approved ANS that address
topics as diverse as dimensions, ratings, terminology and symbols, test
methods, inter-operability criteria, product specifications, and
performance and safety requirements. These standards development
efforts serve the public interest and are being applied to new critical
areas such as the environment, healthcare, homeland security and
nanotechnology.
The Institute's approval of a candidate standard as an ANS verifies
that the principles of openness and due process have been followed and
that a consensus of all interested parties has been reached. Due
process requires that all proposed ANS be circulated to the public at
large for comment, that an attempt be made to resolve all comments, and
that there is a right of appeal. In addition, ANSI considers any
evidence that a proposed ANS is contrary to the public interest,
contains unfair provisions or is unsuitable for national use. This
basic formula has been the hallmark of the ANS process for decades, and
it has garnered worldwide respect and acceptance.
One of the best indicators of confidence in the U.S. voluntary
consensus standardization system (as exemplified by the ANS process) is
Congress's 1996 passage of the National Technology Transfer and
Advancement Act (NTTAA). This law (P.L. 104-113) requires federal
agencies to use voluntary consensus standards for regulatory purposes
wherever feasible and to procure equipment and services in accordance
with such standards. It also requires agencies to increase their
participation in voluntary consensus standards activities and directs
the Commerce Department's National Institute of Standards and
Technology (NIST) to coordinate federal, State and local voluntary
standards and related conformity assessment activities.
ANSI also promotes the use of U.S. standards internationally. The
Institute serves as the U.S. national body representative in two major,
non-treaty international standards organizations: the International
Organization for Standardization (ISO) and, through the United States
National Committee (USNC), the International Electrotechnical
Commission (IEC). ANSI and the USNC play a leadership role in ISO and
IEC, respectively, on both policy and technical matters.
Part of ANSI's role as the U.S. member of ISO includes accrediting
U.S. Technical Advisory Groups (U.S. TAGs) which develop and transmit,
via ANSI, U.S. consensus positions on the activities and ballots of
technical committees and subcommittees. Similarly, the USNC approves
TAGs for IEC activities. In many instances, voluntary standards
developed by U.S. SDOs are taken forward, through ANSI or the USNC,
where they are approved in whole or in part by the ISO and/or IEC as
International Standards. ANSI also encourages the adoption of
international standards as national standards where they meet the needs
of the user community.
In addition, ANSI advocates U.S. positions in various regional
standards organizations and regularly meets with representatives from
standards bodies in other nations. Thus, ANSI plays an important role
in facilitating the development of global standards that support global
commerce and which prevent regions from using local standards that
favor local industries as trade barriers.
Conformity assessment is the term used to describe steps taken by
both manufacturers and independent third-parties to determine
fulfillment of standards requirements. ANSI's role in the conformity
assessment arena includes accreditation of organizations that certify
that products and personnel meet recognized standards. The ANSI-
American Society for Quality National Accreditation Board (ANAB) serves
as the U.S. accreditation body for management systems certification,
primarily in areas such as quality (ISO 9000 family of standards) and/
or the environment (ISO 14000 family of standards). ANSI also is
involved in several international and regional organizations to promote
multilateral recognition of conformity assessments across borders to
preclude redundant and costly barriers to trade.
In summary, through its various roles and responsibilities, ANSI
advances its mission to ``enhance both the global competitiveness of
U.S. business and the U.S. quality of life by promoting and
facilitating voluntary consensus standards and conformity assessment
systems and safeguarding their integrity.''
Annex B
Background on Standards and Trade with China
As the U.S. member body of ISO, and via the U.S. National Committee
of IEC, ANSI serves as the national standards body counterpart to the
PRC and can help influence Chinese stakeholders to participate in the
fair and open standardization process that has as its goal the
development of a single set of globally recognized and accepted
standards.
As noted earlier in this testimony, recent events indicate that the
PRC may have been considering using standards to establish trade
barriers as a strategy to shelter the Nation's growing industries. One
well-publicized example is related to the PRC's domestic high-
technology industry and the issue of a Wireless Local Area Network
(WLAN) Authentication and Privacy Infrastructure (WAPI) and Wireless
Fidelity (Wi-Fi) chips, the devices that allow computers to access the
Internet through local wireless networks.
On May 12, 2003, the PRC government mandated that a new WLAN WAPI
security standard take effect in June 2004. The new standard was
developed independently by the PRC Broadband Wireless IP Standard
(BWIPS) Group with little or no communication with other standards
organizations and no foreign participation. Upon implementation of the
PRC government directive, foreign importers to China would have been
mandated to comply with a requirement to form joint ventures with one
of 24 PRC companies that had been given proprietary technical
information required for implementation of the WAPI standard.
The U.S. Government and industry pointed out that there is already
an internationally accepted standard for such technology (IEEE 802.11).
On March 2, 2004, in a joint letter signed by U.S. Secretary of State
Colin Powell, U.S. Commerce Secretary Don Evans and U.S. Trade
Representative Robert Zoellick to Zeng Peiyan, Vice Premier of the
People's Republic of China, the Bush administration urged PRC to drop
WAPI. Following high-level meetings in Washington, D.C., the PRC
government announced that it would (a) suspend implementation of the
WAPI standard, (b) work to revise the WAPI standard, taking into
account comments received from PRC and foreign firms, and (c)
participate in international standards bodies on WAPI and wireless
encryption for computer networks.
In recent months, ANSI has worked through international forums, its
membership, and in concert with the China desk at the Department of
Commerce's International Trade Administration to invite representatives
of the PRC standards organizations to a meeting to discuss a long-term
resolution of the WAPI issue, including fair consideration of the PRC
proposal in the appropriate international forum. ANSI believes that
respectful and open engagement with the various PRC standards groups is
the best way to resolve such issues going forward.
While WAPI is important for many reasons, the PRC is also
developing several other important (but locally divergent) standards in
areas as diverse as the Internet Protocol, 3G wireless communications
(such as TD SCDMA\5\ and SCDMA\6\), audio-video capture and playback
(AVS), document and data protection, the small intelligent grouping and
resource sharing (IGRS) for terminal device collaboration radio devices
being developed for inventory management (RFID), and others. It is the
pervasive nature of these activities, and the related treatment of
intellectual property, that is of significant concern to PRC's trading
partners.
---------------------------------------------------------------------------
\5\ Time Division Synchronous Code Division Multiple Access (TD-
SCDMA) is a mobile telephone standard for wireless network operators
who want to move from a second generation (2G) wireless network to a
third-generation (3G) one.
\6\ Synchronous Code Division Multiple Access
---------------------------------------------------------------------------
Subsequent to the initial WAPI controversy, the PRC government
issued a report identifying concerns in the PRC standards system and
suggesting solutions. The study was a cooperative effort between the
Chinese Ministry of Science and Technology (MoST), the Chinese General
Administration for Quality Supervision, Inspection and Quarantine
(AQSIQ), and the Standardization Administration of China (SAC). The
report itself was drafted by the China National Institute of
Standardization (CNIS), an agency within the AQSIQ, which met with an
ANSI delegation in Washington, D.C. in December 2003.
The report suggested:
changing the existing four levels of: National,
Vertical, Local, and Enterprise standards to the three levels
of: National, Association, and Enterprise standards;
changing the two categories of standards: Mandatory
and Recommended standards into only voluntary standards;
voluntary standards becoming mandatory only via references or
citations in government regulations;
changing the standards development accreditation
scheme: Currently, national, vertical and local standards are
subject to government approval. The suggestion is to change
this system so that: governmentally accredited bodies will
approve national standards and associations will approve
association standards;
that enterprises should be free to determine their
own standards usage without the governmental registration
required today;
that standards should be adopted voluntarily by the
users of standards.
The issuance of the SAC strategy reports, and the seemingly
positive content identifying internal changes to be made to the PRC
standardization system, prompted ANSI to send a letter to the
Administrator of SAC, Li Zhonghai, in October 2004. This letter
congratulated SAC on the undertaking of this study and applauded the
recommendations put forward in the report.
To further its outreach efforts, in mid-January 2005 ANSI's
President and Chief Executive Officer Dr. Mark. W. Hurwitz, traveled to
China to meet with Administrator Li and representatives of CNIS, the
Administration of Certification and Accreditation of China (CNCA), the
Standards Press of China (SPC) and the U.S. Foreign Commercial Service
in Beijing. During these discussions, ANSI agreed to serve as the
distributor of Chinese national standards in the U.S. and SAC agreed to
become a distributor of American National Standards, as well as certain
other standards developed by U.S.-based standards-setting bodies, in
China. This arrangement will facilitate access to the national
standards of each nation and is seen as crucial to the promotion of
cross-border trade.
ANSI has also taken steps to mitigate the difficulty of obtaining
entry visas for Chinese technical experts who are attempting to attend
meetings of international standards committees in the United States.
Among the actions taken was publication of a guidelines document that
provides information for Chinese technical experts and for the
administrators and officers of the technical committee meetings that
are hosting those meetings; ANSI is engaged in ongoing discussions of
this topic with the U.S. Department of State and other relevant
agencies.
Dr. Hurwitz also explored with SAC the prospect of increasing U.S.
and other foreign access to participation on standards-setting
committees in the PRC. Current and proposed future options were
discussed, with a strong indication being given to ANSI by SAC that
China will be moving away from its past practices of favoring
government-held seats on its national standardization committees and
placing restrictions and/or limits on open participation on these
committees.
Finally, during his visit Dr. Hurwitz was introduced to a new
initiative within PRC to develop a Chinese Standards Strategy. The
Strategy's goals include efforts to develop, within 15 years,
``independently self-proprietary technical standards through effective
measures, so as to improve international competitiveness of China's
technical standards and therefore increase the international market
share of Chinese products.''
Its Guiding Principles bear in mind the goals of ``new-stage
industrialization and comfortably-off society,'' focus on improvement
of technical standard adaptability and competitiveness, couple standard
independence/innovation with international norms, integrate
governmental instruction and market orientation with enterprise as the
major player, and meet the strategic requirements of technological
innovation as well as industrial and trade development on technical
standards.
In the near-term, Chinese strategic goals to be achieved by 2010
include the formation of a rather complete national technical standard
system, putting the overall technological level of Chinese standards on
a par with that of international standards for key areas. By 2020, the
PRC intends to upgrade its international standards involvement to an
advanced level, putting China high on the rank of international
standardization contributors.
Annex C
Excerpt from the [draft] United States Standards Strategy
PRINCIPLES
It is well established in the community of nations that standards
should meet societal and market needs and should not be developed to
act as barriers to trade. In approving the World Trade Organization
Technical Barriers to Trade Agreement, WTO members recognized that goal
and established globally accepted principles as a framework to promote
cooperation and discourage the use of standards as trade barriers. The
U.S. standards system is based on the following set of globally
accepted principles for standards development.
Transparency
Essential information regarding standardization activities
is accessible to all interested parties.
Openness
Participation is open to all affected interests.
Impartiality
No one interest dominates the process or is favored over
another.
Effectiveness and relevance
Standards are relevant and effectively respond to regulatory
and market needs, as well as scientific and technological
developments.
Consensus
Decisions are reached through consensus among those
affected.
Performance-based
Standards are performance-based, specifying essential
characteristics rather than detailed designs where possible.
Coherence
The process encourages coherence to avoid overlapping and
conflicting standards.
Due Process
Standards development accords with due process so that all
views are considered and appeals are possible.
Technical Assistance
Assistance is offered to developing countries in the
formulation and application of standards.
In addition, U.S. interests strongly agree that the process should
be:
Flexible, allowing the use of different methodologies
to meet the needs of different technology and product sectors;
Timely, so that purely administrative matters do not
slow down the work, but meet market expectations; and
Balanced among competing interests.
Biography for David Karmol
David Karmol currently serves as Vice President for Public Policy
and Government Affairs at the American National Standards Institute
(ANSI). In this position he is responsible for advocacy and outreach
programs designed to better educate Federal, State and local government
officials on the value of the voluntary consensus standardization
system and its importance to advancing the competitiveness of U.S.
businesses and enhancing the health and safety of the world's citizens.
Karmol joined ANSI in July 2001 with a thorough knowledge of the
issues important to the standards and conformity assessment community
and a track record of success working on policies, strategies and
programs in close liaison with Federal, State and local governments.
Prior to joining ANSI, he spent ten years as general counsel and
director of public affairs at the National Spa and Pool Institute
(NSPI), an ANSI member and accredited standards developer. Karmol also
served as Press Secretary and Special Assistant to the Director of the
United States Mint; general counsel for the Can Manufacturers
Institute; associate counsel to the U.S. House of Representatives
Judiciary Committee; member of the Ohio House of Representatives, and
assistant prosecuting attorney in Franklin County, Ohio.
Mr. Karmol received his B.A. from Miami University of Ohio, and his
J.D. from the Ohio State University College of Law and is admitted to
practice law in Virginia, the District of Columbia and Ohio.
ANSI's mission is to enhance U.S. global competitiveness and the
American quality of life by promoting, facilitating, and safeguarding
the integrity of the voluntary standardization system. ANSI is the
official U.S. representative to the International Accreditation Forum
(IAF), the International Organization for Standardization (ISO) and,
via the U.S. National Committee, the International Electrotechnical
Commission (IEC). ANSI currently has offices in New York City and
Washington, DC.
Discussion
Chairman Ehlers. And it certainly will.
I thank all of you for excellent testimony. You covered the
spectrum and outlined very well the nature of the problem, at
least as I perceive it, and now to decide where we go from
here.
Let me begin the question period, and I recognize myself
for five minutes.
Something for all of the witnesses to answer, and I have
often heard that we are not, as a nation, playing an active
enough role in various ways, and so I would like each of you to
respond to that. Is the United States playing a strong enough
role in international standards-setting? And by that, I don't
mean just the U.S. Government. I mean the whole country. And in
your answer, if you could--if you think they are not playing a
strong enough role, could you outline for me what you think
would be the top three actions the United States should take to
assert itself. And are these action items for the Federal
Government, for U.S. industry, or some other entity?
Now that may be hard to do for all of you in five minutes--
in a total of five minutes, but I would appreciate reactions
you give. And usually we go in the same order we ask the
question, but I would like to reverse it, just for variety's
sake.
And Mr. Karmol, since you were the one to offer some
concrete suggestions, we will start with you.
Mr. Karmol. Thank you, Mr. Chairman.
I guess I will start by saying I think the United States
does play an active role, and I appreciate your recognition
that it is a joint effort of the private sector and government.
And although we are playing an active role, I think better
coordination between the private sector and the public sector
would benefit our participation. Certainly stronger federal
support, in terms of providing more outreach and support for
standards infrastructure development in emerging nations would
be helpful. And finally, better recognition of the importance
of standards, which you can help by raising the awareness of
the importance of standards, you and the Congress and the
Executive Branch would be helpful by encouraging companies and
government agencies to participate actively in international
standards-setting activities.
Chairman Ehlers. Thank you.
Mr. Bhatia.
Mr. Bhatia. Thank you, Mr. Chairman.
The development of the U.S. Standards Strategy, which is a
process that is coming near completion, will define actionable
items. We want to have industry and government step up to the
plate and own up to their obligations to take certain
initiatives and take certain actions to support the U.S.
Standards Strategy. We feel that there is a contribution to be
made by both the U.S. Government and the industry, including
SDOs, including people in the private sector, including people
in the industry.
With regard to the government contributions, we feel that
more needs to be done by Federal Government in supporting our
initiatives overseas. We need to have a better outreach
program, better education program, more funding of initiatives
that support our needs, such as standards attaches in the right
countries, such as workshops in standardization, which allow us
to explain and make others understand the good features and
acceptable points and practices of our system, which also
allows, ultimately, then the acceptance of our products in
those markets. I feel that we need to have SDOs, as well as
private industry people, participate and recognize the value
and the economic impact that standards and conformity
assessment systems have on our business practices here and
globally.
So I urge you to stay tuned, because we will be spelling
out specific actions and will be looking for endorsement from
various parties, both in the private sector and the government
agencies, to support those initiatives that would be beneficial
for the country.
Chairman Ehlers. Thank you.
Dr. Deutsch.
Dr. Deutsch. Thank you, Mr. Chairman.
One thing that I think we have heard from all of the
testimony today is that we are in agreement that the U.S.
standards process works. It has served our industry and all of
the industries represented here and the government well. So you
have asked me for three things the government should do. I want
to start out by saying one thing the government should not do
is become a standard-setter or to emulate some of the behavior
we have described that we are seeing outside the United States.
We have a very well-functioning, market-driven, diverse
mechanism for setting standards in the United States.
So what is it the government can do then? And basically, I
will go back to the three items I mentioned in my testimony.
One is to strengthen the current standards liaison and attache
programs that are already underway.
The second is to redouble our advocacy efforts. And let me
put a little bit of meat on the bones of that. We have a
process that serves us well, but it is a complex process. And
it is a difficult process to understand. So it is a lot easier,
especially for an emerging economy, to understand a top-down,
government-driven process than it is to understand a disparate,
diverse, and bottoms-up, market-driven process like we have. It
would really help if the government, in its relations outside
the United States became a strong advocate for that. Okay.
And the third recommendation that I brought forward was
something which is not yet underway, to my knowledge, in the
United States and which I see is a combination of government
and industry working together, and that is we probably would
benefit from having some metrics, some research that supported
what is obvious to us that the United States standardization
process, in fact, benefits society as a whole as well as
industries and consumers.
Thank you very much.
Chairman Ehlers. Thank you.
Mr. Noth.
Mr. Noth. Thank you, Mr. Chairman. It is an excellent
question.
I don't think, at this point in time, that, especially in
the small and medium-sized enterprises within the United
States, there is enough industry participation in standards
globally. There are a lot of very intelligent people in those
areas, but they are small. They don't have a lot of extra
funds. They don't fund travel to international organizations.
And they tend to have a mindset that suggests that they should
do what the customer wants and will follow that. I don't think
they have a realization of what is going on, and somehow or
another we need mechanisms to attract them and make it aware
that some of their competition in the future is going to come
from offshore. And even if they only see their market as local
today, their competition is actually coming from other places
in the global world.
From the Federal Government's perspective, what I also
recommended is exactly there. I think the Federal Government
needs to step up with better alignment across the agency with
more of a policy of strategic focus to our activities and
promote this. I think that has impacts, because one of the
areas we are having difficulty getting is state governments to
understand where standards play in. And many of their trade
missions, and what have you, ignore standards and the impacts
of standards that they have, and in our decentralized society,
I think we need better alignment in that area. And our
leadership, the leadership of the Congress, would have some
impact on getting their attention.
Beyond that, it is providing stable funding and resources.
And as Mr. Deutsch and others have said, we need a strong
advocacy, both onshore and offshore, from our extensions,
whether they be State or Commerce or trade missions to make
sure that we are advocating for both the technology and the
standards that underpin them from the United States.
Thank you, Mr. Chairman.
Chairman Ehlers. Thank you.
Dr. Semerjian.
Dr. Semerjian. We are probably running out of answers, but
I will try.
Chairman Ehlers. We can provide more questions if you need
them.
Dr. Semerjian. Well, one of the things that wasn't
mentioned was certainly in the developing markets, such as
China, clearly there is some education to be done. And we are
making significant efforts in that regard through our standards
and trade workshops, for example, where we invite standards
officials and the decision-makers to come to the United States
and try to understand and be exposed to our diverse, as
described by others, system of standards. And I think that is
very important, because in many cases, people don't really
understand how things work in the United States. And if we
expect them to endorse and adopt some of our ways, I think we
need to do a better job of educating and informing them of how
we operate.
Also, we need to make more of an effort to get them
involved, go out of our way to get them involved in the
standards process. For example, we have some NIST staff who are
chairing some of the standards committees who have, on purpose,
held their committee meetings in China to facilitate the
participation of Chinese officials in these activities, and we
hope that if they participate or at least find them
interesting, hopefully they will not--they will see that there
is not necessarily a need for passing different and additional
standards as opposed to using existing ones.
So there are a couple of suggestions. I think there are a
lot of ways of improving the situation. Unfortunately, I don't
think there is a ``silver bullet'' that will solve all of our
problems. I think we need to work on all fronts.
Thank you.
Chairman Ehlers. Thank you all for the good answers. They
stimulated a lot more questions in my mind, but my time has
expired.
I am pleased to call on the gentleman from Oregon, Mr. Wu.
Mr. Wu. Thank you, Mr. Chairman.
First of all, Dr. Deutsch, when the People's Republic of
China first started going down the ``WAPI'' road instead of
standard Wi-fi, my impression was that the Commerce Department
and USTR was not exactly prompt in bringing pressure to bear on
the Chinese. Is that impression accurate?
Dr. Deutsch. I am sorry, Representative; I do not have
personal knowledge of the initial stages of that. I do know
that when the government became engaged that it was ultimately
effective. I do think it took us a while to get not just the
government but the private sector focused on the reality of the
issue.
Mr. Wu. I somehow got the impression that there was a lag
time, a significant lag time, on the order of a year or more.
Dr. Deutsch. That is possible. I will yield to some of my
colleagues here who may have had some immediate----
Mr. Wu. No one is talking.
Mr. Karmol. Mr. Wu, we would be happy to respond back to
you. I don't know--have personal knowledge of that myself, but
we have people in our organization that would be familiar with
that and could give you a more complete answer.
Mr. Wu. Sure thing. Thank you, Mr.--very much, Mr. Karmol.
Mr. Karmol and Dr. Deutsch, especially Dr. Deutsch, I hear
you loud and clear about what the U.S. Federal Government
should not be doing with respect to American standards setting.
What I am very curious about is I understand, I think, what you
would like to see in the international arena. I am at a loss,
at least at this moment, to think of what possible leverage we
have to get other countries to adopt, not our standards, but
our standards-setting process. Many cultures are different.
Their governments are different. They come from a different
tradition, and perhaps the automatic thought is instead of
having a competition in the marketplace and voluntary
standards, by golly, you know, we are going to develop a
regulatory approach to this. I--help me out here. I just don't
see how--this is like pushing on a string. I don't quickly see
any leverage to get other societies to change the way in which
they set their standards. Do you have some in mind?
Dr. Deutsch. Well, if by leverage you mean a carrot and a
stick, okay----
Mr. Wu. I have generally found that without sticks, carrots
tend not to be all that effective.
Dr. Deutsch. I think--and I don't have the stick. I mean--
but I do think the most significant ``carrot'' is how well our
system serves--take my industry, the IT industry. This is an
industry that is U.S.-dominated. We have thrived in the absence
of government intervention. We have used this standardization
process and evolved it, over time, to meet our time-to-market
requirements to meet the rapid growth of the IT industry, and
as such, not only have our companies, you know, benefited, but
society, as a whole, has benefited with the efficiency and the
productivity in our economy, and that is why I suggest that I
think a really good case could be made that our approach to
standardization has a substantial amount to do with the success
of the economy in general of the IT sector in particular and
that alternative approaches do not have the same positive
effect.
Mr. Wu. Well, I am not so much disagreeing with you as just
thinking back to instances like beta videotapes and Apple
software versus DOS and a couple of other instances where, you
know, the market did come to a conclusion, but whether the
market came to the best technical conclusion or not is--it is
still a question open to history, one would think.
Mr. Bhatia. I think your question is very insightful.
Clearly, there are governments out there, nations out there
that will never be comfortable in the standards-setting process
that we deploy in the United States. It has to have a structure
of the type which is comparable. And constituency build-up and
contributions from different groups that is feasible here may
not be feasible in other countries. But clearly, the
opportunity to promote and educate others to go out and
celebrate, if you will, our successes openly to tell them about
the benefits that we accrue from this system, which is open,
which is market-relevant, which has participatory options,
which has impacts that are analyzed and considered and
technical superiority of the documents that are often produced
in many industry sectors: medical, aerospace, IT, you name it.
There is industry after industry, which is totally dependent on
United States and United States standardizations and documents
to carry the flag.
I think we need to get that message out there. We need to
educate people early on. If we are not available to do this and
the Europeans and other parts of the globe are there with their
arsenal and capability, I think we will lose out. People will
accept what is available in absence of something better.
So I think we have a challenge to get out there and preach,
if you will, the benefits and the goodness of the process as
well as the documents.
Mr. Wu. Well, I think the Chairman is going to tell me that
I have run out of time, and I have, but I would very much like
to help you out in your enterprise. I would like to help you
out as effectively as possible, and the challenge is to find a
sufficiently large carrot or a smaller carrot backed up by a
little bit of a stick. So if you all could help us think
through what the appropriate carrots and sticks would be, I
would love to work with you on this. It is a question of
finding proper leverage.
Chairman Ehlers. The gentleman's time has expired. I would
just comment that carrots have never done it for me, but a good
piece of pecan pie will always work.
But I would also observe, I have no expertise on the beta
versus VHS issue, but you are clearly right on the MAC versus
DOS system, and the public made the wrong choice there.
I am pleased, next to you, to recognize the gentlewoman
from Illinois, Mrs. Biggert.
Ms. Biggert. Thank you, Mr. Chairman, and thank you for
holding this hearing.
My first question is to Mr. Karmol. ANSI has been
designated by the U.S. Government as the organization that
represents U.S. interests in international standards
organizations, such as the ISO, while the U.S. Government is a
party to the WTO agreement on technical barriers to trade,
which states that members shall ensure that standards are not
prepared, adopted, or applied with a view to or with the effect
of creating unnecessary obstacles to international trade. How
exactly does ANSI ensure that it has accredited SDOs and the
standards they develop comply with the WTO agreement?
Mr. Karmol. Thank you, Ms. Biggert, for your question.
I guess the first point I want to make is that actually
ANSI has not actually been designated by the government as a
representative to ISO and IEC. We are the representative--we
are a founding member of both organizations. They are private
sector, however, so although the government does recognize our
role there through various means, we are really not officially
designated.
With respect to your question about WTO principles, ANSI's
document ``The Essential Requirements'' is the document that
governs the development of American national standards, and
that document requires openness, transparency, balance, and due
process in the creation of American national standards. And we
think that properly followed, those provisions do ensure that
American national standards, as reviewed by ANSI, will not be
barriers to trade.
Ms. Biggert. And Dr. Semerjian, how does the U.S.
Government ensure that ANSI-accredited SDOs and the standards
that they develop comply with the WTO agreement, in your
opinion? Would it be through monitoring or responding to
complaints?
Dr. Semerjian. Yeah, I guess I need to state that NIST
directly is not involved in the implementation or--so those
would fall in the realm of the responsibility for USTR or
perhaps ITA, but primarily USTR.
But these certification, accreditation type of processes
are done through internationally-recognized organizations, so
there is always a mutual recognition aspect built into the
system. So what ANSI does is recognized by others, their
counterpart organizations in other countries. And I don't think
that that is a real point of contention, at least to my
knowledge, but I am not very knowledgeable in this area.
Ms. Biggert. I guess my problem seems to be that there is a
disconnect between the WTO barriers and the organizations, such
as ANSI and maybe with NIST.
Mr. Bhatia.
Mr. Bhatia. May I amplify?
I would like to suggest that all signatories to WTO member
nations have an obligation to adhere to those principles. ANSI,
as a representative of the United States to these
organizations, is duty-bound to comply with WTO principles, and
we are reflecting that in all of the documents that ANSI uses
for accreditation. So the basic criteria of openness, of
balance, of consensus, of due process are fundamental
principles on which American national standard designation is
based. You can not become an American national standard using
an accredited SDO process unless you comply with these
criteria.
The further balance comes from checks and balances of
public review comment period, an obligation to respond to every
critique that is presented in resolving that. And we have an
additional verification process to USTR and DOC in the form of
industry technical advisory committees, one of which I chair
along with members like Bob Noth and others. And these
individuals make sure that we stay on the track and we report
back to USTR, DOC, and Congress, if appropriate, if there are
any violations that are noted or recorded or complaints that
are made.
Ms. Biggert. Well, in 2002, the ANSI Chairman, Oliver
Smoot, said that the ANSI accreditation process applies only to
those standards submitted to ANSI for adoption as an American
national standard, so there is----
Mr. Bhatia. That is correct.
Ms. Biggert. And so is there a group out there then that
there is no process to ensure that they are not complying if
they haven't really----
Mr. Bhatia. You are absolutely right. There is a large body
of SDOs who do not follow the accreditation process. I think
they suffer in the marketplace because of that. They lack,
perhaps, some of the credibility and some of the prestige that
goes with a recognized accredited process. And that affects the
ability, if you will, in their marketplace of conducting their
business. For some industry sectors, it works. For others, it
is more important to have that credential, especially if you
are going to be operating internationally.
Ms. Biggert. Is there something that should be changed
then?
Mr. Bhatia. I think, as has been noted by other panel
members, the system we have is very market-responsive. It seems
to work, and it has a sectoral approach to it, which seems to
recognize the needs that are different for each industry
sector.
Ms. Biggert. But there are no police, then, as far as the
development of standards or the standards being carried out?
Mr. Karmol. If I may respond further, Representative
Biggert, ANSI actually does--in addition to the essential
requirements that our accredited standards developers are
required to use--we audit each of our accredited standards
developers at least once every five years to ensure that they
are following The Essential Requirements. We have actually
suspended the accreditation of a number of organizations, whose
names I am sure you would know, if I mention them, which I
won't. But we have a very strict audit procedure that goes
along with the accreditation process to make sure that our
accredited developers are using the process and following it
precisely as they have told us they will.
Ms. Biggert. Okay. Thank you.
Thank you, Mr. Chairman. I yield back.
Chairman Ehlers. The gentlewoman's time has expired.
We will start a second round of questions.
Let me--I am not sure I can ask a question on this, but let
me just share some of my unease here. The world has
dramatically changed, as far as I can see, in the area of
standards. Mr. Noth, you have been here a long time in this.
Maybe you can verify that or contradict it. But as a scientist,
I remember being involved indirectly with standards-setting,
and there was always a good spirit about it, a good--saying,
``This is good for all of us if we can agree on standards and
let us all work together.'' And by ``all,'' I mean different
countries. What seems to me has changed is that not all
countries are working out of a sense of integrity and good will
anymore. And perhaps it is epitomized by what a friend told me
in dealing with a certain country. He said, ``They always tell
the truth, except when it is not convenient.'' It makes it very
hard to work together at that point. And several of you
referred to the fact that perhaps a trade representative's
office should be more heavily involved in these issues. And I
would certainly like to pursue that, if you think that is
something good. We do have a brand new trade representative, a
former Member of Congress, and I am sure he will be very
responsive to us.
You talked about the U.S. standard as having developed in a
way that is very beneficial for our country, but is it truly
beneficial for the rest of the world or is it even beneficial
for us vis-a-vis the rest of the world? That is still not clear
to me.
And a specific question, Mr. Karmol, you are working on the
new Standards Strategy. When do you expect that to be out?
And then I will ask--I will let the rest of you respond to
my ramblings.
When do you expect the new Standards Strategy to be coming
out?
Mr. Karmol. We have a draft at this point, Mr. Chairman,
which is available on our website, and it is referred to in the
testimony. We do have some thoughts--some comments that came in
during the comment period, which ended April 18, which we are
reviewing. I think the expectation is that there will be a
special meeting of our Board of Directors prior to our
scheduled December meeting to approve the Strategy, but Mr.
Bhatia may be the better person to answer, since he is chairing
the committee.
Would you like to----
Mr. Bhatia. All I can do is give you our best estimate. We
hope to have this accomplished by the end of November. If the
dialogue and review of the comments submitted and resolution of
those comments takes longer, I would propose to the ANSI Board
and others that we take our time and come up with a document
that has more meaning rather than one that is finished in a
speedy fashion.
Chairman Ehlers. Thank you for your response to that
specific--now would any of you like to comment on my unease or
set me at ease or say, ``You are right: we should all be
uneasy.''?
Mr. Noth.
Mr. Noth. I think your unease is justified. There have been
a lot of changes in the standards world. Starting with the
European Common Market's activities in 1992 and their--what
they call their new approach as it evolved, that had the effect
of taking what was basically a technical process in the past,
and your recollections, Mr. Chairman, as a scientist, probably
remember more collegial activities between technical experts.
The European approach, and now what they are trying to export
and, to a certain extent, the ISO and IEC approach, puts a
political element into the process. So it is--now requires a
two-level activity: one is an agreement between experts, when
you can get the experts to the table; and two, an agreement
between the politicians as to whether or not the agreement of
the technical experts makes sense to them in terms of their
developing world. And that creates some unease. It was
challenging enough when it was the United States and Europe
that were basically arguing over technical specifications and
political issues. The size and the forceful entry of the--and
aggressive entry, not forceful, but aggressive entry of the
Chinese into the global markets has also shifted the balance of
power, and they are not the only ones: the South Americans, the
Indians, the former Soviet Union countries, the CIS countries
are all going to ultimately want to claim a share of this.
And we need to remember that standards are only a form of
product specification. What we are really talking about here is
trade issues on commerce and goods of services, because
standards are simply just the technical underpinnings of many
of those, as you said in your opening remarks.
So we need to make sure that ultimately we don't lose that
track. One of the advantages of the U.S. system is that we are
rapid. We are--our system is much more responsive to
innovation. We get our technical specifications, when locally
set, are often technically superior to what the rest of the
world will adopt.
So our ability--our efficiency with our system is one of
the reasons why our economy continues to be the economic engine
of the world. And that is our advantage, Mr. Wu, is that we
need to taut that. And you are already starting to see some of
that, because the Europeans, 15 years later, now are shifting
their activities toward what they call their Lisbon Agenda,
trying to make their industries more competitive, because their
regulatory agenda that they have pursued has moved them in the
wrong direction.
So you are--ultimately, market forces themselves are going
to help us correct and let other countries see the advantages
of the U.S. system.
Thank you, sir.
Chairman Ehlers. Do you ever expect we will ever have one
vote for the United States and one for the European Union?
Mr. Noth. I don't hold my breath on that one, Mr. Chairman,
but I also know, from vast experience in this area, that it is
a myth to believe that all of Europe is united and it is going
to get worse before it gets better now that they have expanded
the size. So the fact that we are disadvantaged politically
when ISO has more players at the table does not necessarily
mean that we can not make the system work for us, because we
can work behind the scenes, based on the quality and
effectiveness of our technical input.
Chairman Ehlers. And of course we could always say we have
our 50 different states and we need 50 votes.
A last quick one, Dr. Deutsch, and then----
Dr. Deutsch. I was going to vote for a vote for Alabama,
myself.
Chairman Ehlers. I see.
Dr. Deutsch. I would like to follow up on your comment that
things have changed. And one aspect of the change from the
perspective of the IT industry, which is--we have a sector-
based approach in the United States, the IT industry has
increasingly taken our standards development activities outside
of the formal process where we have the ANSI-accredited SDOs.
We still participate there, and we still do work there, but a
very, very substantial part of our efforts are going on in
consortia and other forums, okay, that--many in which are
international in nature from the beginning, such as W3C. Okay.
I can put on my Oracle hat and tell you we are spending more
money today in fees, in engineers' time, in travel to do
standards-related activities than we ever have, okay. An
increasing percentage of that money is being--and professional
time is being spent in forums other than ANSI-accredited SDOs.
Okay. And that--the effectiveness of what we are doing is
demonstrated whether you fire up your MAC or fire up your
Microsoft operating system and bring up your web browser and
say, ``Google,'' and all of a sudden there is something there
that you want to see. There is a layer after layer after layer
after layer of standards, which make that happen that we
absolutely take for granted, okay, and that is what you have
gotten out of the standards system that we have been using.
Chairman Ehlers. Okay. I guess--well, my time is running
very short, but I just--thank you. I am just troubled. You
know. Take for example the U.S. cell phone standard as used in
the United States. The European standard is used in 80 percent
of the world, the non-U.S. portion. I--it is hard to say we
have won on that one.
But Mr. Bhatia.
Mr. Bhatia. Yeah. I think I would like to suggest that the
change in standardization is not necessarily bad. I think it is
the natural outcome of opening up of the markets. If you talked
to somebody 20 or 25 years ago, it was a given that you had to
comply with Japanese standards and Japanese codes if you wanted
to sell in Japan. You have to comply with the U.S. standards
and the U.S. codes if you had to sell here. With the exception
of very few industries, you basically had to work with
standards and codes of that nation which were regulatory or
marketplace requirements. But the opening of markets with the
trade agreements which allowed manufacturers to sell and seek
opportunities in multiple markets, the standardization process
needed to change. There was more of a need to participate in
internationally-relevant documents. There was more need to
harmonize standards. There was more need to be aware of what
the other countries were doing, so you could avoid repetitive
mistakes or repetitive efforts.
So I think that is the natural outcome, and we are going to
get better as we go forward. But clearly, make no mistake about
it, many nations, even today, use standards as a barrier for
market protection for supporting their inherent industries or
their infrastructures. And at some point, that will have to be
taking a subservient position, but for many countries,
especially the new ones and developing ones, criteria, which
are unique in the name of national security or national
interest, are in the transitional period do pose as barriers.
So I think we need to look at standards that need to be
more harmonized, we need to be more participatory, and we need
to open up our system to allow other countries to participate
as willingly.
Chairman Ehlers. Thank you all, and my time is more than
expired.
I am pleased to call on Mr. Wu again.
Mr. Wu. Thank you very much, Mr. Chairman.
I want to make one comment and get out as many questions as
I can. Some--I hardly recommend this institution as a model of
efficiency, however, you might consider, just as we set up the
Congress with two Senators for every state and then population-
weighted on the House side, that you might have each country
have one representative in part of your standards-setting
operation and then have a GDP-weighted chamber, if you will,
for the other part of it.
And then that leads me to my first question. I mean, the
way that that system works, as it works here in Congress, is
that we have certain efficiency challenges. The speed with
which we do things can be somewhat challenging. And especially
for you, Dr. Deutsch, who--and perhaps others would want to
comment, it seems to me that the standards-setting
organizations have had some difficulty in keeping up with
technological change and that a lot of private sector
operations have gone to a regime where folks form consortia in
the absence of a true standard of, you know, ``We need
something quick, and we need it now, so let us get it done
quickly.'' Is there something that can be done to improve the
speed with which standards can be set?
Dr. Deutsch. Let me respond. First of all, in the interest
of full disclosure, let me just say I am a member of the ANSI
Board. I also serve on the Board of an ANSI-accredited SDO, the
INCITS, which is an ANSI-accredited SDO that does most of the
IT-related standardization in the United States. And my
observation, from my personal experience over even more years
than Mr. Noth has had in the standards business, is that there
is a competitive world of standards-setting organizations and
that in response to observations such as yours, which I think
was absolutely correct 10 years ago, okay, the standards-
setting organizations have, over a period of time, recognized
the threat to their turf and have responded. I can tell you
this, if there is consensus, which is a big if, among all of
the stakeholders, I can create an INCITS ANSI-accredited U.S.
standard in a very, very short period of time. If there is
contention, which there very well may be, my industry--I am
sitting here representing both Apple and Microsoft, by the way,
Mr. Chairman, okay, you know, there is frequently disagreement
in those forums. Then it takes a little bit longer. The time is
to resolve the differences.
Mr. Wu. Is there a special problem in the medical
information technology field? I mean, it seems to me that I
hear repeatedly that there are problems with inter-operability
of platforms in medical information systems.
Mr. Noth. I can respond, wearing my ANSI International
Policy Committee hat, and a little bit of knowledge of
manufacturing. Where we get into trouble, and if you look back
at the history of standards or where there have been
``standards wars,'' usually you have problems where the
industries have innovated and brought products out on the
marketplace and had them--and had an installed base of
investment for a long time before the standards activity
started to actually get together and the public got to--got
congealed in their opinion enough to start calling for
standards and inter-operability. And then you have people who
play the game defensively, because they are trying to protect
that installed investment and not have to--and ultimately you
end up--that is where the beta versus VHS kind of a scenario
tends to play itself out in the marketplace. And in the medical
device community, and many of those areas, it is exactly that
way.
What many of us are trying to do in the new technology is
we all have to recognize that it is slower in--where we have
got an installed base. But in the new technologies, we are
trying to be much more proactive and work in the standards
world ahead of the game, so that you don't get those
innovations and that installed investment in the marketplace
earlier, and that is the big challenge, because it takes a
significant commitment of resources and dollars, you know,
human resources in terms of subject matter experts and dollars
to get out there ahead of the products. And then you have the
concerns about sharing intellectual property or destroying a
competitive advantage in that activity.
So it is the challenge--everybody is working on it, but it
is not a simple problem to solve.
Mr. Wu. Well, we will take this conversation off-line,
because I want to ask one quick question before the light goes
red.
But I am very, very surprised that there would be this
large installed based problem in the medical IS field, given
the many complaints I have heard about lack of medical IS. So
it seems to me that, you know, this is a wide--it should be a
wide-open field instead of one strewn with installed-base
problems.
But Mr. Noth, I am very sympathetic to your--to the
challenge you raised about conformity and the costs. And I
believe, Dr. Deutsch, you referred to that, also. And maybe--
that is part of Oracle's challenge, also. What can we do? What
can we do to develop better reciprocity between different
national or continental testing organizations so that we can
decrease the costs of conformity testing and conformity
standards?
Mr. Noth. One of the areas we have worked on collectively
is trying to ultimately get mutual recognition agreements in
the--so that we can test it once and have that test accepted
everywhere.
Mr. Wu. What has held that up?
Mr. Noth. Again, special interests. Ultimately, on a global
basis, you are talking about jobs in other markets, and because
much of the innovation and the products are coming from the
developed world, whether they be U.S. or Europe, the developing
world is much more interested, as I tried to indicate in my
testimony, not only in making sure that their consumers are
protected, because they are not sure they trust us, but also
because they want to ultimately learn from the technology we
are delivering and then advance their own industries and their
own abilities. Our industry, we are the largest manufacturer of
farm equipment, agricultural equipment in the world, full line
farm equipment in the world. But in every local market, we face
local competition, who makes the same products, and they are
all very interested in knowing exactly how we are doing it. And
so there is always a concern, whether it be China or other
markets, that are--that much of the testing that is being done
is really a reverse engineering activity, and very often, they
want to come to our facilities to do the testing rather than
have us ship the product to them to test so that they can not
only test the--see the product but also see how we produce it.
Mr. Wu. Thank you very much. As always, the answers raise
even more questions.
Thank you very much, Mr. Chairman.
Chairman Ehlers. Thank you, Mr. Wu.
Ms. Biggert.
Ms. Biggert. Thank you, Mr. Chairman.
Dr. Semerjian and probably Mr. Karmol again, when we--what
recourse do U.S. companies have if there is--they think that
there is an SDO who is not adhering to the ANSI-accredited
process and they have no intention of--and we just talked a
little bit--this is kind of the beta versus VHS, that they have
no intention of submitting it as a national--American national
standard but really going right to the international standard
and bypassing the U.S. Is there any appeal process? What
happens if companies--and that would be, you know, to be out in
front, but then they go to the international and not to the
American?
Mr. Karmol. I am not exactly sure I understand your
question. Are you suggesting that a company has an issue with a
standard that was developed by an accredited standards
developer or----
Ms. Biggert. Yes.
Mr. Karmol.--not?
Ms. Biggert. Yes.
Mr. Karmol. If the standard was developed by an accredited
standards developer and submitted as an American national
standard----
Ms. Biggert. Well, no, I am saying that they bypass that
process and go and submit it as an international standard.
Mr. Karmol. Well, in order to submit it as an international
standard, they would have to, essentially, go through ANSI,
which holds the seat in ISO.
Ms. Biggert. Yes.
Mr. Karmol. So----
Ms. Biggert. But they don't have to submit it as an
American standard, do they?
Mr. Karmol. Not necessarily, no.
Ms. Biggert. So they go directly to an international
standard, what--and the U.S. company objects----
Mr. Karmol. Well, the process----
Ms. Biggert.--what recourse would they have?
Mr. Karmol. The process for submitting at the international
level, the technical advisory group, has the same requirements
as--operates under the same essential requirements as we
require of our accredited standards developers. So you have the
same due process requirements imposed on that technical
advisory group as you do on all of the accredited groups.
Ms. Biggert. Maybe Mr. Noth. You seem to----
Mr. Noth. Maybe I should comment, Ms. Biggert.
The--that is exactly what our industry is doing, as I tried
to put into my testimony. We are working with--we are taking
our proposals as well as reacting to proposals from other
sources and working our whole standards issues at the ISO
level, because that seems to make the most sense for our
industry. And all of our players anymore are more and more
global in their scope.
There is--most of the standards in the U.S. at this point
in time are voluntary, so if an American company suggests that
they don't like to use an ISO standard or follow all of its
tenets exactly, they have complete freedom to do that, as long
as they meet the requirements of product liability or market
acceptance or what have you, and they can--if they want to
petition SAE or ASAE or any other SDO to put up a competing
standard, they certainly can do that, and that occasionally
happens. But for the most part, because everybody is interested
in being able to produce at the lowest possible cost and
distribute their goods on the broadest possible market, working
with an international standard and reducing the cost and the
number of venues you have to send subject matter experts to
makes a lot of sense. So really, it is--that is the way that
many industry sectors, like the off-highway industry, is
pursuing the--pursuing global standards.
Ms. Biggert. Would a company have any recourse? Is there
any appeal process?
Mr. Noth. Yes. Yeah. There is an ANSI appeals process.
Anybody who wanted to complain, would file----
Ms. Biggert. What about international?
Mr. Noth. Well, and there is a process in the national
environment, but----
Ms. Biggert. International.
Mr. Noth. In the international environment, but there is
also an--there is an appeals process there as well.
Ms. Biggert. Do you think that this would at all undermine
the voluntary consensus standards? I mean, it is voluntary. You
don't see any problem with going directly and not having the--
--
Mr. Noth. If the voluntary process worked worldwide, we
wouldn't really have a big problem, because it would be fine
and the processes are great. Where we are getting into
problems, and what we have tried to put into our testimony, is
that many of the developing world and other countries around
the world are blurring the line between what is voluntary and
what is regulatory by creating mandatory requirements to comply
with voluntary standards before you can sell in their markets,
and as a result of that, the process gains more political
importance than it did maybe a decade ago or longer.
Ms. Biggert. Dr. Semerjian, do you have any--at NIST, are
you concerned about how ANSI is being used, then, for going
directly to the international? I guess not.
Dr. Semerjian. No, I think they have represented us well.
We are not a regulatory agency. This is--as was said again and
again, we do have a voluntary system. Companies are not
required to adopt any given standard. They can--just like other
countries are doing, they can adopt their own standards. They
can adopt some other country's standard. The question is, which
standards serve their purposes best? But we provide--we
certainly contribute to the robustness and the technical
strength of the standards that are developed by ANSI-member
SDOs, because many of our--we have some--more than 400 NIST
staff who serve as technical experts on many, many committees.
Ms. Biggert. Would there be any reason to want to have the
SDOs certified that they are in compliance with the WTO
technical barriers?
Dr. Semerjian. I think the system that Mr. Karmol
articulated, you know, is very well defined, and they have very
specific measures. If those requirements aren't met, I see no
reason why there would be an issue.
Ms. Biggert. Thank you.
Thank you, Mr. Chairman.
Chairman Ehlers. The gentlewoman's time has expired.
It is about time to wrap up, but I have a few quick ones,
first.
First of all, this is--this may sound tongue in cheek, and
it probably is, but it is not offered in jest. Do you think
that any country that has refused to adopt the metric standard
has any right to expect the respect of other countries when
they come to them to make suggestions about standards?
Mr. Noth.
Mr. Noth. The metric issue has been--is a challenging one,
and of course, it has been politicized again. But you--it is--
most companies, at least, that are doing--dealing
internationally are already adopted metric, where metric is
available in the marketplace. The automotive industry,
certainly in your state, is clearly a metric industry. The--our
industry is metric where we can be metric, metric where the
tools go on the nuts and the bolts and the washers. But you
still can not buy metric pipe, for example. You can't buy
metric steel--or metric barstock around the world because that
is the way it has been--the supplier industry has developed,
and so even metrics don't apply everywhere. But where we can be
metric, we are.
The only industry that I know that is clearly is the
aerospace industry, which has--which grew up in the United
States, was based on U.S. metrics and therefore has been
accepted for most of the metric legislation and that, because
they have--as everyone else has said, we are totally satisfied
in the redevelopment of all of that technology is--would be a
waste of time and resources.
Mr. Wu. If the gentleman would yield for just one moment.
Chairman Ehlers. Yes, I would be happy to yield.
Mr. Wu. Mr. Chairman, I am just shocked and appalled that
you would attack the roots of American culture this way. The
day when a football field is no longer 100 yards long, the
White Cliffs of Dover are going to fall into the ocean.
I yield back.
Chairman Ehlers. Thank you for yielding back.
Now I think it is a major problem. I remember the argument
when Thomas Jefferson tried to institute the metric system, and
the argument was that it would cost far too much. It would be
$7 million to convert. And today, of course, it is upwards of
$170 billion or something like that.
More serious questions.
One of you mentioned that perhaps we need a ``standards
czar,'' and I don't recall who mentioned that, but is that a
general feeling? We should have a ``standards czar'' who sort
of ties all of this together? Maybe you feel we have one
already, but we have the trade issue, which somehow seems to be
separate, even from the Department of Commerce, and we have the
standards-setting process, which is different from most of the
rest of the world. What do you think?
Mr. Noth. Mr. Chairman, I was the one who mentioned it, so
I will respond and let the others add, as they see fit.
But we think alignment between government agencies and with
the private sector, the various sectors, is critical to our
long-term competitiveness. And so we think we need some
accountability to get the alignment. The efforts that have--
that are going on, the Interagency Council, what have you, are
a bottoms-up kind of effort. We need a little bit of top-down
leadership in this area to make sure that some of that
alignment happens and it gets the appropriate priority.
We think the Department of Commerce probably is a good
place for that ``standards czar.'' We probably think it ought
to be a government individual who is charged with oversight and
has some accountability in the area so that the alignment
processes take place with a little bit more priority and
urgency than we have seen in the past. And that is why we
propose it. We think it ought to be a government, because the
sectors are so diverse and what have you they are going to put
their people forward. What you need is someone in the
government who is going to understand what we are talking about
in terms of standards and make sure that we are all basically
on the same page when it comes to how we deal with standards on
the international arena.
Mr. Bhatia. I think----
Chairman Ehlers. Mr. Bhatia.
Mr. Bhatia. I think what is needed is empowerment of the
people at policy level to interface effectively with the
private sector and advance our agenda on the international
stage. If we have federal agencies, which are dedicated to
their own particular mission, their own empowered area of
activity, if we have that coordination at the policy level, we
will not be successful. It could be a ``czar.'' It could be a
coordination at the standards executive level from each of the
federal agencies that works effectively to resolve the
horizontal issues but leaves individual sectoral issues to that
particular agency.
There are many ways to skin the cat. The reality is we do
need more attention, more recognition of the impact that the
standards have and the standards issues have on the economic
well being of many, many industry sectors. That is lacking. We
do have one standards executive, Heidi Hejukata from ITA. We
have executives who are top-level policy people in various
federal agencies who need to work together. There is an
interagency standards policy coordinating committee. I don't
know what the name is, but I believe you chair that. We need
more coordination of that. We need more linkages of these
organizations with the private sector. And I think we need to
have them more focused on international issues and problems.
Chairman Ehlers. Any other comments, Mr. Karmol?
Mr. Karmol. Yes, Mr. Chairman.
I certainly--I don't want to be at odds with any of my
member organizations here, but I think I would want to
recognize that a lot of good work is being done by NIST with
the SIT programs, ITA. There is now great coordination within
the Department of Commerce, headed by Heidi Hejukata. But we
could use more coordination among the agencies, and that is the
place where, you know, USTR and Commerce and the Department of
State, if there could be some coordination. And I think that is
where the Congress can step in. And I think if Congress would
raise the profile of this whole standards community and the
importance of standards, at some point, by appropriate
recognition of the U.S. Standards Strategy and other ways, I
think that is what really is needed to bring better
coordination with the private sector and the government sector.
Chairman Ehlers. Thank you for your comments.
Did you have anything further that you wish to ask, Mr. Wu?
Mr. Wu. Thank you very much, Mr. Chairman.
There are a host of questions that I think I would like to
ask in writing, but just to--one final question.
The overall theme that I have heard is further support for
voluntary private sector standards-setting organizations and
perhaps further advocacy and--well, the question is this, that
given that there are so many different standards-setting
organizations, do we talk about the system in general? Do we
get behind particular ones and not others? In essence, how do
we set the standard for this standard advocacy?
Dr. Deutsch. I don't see how you could select from among
the many. And I think one thing about our standards-setting
mechanisms in the United States is that it is constantly
evolving, so it would be, I think, inappropriate to get behind
a particular SDO or a particular consortia. But--so therefore,
I think the answer has to be A, your first option, and that is
that we really want to recognize the benefits of the system in
general and become a strong advocate for that.
Mr. Bhatia. I would like to suggest, once again, that we
recognize that we have a sectoral approach to the
standardization process. Different sectors would have different
needs. Some would work within the consortia type framework and
would bypass the accredited process or the very long and
prolonged consensus-developing process and it would work fine
for them. I think there will be other sectors, which are more
heavily dependent on health and safety and environmental
issues, which are much more heavily regulated, and government
agencies and others have to participate and play a role. I
think there we have to have a different approach. There are
other opportunities to look at and enhance the overall quality
of the SDO activity.
One fundamental suggestion that I can make is we encourage
all of the players to adhere to nationally-recognized,
internationally-honored WTO principles of standards development
and stick with that, whether it is a credited process or not.
If we do the right things, if we bring the right people to the
table, if we have an open and balanced process, if we give an
opportunity for people to comment and react honestly to those
comments and those suggestions, I think we will have a very
robust and well-connected process.
Mr. Wu. I want to thank all of the witnesses.
Mr. Chairman, thank you and all of the Committee staff for
a very, very interesting hearing.
Chairman Ehlers. I would certainly echo that. We couldn't
have had a better Committee--or I am sorry, a better panel of
witnesses. And we really appreciate your contributions.
Yes, I see two--Dr. Semerjian, you----
Dr. Semerjian. If I may, Mr. Chairman.
I would certainly like to finish this with some positive
comments. Things--there are some things that are working well.
Mr. Wu asked earlier, you know, how can we accomplish mutual
recognition of conformance testing, et cetera. There is room,
obviously, for improvement there, but one area where we have
made significant progress over the last 6 years, I guess, is we
have signed--some 60-some-odd countries have signed an
International Bureau of Weights and Measures mutual recognition
arrangement where we recognize each other's measurement
standards, which are, obviously, the foundation of the
conformance testing and the other standards activities.
So at least in those--in that area, we have come full
circle, and it is a very open and transparent process where we
compare our capabilities with each other, and the results of
these are shown on the--you know, included on the websites of
all of the laboratories, so you can basically go in and see the
capabilities vis-a-vis each other of the laboratory--National
Laboratories, such as PTB in Germany versus NIST or versus
Japan or in China. So this is one area where mutual recognition
of measurement standards have been accomplished in a very
quantitative way.
And I think that is a significant step forward in this
general area of measurements and normality of standards.
Thank you.
Chairman Ehlers. Thank you.
Mr. Noth, did you want the last word?
Mr. Noth. I don't know if I want the last word. I just
wanted to--and I don't know that I could speak for the whole
panel, but I, for one, certainly would be willing to entertain
any written questions or anything else that Mr. Wu or any of
the other panel members would like to submit before the process
is over. I think this is an excellent hearing, and I would--and
we--I think I can speak for the panel when we say we all
appreciate the fact that you called it and we had the
opportunity to highlight these issues. And anything further we
can do to help you understand and focus on this activity, I
think we are willing to participate.
Chairman Ehlers. I appreciate that, and without objection,
the record will remain open for members' statements and
members' written questions and your written responses. So
without objection, so ordered.
I want to express, again, my appreciation. We wandered a
bit away from what we were really after and that is the use of
standards as trade barriers, but that is our overwhelming
interest here, and we will certainly continue to pursue that on
the Committee. And the advice and information you have given us
today is extremely valuable.
I will continue to argue for the metric system, even though
I am outnumbered, I think, 433 to two, but I would also comment
that if football fields were 100 meters long, probably football
could become an Olympic sport, and maybe that would be enough
of an inducement.
I----
Mr. Wu. Mr. Chairman, we have a term for 100-meter long
football field, and that is ``Canadian football.''
Chairman Ehlers. Thank you.
But the other fact that I have mentioned, the aerospace
industry, I am not so sure it operated that well. We have lost
$150 million satellite because they used the--didn't use the
metric system. So I will continue my battle on that, but--
without conceding defeat but without anticipating a quick
victory.
Thank you, again, very much for your expertise and the help
you have given us. It has been wonderful. We appreciate it.
And with that, the hearing is adjourned.
[Whereupon, at 4:05 p.m., the Subcommittee was adjourned.]
Appendix 1:
----------
Answers to Post-Hearing Questions
Responses by Hratch G. Semerjian, Acting Director, National Institute
of Standards and Technology
Questions submitted by the House Science Committee Majority
Q1. Are foreign governments using standards in a way that is
inhibiting innovation, competition, respect for intellectual property,
and free trade in products where the U.S. is competitive, and if so,
how?
A1. The globalization of commercial activity is increasing the
potential scope of the effects of the manner in which governments
utilize standards in technical regulations to regulate products for
their safety, health and environmental effects, and also the effects of
divergent standards systems. The U.S. rule-making process is
characterized by transparency in the making of technical assessments,
factual findings, and normative policy choices, and transparent and
open opportunities for public participation to ensure effective
monitoring, critiquing and reviewing of rule-making. Competition and
respect for intellectual property are inherent in both the U.S.
regulatory and commercial arenas.
This is not always the case in other countries, where government
structures and economies are more centralized and the scope of
government authority is much broader than in the United States. In
countries where the government retains responsibility for directing the
standards development process, participation in standards development
activities may be restricted to domestic interests. Laws on competition
and protection of intellectual property, if enacted, may not be
enforced effectively.
Q2. Are foreign governments using standards policy as a mechanism to
protect their domestic industries at the expense of external
competition, including competition from U.S. companies?
A2. As noted above, some foreign governments restrict participation in
standards development activities to domestic interests. And in some
cases, government, rather than industry and market needs, drives the
standards development process. The result may be at the expense of
external competition. The WTO Agreement on Technical Barriers to Trade
was created to discipline the development and use of standards,
technical regulations and associated conformity assessment procedures
so as to prevent their use as trade protectionist tools. Among other
things, the Agreement requires such documents to be developed through
transparent procedures and prohibits the creation of unnecessary
obstacles to trade.
Q3. If the answer to any of these questions is yes, what, if anything,
should the U.S. Government be doing to respond?
A3. The U.S. Government should continue to place a high priority on
ensuring that our trading partners live up to their WTO commitments,
including those under the Technical Barriers to Trade Agreement. The
U.S. Government is actively pursuing specific trade complaints through
bilateral representations and, as appropriate, seeking third country
support by raising at meetings of the WTO TBT Committee. We are also
working in partnership with U.S. industry and the U.S. standards
community to promote the advantages of market-driven, globally relevant
standards, and the merits of openness and transparency in standards
development.
Likewise, strong intellectual property laws and effective
enforcement of those laws is integral to stimulate and protect the
creativity and innovation that is the foundation of many U.S., as well
as foreign, industries. The USG will continue to work with our foreign
trading partners to ensure they implement and enforce their
intellectual property laws and will oppose the development of any
standard that undermines the intellectual property rights of U.S.
innovators.
Questions submitted by the House Science Committee Minority
Q1. The U.S. Standards Strategy lays out a series of ambitious
recommendations. Aside from Congress endorsing the Strategy, will there
be a follow-up document laying out how these recommendations should be
implemented? What resources will be required to implement the Strategy
and what does the Federal Government need to do?
A1. Once the Strategy is finalized, later this year, all interested
parties--government agencies, industry, standards developers and
others--will be requested to identify appropriate implementation
actions that will address the tactical initiatives in the Strategy.
ANSI, who facilitated the development of the draft, will serve as the
mechanism to coordinate, integrate and report progress on the Strategy
at regular intervals. The Interagency Committee on Standards Policy,
composed of federal agency Standards Executives and chaired by NIST,
has received periodic briefings on the status of the Strategy and will
consider action on the Strategy document once it is approved, as will
the Trade Policy Staff Committee (Subcommittee on Standards and
Technical Barriers to Trade), chaired by USTR.
Implementation of the Strategy should help the U.S. Government to
address many of its high-priority concerns by working in concert with
the private sector. The Strategy calls on government agencies to seek
early collaboration with industry and standards developers to identify
standards needed to meet emerging national needs, to increase
participation in the development of voluntary consensus standards, to
continue to foster and support the unique character and strengths of
the public-private partnership in standards development as it pursues
its international agenda, and to work with counterparts in other
countries to encourage the consideration of all relevant standards in
support of regulations.
Implementation of most elements of the Strategy will not
necessarily require additional resources from federal agencies, but may
require thoughtful alignment of existing programs with both the
strategic goals and tactical objectives outlined in the Strategy. There
may be resource implications for federal agencies associated with
increasing participation in the development of voluntary consensus
standards, however. Federal agencies have noted that maintaining their
current levels of participation in standards development activities is
becoming increasingly difficult because of competing agency priorities.
Q2. What do you think are the three most important things the Federal
Government needs to do in the standards and trade arena? What role do
you think NIST should play within the Federal Government and should
NIST be doing anything differently?
A2. The Federal Government needs to continue to place a high priority
on ensuring that our trading partners live up to their WTO commitments
under the Technical Barriers to Trade Agreement. Where relevant,
education of foreign governments on these commitments and how to carry
them out effectively should be a component of this effort. The
government also needs to continue to engage U.S. industry and the U.S.
standards community in a partnership to promote the advantages of
market-driven, globally relevant standards.
NIST is tasked by Congress with promoting the efficiency of the
U.S. standards system, by coordinating federal agency use of non-
government standards and participation in the development of relevant
standards, and through promoting coordination between the public and
private sectors in both the standards and conformity assessment arenas.
Under the Trade Agreements Act, NIST is designated as the U.S. Inquiry
Point for the WTO Agreement on Technical Barriers to Trade, and as such
is responsible both for notifying proposed U.S. technical regulations
that may have an impact on trade and for disseminating notifications to
U.S. Government agencies and the private sector of proposed foreign
technical regulations and conformity assessment requirements. It is
also responsible for responding to requests for information on U.S.
standards and technical regulations.
NIST technical programs support global awareness of U.S. standards.
NIST researchers participate in standards development activities of 90
standards developing organizations; activities that help ensure the
transfer of NIST measurements, standards and technology in areas
ranging from information technology to telecommunications to health
care, and so on. NIST programs take advantage of synergies with related
Department of Commerce trade-related programs and with the private
sector, and are critical to U.S. manufacturers' access to export
markets. These programs include our Standards in Trade Workshop
program, maintaining good working relationships with foreign standards
officials, leadership in key standards development activities that
impact trade, and notifying U.S. exporters of proposed technical
regulations and standards in foreign markets.
NIST should expand its outreach to standards developers and
industry to enhance our ability to define high priority technology
issues where NIST-sponsored workshops, participation in developing
documentary standards, and development of measurement technologies can
facilitate the development and deployment of innovative technology. In
this context, NIST should develop specific metrics to measure the
impact of NIST programs in these areas. In the area of knowledge
dissemination, NIST should expand web-based access to standards
information, both for federal agency use and to support U.S. exporters.
NIST should also expand its outreach to promote awareness of U.S.
stakeholders' opportunities pursuant to the TBT Agreement to influence
the development of other countries' standards and regulations.
Q2a. We are facing an increasingly global marketplace, how do you see
U.S.-based standards organizations evolving over the next five to ten
years?
A2a. U.S.-based standards organizations take a variety of different
forms--trade associations, professional societies, consortia, and so
on. Some serve very small market niches, while others serve large
economic sectors or reach across sectors in their technical work. Many
of the standards produced by U.S.-based organizations are used
globally. These organizations are likely to evolve toward increasingly
global membership, allocating a larger percentage of funds to
translating their documents into other languages, and working in
partnership where feasible with national standards bodies in other
countries, as well as with associations of national bodies such as ISO
and IEC. This may take the form of partnership arrangements, joint
adoption of standards, and/or sharing of workloads.
Q3. Clearly, the commitment to technical assistance by the EU is
unmatched by the U.S. in its coordination and magnitude. Is it fair to
say that the EU and European industries believe that they can create a
competitive advantage in world markets by strongly influencing the
content of international standards? Will the mass marketing by the EU
of selected standards create a preference for European products rather
than U.S. products? If so, what should the U.S. be doing and why have
we waited so long to take any action?
A3. European Commission policy gives preference to international
standards, specifically ISO and IEC standards, and regional European
standards, in fulfilling regional regulatory requirements. Some
European Union (EU) regional standards are developed specifically to
meet European regulatory requirements. It is these standards, and
accompanying European regulations, that are not only used in the
growing EU market, but are also being promoted for use in emerging
economies, which comprise some of the major U.S. (and EU) export
markets. In addition, a number of countries are adopting EU standards
and regulations in anticipation of joining the EU and/or to ensure
their domestic exporting companies comply with the EU requirements.
The U.S. Government, working with our private sector, should
continue to promote U.S. interests in our most important markets. Our
message needs to emphasize the U.S. principles of effective
standardization, which underpin the U.S. system and which lead to
standards development driven by the marketplace, with sound technical
content, allowing for multiple technologies. The fact that U.S.
Government agencies rely to a great extent on private sector standards
in their own regulatory and procurement activities, and the
transparency and safeguards against trade protectionism or other
bureaucratic abuse, should be a part of our message to foreign
governments as well. The importance of delivering a positive and
persuasive message is especially critical in key emerging markets where
infrastructure is lacking.
The Commerce Department launched its Standards Initiative in 2003
to facilitate more effective Federal Government work to effectively
promote U.S. standards interests and to eliminate standards-related
market barriers that undermine U.S. exports and threaten the
international competitiveness of U.S. industry. A Departmental report--
``Standards & Competitiveness: Coordinating for Results,'' May 2004--
presents a broad set of recommendations, some of which address outreach
and promotion. Priority action has been taken to date on more than two-
thirds of the report's recommendations.
We are working now with our partner agencies on the Trade Promotion
Coordinating Committee to build on these recommendations and craft a
trade promotion strategy for the coming year recognizing the importance
of standards to the export competitiveness of American companies. Our
strategy endeavors to develop an ambitious partnership with U.S.
manufacturers and service providers, and the U.S. standards community,
to better promote U.S. standards interests in our most important
markets. This includes not only emerging, fast-growing markets such as
China, but also the EU itself. The USG is working with the EU through a
variety of cooperative mechanisms intended to promote better quality
regulation, minimize regulatory divergences and facilitate
transatlantic trade.
Q4. Do China's laws and regulations concerning the recognition and use
of ``international standards'' comply with their commitments under the
WTO? If not, is this discrepancy a problem for U.S. industry and has
the U.S. Government taken any action to respond to industry concerns?
A4. China, as a Member of the WTO, has passed legislation to implement
its WTO commitments, including those of the WTO Agreement on Technical
Barriers to Trade. The Department of Commerce is unaware of any
national or comprehensive Chinese law or regulation limiting its
recognition and use of international standards. The Department of
Commerce's International Trade Administration operates a monitoring and
agreement compliance program, which actively responds to the concerns
of U.S. industry and helps ensure that U.S. exporters receive the full
benefits of U.S. trade agreements.
Q5. The National Technology Transfer Act promotes the use of private
standards by U.S. Government agencies. How successfully has this Act
been implemented and what improvement could be made to the Act?
A5. NIST believes that implementation of the Act has very successful.
The data reported by federal agencies from FY 1997 through FY 2004
indicate that federal agencies continue to increase their use of
private sector standards. A key measure of agency behavior in this area
is the number of government-unique standards used in lieu of available
private sector standards. This figure is quite small compared to the
high frequency with which agencies use available private sector
standards; in FY 2004 the number of government-unique standards
reported in this category was about one-half-of-one-percent of the
total private sector standards used.
For many federal agencies, the NTTAA serves to reinforce practices
for using private sector standards, managing and reporting standards
activities as called for by pre-existing legislation and/or policy
directives. The Departments of Defense and Energy, Environmental
Protection Agency, Consumer Product Safety Commission, Food and Drug
Administration and National Aeronautics and Space Administration are
examples of agencies that have effectively developed such policies.
However, for a number of agencies implementation of their NTTAA
responsibilities has been difficult and slow, due to competing budget
priorities.
The Interagency Committee on Standards Policy, chaired by NIST, has
become an effective vehicle for exchange of important information
affecting standards use by federal agencies. The committee also serves
as a primary point of contact for addressing private sector concerns
about use of government-unique standards. NIST has enhanced its role as
coordinator of standards use within the Federal Government in other
ways as well. In 2005, NIST launched Standards.gov, which offers
background materials, useful links, and search tools for locating
information about government use of standards for regulatory and
procurement purposes. A key component on the Standards.gov site is a
searchable database of standards currently incorporated by reference
into federal regulations.
Agency opinions regarding the effectiveness of the Act, and
therefore the need to make changes to it, are varied. Some government
officials have found the Act to be a strong motivator for encouraging
greater use of private sector standards and increased participation in
standards development activities. On the other hand, some agencies have
questioned whether the problems that made passage of the NTTAA
necessary back in 1995 still exist today. The bottom line is that since
the passage of the NTTAA, federal use of government-unique standards
has dropped, while the number of private sector standards used by the
government in both regulation and procurement has increased by more
than 2600. These data reinforce the fact that non-government standards,
both U.S.-developed and international standards, meet government needs
in both regulation and procurement. Now more than ever, federal
agencies look to private sector standards before initiating in-house
standards, and they are working in concert with the private sector to
develop standards appropriate for government use.
Q6. Last year, the Commerce Secretary created a Standards Liaison
office and issued a comprehensive report, Standards and
Competitiveness: Coordinating for Results that includes 50
recommendations for federal action. How much funding has been allocated
to the Standards Liaison Office and to implementing the recommendations
in the Secretary's report? A year later, how many and which of the
recommendations have been implemented?
A6. The Standards Initiative launched by then-Secretary Don Evans in
2003 created a position of Standards Liaison within the International
Trade Administration. There is, however, no Standards Liaison Office
and therefore, no specific allocation. As part of the Office of the
Assistant Secretary for Manufacturing and Services, there are now three
FTEs specifically dedicated to addressing standards concerns of the
U.S. private sector, and numerous other staff throughout ITA (e.g.,
industry and country-specific specialists, as well as Commercial
Service domestic and overseas staff) who focus in part on standards-
related issues and activities.
Priority action has been taken to date on more than two-thirds of
the 50 recommendations in the 2004 report. Progress continues to be
made on all fronts identified in the report. Based on a comprehensive
assessment of Department standards-related programs, substantial work
has been done to improve coordination within the Department.
An ITA standards liaison with industry was named more than a year
ago to ensure that industry's priorities on standards are promoted
through the Department's international policies and programs. Intensive
training is being provided for Commercial Service officers and other
ITA staff on standards-related issues.
Department training and outreach programs, both those of NIST and
ITA, have been enhanced where feasible and are targeted at key markets,
such as China, where industry has identified standards-related issues.
NIST, ITA and TA are collaborating on the 2005 U.S.-China Standards and
Conformity Assessment Workshop scheduled for August 10-11, which will
allow U.S. industry with export potential and interest in China to get
to know the Chinese Standardization System and learn more about the
Chinese system requirements for their market sector. Furthermore, the
following NIST workshops have been delivered or are scheduled for FY05:
(1) Standards in Trade (SIT) workshop for Israel on Roadway
Infrastructure and Safety (April 2005), Enquiry Point Workshop for the
Caribbean (June 2005), SIT Workshop on Standards and Conformity
Assessment in the Oil and Gas Sector in India (August 2005). In
addition, on July 1st, NIST launched a new, improved electronic
notification system for U.S. exporters on proposed foreign regulations
and standards.
Q7. What are the duties of a Commercial Officer in a Standards
position? For example, the Department recently announced posting a
Commercial Officer to the new standards position in our Embassy in
Beijing. What are the duties of the Officer and what does the
Department hope that he will achieve? Also, what special skills and
background are required to fill this technically-oriented post?
A7. In general, Foreign Commercial Service Officers (FCSO) assigned to
Standards positions--currently three, in Sao Paulo, Mexico City and
Brussels--provide technical support to their respective regions on
standards-related issues that might affect U.S. Government agencies or
U.S. companies. The three current Commercial Officers in Standards
positions, and the officer to be posted to the American Embassy in
Beijing this fall, provide assistance on standards-related issues to
host government and private sector bodies that establish and implement
policies, technical regulations or voluntary standards and conformity
assessment practices that might affect market access for U.S. exports.
These officers arrange and participate in technical assistance projects
and workshops targeted at participants from the region in which they
are stationed, either in-region or in the United States.
The Commercial Officer to be posted to the Standards position at
the U.S. Embassy in Beijing is a career FCSO and was selected through a
rigorous recruiting and panel process by the Department's Commercial
Service. The Officer meets the language and technical expertise
requirements established by the Commercial Service for this position.
Prior to posting in Beijing, the Officer will undergo intensive
training, both at NIST and through the Commercial Service. As the
Ambassador to China and the Secretary of Commerce have both recognized,
there is a clear need for a dedicated STANDARDS position in China, to
facilitate communication and regular interaction with Chinese officials
on standards issues.
Q8. Recognizing that access to global markets increasingly depends on
standards being set by other countries and international organizations,
what is the policy of the U.S. towards implementation and enforcement
of the WTO's Technical Barriers to Trade agreement as it relates to the
definition, recognition and use of ``international standards''?
Is the U.S. Government aware of any country whose
laws or policies fail to comply with the Technical Barriers to
Trade agreement obligations to recognize and use international
standards to meet the requirements of the agreement? If yes,
what action does the U.S. Government take to ensure compliance?
China's policy is that ``International Standards are
the standards issued by the International Standards
Organization (ISO), the International Telecommunications Union
(ITY) and other international organizations recognized and
publicized by the ISO.'' Is this regulation compliant with the
technical Barriers to Trade Agreement and if not what changes
will China be obligated to implement to achieve compliance?
A8. The WTO Agreement on Technical Barriers to Trade recognizes the
right of Members to establish standards and technical regulations but
establishes a set of rules and procedures aimed at preventing the
development and application of such documents as unnecessary obstacles
to trade. Among other things, the Agreement encourages Members to base
their standards, technical regulations, and conformity assessment
procedures on ``international standards,'' if relevant ones exist and
they would be effective and appropriate for the particular objective at
hand. The Agreement itself does not define ``international standards''
nor does it specify the use of standards from any specific
international standards-developing body. However, the WTO Committee on
Technical Barriers to Trade further refined the concept of
``international standards'' in a Committee decision which emphasizes
the need for international standards to be developed with ``open,
impartial, and transparent procedures that afford an opportunity for
consensus among all interested parties.'' The United States played an
instrumental role in the development of, and fully supports, the
Committee's Decision. The amplified criteria assist in evaluating
whether a particular standard or technical regulation of a trading
partner is an unnecessary barrier to trade.
The Department of Commerce is unaware of any individual Member's
law or national policy limiting the recognition and use of
international standards. Likewise, the Department of Commerce is
unaware of any national or comprehensive Chinese law or regulation
limiting its recognition and use of international standards.
Q9. Has the Administration endorsed the U.S. Standards Strategy? What
level of resources and actions will be required by the Federal
Government to implement the U.S. Standards Strategy?
A9. The U.S. Standards Strategy is still under development. We expect
that a final document will be approved by the ANSI Board of Directors
sometime this fall. The Strategy contains recommendations for action by
government, ANSI, standards developers and industry. The Commerce
Department will consider the Strategy's recommendations for action by
government agencies, identify areas where Department standards-related
objectives can be aligned with those of the U.S. Standards Strategy and
promote similar actions by other government agencies.
The Interagency Committee on Standards Policy, composed of federal
agency Standards Executives and chaired by NIST, has received periodic
briefings on the status of the Strategy and will consider action on the
Strategy document once it is approved. We anticipate that individual
agencies will endorse or otherwise indicate support for the Strategy on
a case-by-case basis. It is unclear at this point what level of
resources and actions will be required by the Federal Government to
implement relevant elements of the Strategy. Since government interests
are well represented on the U.S. Standards Strategy Committee,
responsible for development of the U.S. Standards Strategy, they were
able to provide ideas for strategies that will meet USG needs.
Consequently, alignment and implementation should not be difficult.
Q10. You stated that the Department will work to implement relevant
elements of the U.S. Standards Strategy. What are the relevant elements
of the Strategy and what level of resources will be required to
implement these recommendations?
A10. The Department plans to leverage its relationships with other
government agencies, with industry and standards developing
organizations, and with academia, to implement key elements of the U.S.
Standards Strategy. These include as a first principle the Strategy's
promotion of broad access and inclusivity in the standards development
process. This is a clear evidence of the strength of standardization in
the United States. The strategy recognizes that many types of
organizations develop standards, and that new modes of operation and
new methodologies have changed the standards landscape in recent years.
A dynamic standards infrastructure is needed to meet future demands--
both government and private sector. The Department supports this
standards infrastructure both through Department staff participation in
standards activities and through coordination among federal agencies in
the use of non-government standards and participation in standards
development. Another key element of the strategy is the encouragement
of government at all levels to seek early collaboration with industry
and standards developers to identify standards needed to meet emerging
national priorities. We have had success already with this proactive
approach in both the homeland security and nanotechnology standards
arenas where NIST staff co-chair private sector standards panels under
the sponsorship of the American National Standards Institute. The
strategy also recognizes the clear link between standards and
government trade policy and the need for both the government and
private sector interests to give more attention to the impact of
standards on market access. Department technical and policy programs
support global recognition of standards that are fair and responsive to
market and technology needs. We expect to be able to implement key
elements of the Strategy through focused allocation of existing budget
resources.
Q11. NIST has proposed a FY06 initiative on standards in support of
global trade to address specific needs of U.S. business. What are the
specific needs of U.S. business, and what activities will NIST
undertake under this initiative?
A11. In an increasingly globalized economy, the capacity to compete
successfully depends on the ability of individual manufacturers to
satisfy global as well as U.S. measurement and standards requirements.
To respond to global challenges, a growing number of companies, both
large and small, are organizing their operations on a multinational
basis. This has led to reduced attention or dependence on nation-
centric measurement and standards infrastructures, and increased demand
for a viable global infrastructure. NIST's role as the primary agency
responsible for the health of the Nation's measurement system and its
mandate to ensure that appropriate non-government standards are
available to meet the needs of federal agencies and to coordinate
between the public and private sectors, places the Institute in a
unique position to address these international measurement and
standards challenges.
In order to promote international trade, at every step, U.S.
manufacturers need to tie their processes and products to international
standards of measurement that are provided by NIST. Standards and
calibrations must be aligned with international standards to give U.S.
manufacturers seamless access to foreign markets, developing foreign
and international standards efforts must be monitored for potential
impact on U.S. exports and the resulting information made easily
accessible to U.S. manufacturers.
NIST proposes a program for FY06 to coordinate with U.S. industry
to meet its needs for leading-edge measurement capabilities for key
technologies, and to develop new and more efficient ways to deliver the
highly accurate measurements needed by U.S. industry. NIST will provide
the technical leadership and coordination for key trade-related
documentary standards activities in specific technology sectors such as
wireless communications, manufacturing systems inter-operability and
nanomanufacturing to ease access to foreign markets, and to ensure that
U.S. interests are fairly represented. NIST also will work to align
U.S. measuring instrument standards with international standards, to
provide standards-related information and analysis to U.S. industry,
and in-depth training on standards and measurements for regulatory
officials in key foreign markets. These activities are key to enabling
U.S. industry to overcome market access barriers and compete
effectively in global markets.
Q12. The Department is developing a strategy to do a better job of
promoting U.S. standards interests in foreign countries and especially
in China. When will this strategy be completed and what are the
components?
A12. In May, the Trade Promotion Coordinating Committee launched an
interagency standards-related promotion plan as part of its National
Export Strategy. NIST and ITA are taking the lead in partnering with
the private sector and in consulting with other U.S. Government
agencies. The plan grew out of the Department's focus on markets with
the most commercial potential. Standards area major market access issue
in many of these markets.
Some elements of the plan have already been implemented, (e.g.,
focusing of NIST's assistance and foreign outreach on target
countries). A long-term goal is outreach to markets (a) whose standards
systems are still in flux and (b) where EU marketing of selected
standards may create a preference for European products. The target
markets include Brazil, China, India, South Korea, and Russia. We want
to engage these trading partners in a more positive working
relationship and improve their understanding of the advantages of
market-driven, globally relevant standards, which advances U.S.
technology.
In China, we are pursuing a series of cooperative ventures with the
Chinese Government and U.S. industry. Through ITA's Market Development
Cooperator Program, we have awarded partner-matched financial awards to
support the establishment of three U.S. private-sector offices in China
to work with the Chinese Government and industry. The Department of
Commerce will hold its second comprehensive U.S.-China Standards and
Conformity Assessment Workshop this summer with relevant Chinese
Government partners. We are working with other agencies and U.S.
industry to head off new Chinese mandatory standards that create
unnecessary barriers to trade.
In the other spotlight markets, we are at various stages of
developing and implementing strategies for engagement. In India, the
Commerce Department has proposed standards as an initial subject for
re-energizing the U.S.-India Commercial Dialogue. In Korea, Embassy
Seoul has found productive ways to engage the Korean Government, and
ITA and NIST are exploring options for expanding public and private
dialogue. In Brazil, we are exploring the possibility of activities
focused on emerging technologies and sectors. In Russia, we are
reaching out to U.S. industry in Russia to identify partners and target
sectors of interest.
Q13. NIST intends to partner with U.S. industry and standards
developers to promote the U.S. approach to standards development. What
will NIST do to meet this goal and what are you going to do differently
from past activities?
A13. NIST, working with ITA and other parts of the Department, and
other agencies, will actively engage U.S. industry and the U.S.
standards community in a partnership to promote the advantages of
market-driven, globally relevant standards that advance U.S.
technology. At the heart of this outreach plan is the realization that
the United States will not succeed in overcoming standards-related
market barriers unless it does a better job than the competition in
promoting standards that are fair and responsive to market and
technology needs. The importance of developing and delivering a
positive and persuasive message is especially critical in key emerging
markets where standards regimes are still in the formative stage. It is
important for our trading partners around the world to hear loud and
clear how recognition of U.S. and other market-driven, globally
relevant standards can help them improve their economic efficiency and
competitiveness while promoting a higher quality of life.
In collaboration with the American National Standards Institute,
the Department is planning a high level summit meeting of standards
developers, corporate representatives and key government participants
in standards activities to develop a proactive plan of action, based on
the principles of the U.S. Standards Strategy and the Department's
Standards Initiative and Standards and Competitiveness Report. The goal
is to identify and consider the many activities being undertaken by
various government, corporate and standards groups, and develop options
to better coordinate and leverage these actions; while also considering
new actions to provide more and better partnering in this area. With
respect to NIST's own outreach and education programs--our Standards in
Trade Workshop program, dialogues with foreign standards officials and
other outreach--we will expand our partnership with private sector
stakeholders to facilitate greater reach and investigate other means of
disseminating information on the U.S. approach to standards
development. NIST has also begun referencing the National Export
Strategy in its Federal Register announcements calling for Workshop
applications.
Q14. Today you announced that NIST will launch a comprehensive effort
to roadmap American industry's measurement needs. How long will this
take to complete, and does NIST currently have the funding to undertake
this ambitious project? How much funding will be required?
A14. This comprehensive effort will ultimately involve all customers
and stakeholders of the U.S. measurement system (USMS), which is the
complex of all methods, instruments, entities, institutions, and
standards involved in measurements of products and processes of
significance to the economy, security, and quality of life of the
Nation. In particular, the USMS is an essential component of the
national innovation infrastructure, and a critical element of the
strategic environment in which we all operate. NIST has established an
aggressive timetable for completion of the first iteration of the
measurement needs roadmap, which will comprise a comprehensive
assessment of the most important current and future measurement needs
of the U.S. economy; a plan delineating what USMS solution providers
intend to do, both individually and working together, to address those
needs; and identification of the most important gaps remaining, and the
consequences of not addressing those gaps. We expect to publish the
first USMS roadmap in late 2006 or early 2007. NIST and other
interested parties will monitor and report periodically on progress in
implementing the resultant plan; update the roadmap on an ongoing
basis; and repeat the entire process approximately every four years.
Given the breadth and complexity of the task at hand, NIST estimates
that it will take three iterations--or ten years--to create a robust
self-sustaining process that covers the entire economy, including both
the private and public sectors. NIST is committing the resources
necessary to complete the first iteration and to demonstrate the value
of the overall roadmapping approach.
Q15. Under OMB Circular A-119, NIST is responsible for collecting and
reporting to Congress on the participation by federal agencies in
Standards Development Organizations (SDOs). As a part of this
requirement, do agencies report on the level of participation by their
employees in standards development activities? What has been the trend
in federal employee participation in SDO activities over the past five
years?
A15. Yes, federal agencies do report on their employees' participation
in private sector standards development activities. Over the past five
years, participation of federal agency personnel in the activities of
private sector standards developers (SDOs) has increased (from 2001
through 2003) and then declined slightly. Agencies continue to face
competing budget priorities as they try to maintain adequate levels of
participation in SDO activities. Private sector standards developers
continue to request greater government participation in a variety of
development activities. U.S. Government participation is an excellent
way of ensuring that federal needs are considered during the
development of a standard and making sure that the resulting standard
can be used by the government.
Q16. The U.S. Government is a party to the WTO Agreement on Technical
Barriers to Trade, which states that Members ``shall ensure that
standards are not prepared, adopted or applied with a view to, or with
the effect of, creating un-necessary obstacles to international
trade.'' As a part of NIST's responsibilities under Circular A-119,
does NIST ask federal employees that participate in standards
development activities to report if the standards produced are in
compliance with the WTO Agreement on Technical Barriers to Trade? If
not, should NIST monitor these activities to ensure compliance?
A16. The OMB Circular contains no requirement for federal employees to
report on the compliance of developed standards with the WTO Agreement
on Technical Barriers to Trade (TBT). The Uruguay Round Agreements Act
(Public Law 103-465) provided the basis for implementing the WTO TBT
obligations in the United States. The Office of the U.S. Trade
Representative has overall responsibility for domestic implementation
and works in partnership with other agencies via the TPSC to monitor
implementation and develop appropriate responses to issues identified.
Individual agencies regularly consult with the U.S. Trade
Representative's office and other relevant agencies through the trade
policy coordinating process when they undertake regulatory actions that
may have an impact on trade.
Answers to Post-Hearing Questions
Responses by Robert W. Noth, Manager, Engineering Standards, Deere and
Company
Questions submitted by the House Science Committee Majority
Q1. Are foreign governments using standards in a way that is
inhibiting innovation, competition, respect for intellectual property,
and free trade in products where the U.S. is competitive, and if so,
how?
A1. The answer is yes. Europe has a penchant for design prescriptive
standards that tend to inhibit innovation and to the extent they are
successful exporting their standards it remains a concern as it affects
competitiveness and free trade in other markets. In regard to
intellectual property, John Deere has had negative experience with
trademark infringement emanating from several countries including
China. Overall however, the off-highway equipment sector has not been
impacted by standards disrespecting intellectual property ownership as
other sectors like ICT but it is a real concern with potential future
impacts.
Q2. Are foreign governments using standards policy as a mechanism to
protect their domestic industries at the expense of external
competition, including competition from U.S. companies?
A2. The answer is clearly yes. In our industry sector, we can observe
it in countries all over the world, including Europe, South America,
the CIS countries, China, and even Mexico and Canada on occasion. It is
most notable through selective enforcement, by which U.S. products are
challenged but locally-produced goods are not, even when designs are
identical.
Q3. If the answer to any of these questions is yes, what, if anything,
should the U.S. Government be doing to respond?
A3. The U.S. Government must be more aggressive in addressing these
issues on behalf of U.S. manufacturers. The U.S. should insist that our
trading partners who are WTO members live up to their commitments to
the WTO principles, but in doing so the U.S. must also be prepared to
demonstrate more visibly its commitment to them. This is why, in
previous testimony, we commented on the need for better targeting of
USAID and Trade Development Agency funding and programs, so that the
U.S. can provide more effective technical support. Beyond that, our
other recommendations include: new priority and visibility to the
challenges, better alignment between government agencies and the
private sector to ensure our international message is clear and
unambiguous, continued and annually secure funding for the ongoing
efforts of NIST, the new standards initiatives in the U.S. Department
of Commerce and the endorsement of the U.S. Standards Strategy with
ultimate support, including funding for the appropriate government-
related initiatives outlined there.
Questions submitted by Representative David Wu
Q1. The U.S. Standards Strategy lays out a series of ambitious
recommendations. Aside from Congress endorsing the Strategy, will there
be a follow-up document laying out how these recommendations should be
implemented? What resources will be required to implement the Strategy
and what does the Federal Government need to do?
A1. Actually, the proposed Strategy encourages individual sectors to
develop their own follow up documents. The work recently completed by
the Aerospace Sector outlining their strategy provides an excellent
example. John Deere is involved in the Off-Highway Sector's efforts to
utilize a similar approach and in appropriate forums; we encourage
other sectors to consider it as well. As was initiated with the current
version of the strategy, ANSI will keep track of the sector specific
strategies and tactical initiatives as they are reported and issue an
annual status report. Most, if not all of the recommendations presented
and discussed in the hearing are included in the proposed Strategy
document. The effort required to implement will come primarily from the
private sector but there are some important public sector elements.
Some of the recommended initiatives in the public sector are new but
most are extensions and expansions of efforts already underway that
need to be made more visible and adequately funded. The Federal
Government needs to ensure those outcomes.
Q2. What do you think are the three most important things the Federal
Government needs to do in the standards and trade arena? What role do
you think NIST should play within the Federal Government and should
NIST be doing anything differently?
A2. (1) Improved direct support for and increased government
participation in the U.S. standards system. This includes restoring
support for ANSI, as our National Standards Body in international
forums and include funding for emerging standards initiatives driven by
global public interest (such as Social Responsibility) that attract
subsidized support internationally but without enough immediate impact
to be fully supported by U.S. private sector funding; support for our
outreach and promotion of the U.S. Standards System and US based
standards; encouragement for more government personnel to participate
in private sector standards development and support for education and
training of foreign service/foreign commercial service officers in
standards and standards issues.
(2) Increased policy level coordination between U.S. Government
departments and agencies engaged in standards activities so as to
better align with private sector activities. The U.S. can maximize its
power and influence by better coordination to avoid sending conflicting
messages or signaling conflicting priorities.
(3) Congressional endorsement of the U.S. Standards Strategy. The
signal sent by this act would of itself, indicate better coordination
between the public and private sector, reinforce the U.S. Standards
System and motivate the resources required to effectively implement it.
Regarding NIST, we believe they have a uniquely important place in
the U.S. standards system. Dr. Semerjian itemized some of the agency's
many roles in his written and oral testimony, from basic metrology as
applied to the wide span of U.S. commerce and ranging to advanced
Research and Development in important or emerging technologies like
cryptography and nanotechnology. They are also the U.S. WTO inquiry
point and conduct Standards in Trade (SIT) workshops. Both are
important resources to our trade partners and U.S. stakeholders. These
important services need to be maintained and allowed to grow to keep
pace with demand.
Q3. We are facing an increasingly global marketplace, how do you see
U.S.-based standards organizations evolving over the next five to ten
years?
A3. Market forces relative to globalization will continue to impact
different industry sectors in different ways and on different timelines
so even in five to ten years the impacts on U.S.-based standards
organizations will be mixed. Most U.S.-based standards organizations
evolved in support of a specific industry or technology sector and
enjoyed a captive market for their standards as long as the products
made to their standard specifications were acceptable in the markets
the industry chose to serve; primarily but not exclusively U.S. or
North American. As the companies that make up those industries seek to
be competitive in new global markets and are faced with new demands
from both customers and governments, the previously symbiotic
relationship becomes at risk. The future of those standards
organizations will be determined primarily by the decisions made by the
constituent companies in the sector and in part by how the standards
organizations choose to respond to those decisions. In some sectors the
market for U.S. produced standards may dry up in favor of more
internationally acceptable specifications established in other
organizations as the company/industry seeks the best fit solution.
Those organizations thus effected will be forced to consider a revised
business model. Large organizations serving many sectors may have to
support multiple processes to better serve their constituents; much
like SAE has done to effectively serve the standards needs of their
Aerospace, Automotive and Commercial Vehicle sectors. (See question 8
below). Smaller, more narrowly focused organizations may have to
consider merger, acquisition, partnership or loss of the standards line
of business. To a large degree ``competing standards'' are an oxy-moron
and over-capacity relative to the demands of the market eventually
results in consolidation of suppliers in some form.
Q4. Clearly, the commitment to technical assistance by the EU is
unmatched by the U.S. in its coordination and magnitude. Is it fair to
say that the EU and European industries believe that they can create a
competitive advantage in world markets by strongly influencing the
content of international standards? Will the mass marketing by the EU
of selected standards create a preference for European products rather
than U.S. products? If so, what should the U.S. be doing and why have
we waited so long to take any action?
A4. Yes. In fact, Europe has published documents indicating their
commitment to that very strategy. Our company already has experience
with sales contracts in several countries where a Memorandum of
Understanding (MOU) between Europe and that country resulted in a
preference for European manufactured products where it did not exist
before. We recently experienced a problem of this nature with Turkey
for example. As stated in previous testimony, effective and timely
response is dependent on new priority and visibility being given to the
U.S. Government departments and agencies already working to meet the
challenge. Better alignment between them and the private sector must
also be assured so our international message is clear and unambiguous.
This has to include secure funding for them and a retargeting of the
funds allocated to USAID and the Trade Development Agency to better
address these specific challenges.
Q5. Do China's laws and regulations concerning the recognition and use
of ``international standards'' comply with their commitments under the
WTO? If not, is this discrepancy a problem for U.S. industry and has
the U.S. Government taken any action to respond to industry concerns?
A5. China has made it clear on several occasions in public that they do
not share the U.S. interpretation of the WTO language defining
``international standards,'' and have taken positions against products
that incorporate U.S.-based standards in their specifications that,
under the U.S. interpretation, should be perfectly acceptable. This
makes the Chinese position a problem for U.S. industry in many sectors.
The U.S. Government has been quick to respond to these concerns and
there are several private sector initiatives as well. While, the
Chinese attitude, up to this point, remains unchanged, we need to
continue to press the point through all appropriate channels of
communication.
Q6. The National Technology Transfer Act promotes the use of private
standards by U.S. Government agencies. How successfully has this Act
been implemented and what improvement could be made to the Act?
A6. The U.S. Government agencies have made a good faith effort in
implementing the NTTAA, with a positive impact. In effect, it forges a
partnership between the public and the private sector that benefits
both sectors. We believe its shortcoming is that it allows exceptions
based on the unilateral judgment of the agencies, without recourse. As
suggested in previous testimony, establishing a policy level oversight
committee to be made up of senior agency officers might provide an
appropriate level of accountability and provide needed incentives for
enhanced alignment and cooperation. Another alternative might be to
elevate interagency standards concerns enough to create an incentive
for agency executives to become more actively engaged with the existing
Interagency Council on Standards. The objective is to speak more
clearly and unambiguously and therefore more effectively in
international discussions on standards utilized in trade.
Q7. You mention that many World Trade Organization (WTO) countries and
signatories to the Technical Barriers to Trade Agreement have not yet
implemented its provisions. Which countries are the worst offenders and
how does this hurt U.S. companies? How responsive has the U.S.
Government been in addressing this issue and how do you think
governmental actions could be improved?
A7. The worst offenders are listed annually in The National Trade
Estimate, a report to Congress from the office of the U.S. Trade
Representative. It lists specific trade issues and problems by country
that are compiled from industry input. Impacts on U.S. companies
include lost sales and increased costs due to meeting requirements not
imposed upon local competitors. The numbers vary by country but add up
to a substantial amount of lost trade. The sensitivity and
responsiveness of the U.S. Government to these issues has been good and
continues to improve. The recommendations in my earlier testimony are
aimed at making that responsiveness even better.
Q8. As your industry has become more globally focused, you depend more
on the International Standards Organization (ISO) for standards
development. How has this affected how your industry funds and
interacts with traditional U.S.-based standards organizations such as
the Society of Automotive Engineers (SAE) and the American Society of
Agricultural Engineers (ASAE)? As industry becomes more globally
focused, how do you think U.S.-based standards organization will need
to evolve? What should the Federal Government do differently in the
face of these changes?
A8. In the past, SAE and ASAE have relied upon a combination of three
streams of revenue to fund their activities related to standards
development. They primarily depend upon sales revenue from the
documents and seek voluntary industry contributions in addition to
cover their costs. Membership dues subsidize any shortfall from the
other two. Their industry constituents are the primary source of all
three streams. Over the last decade, as market forces have consolidated
the Off Highway Equipment Industry reducing voluntary contributions and
increased demand for a more internationally acceptable standards
portfolio has driven document sales revenues to other organizations,
these revenue streams no longer consistently cover costs and have put
pressure on dues to provide adequate funding. Concurrently the
surviving industry participants have realized that going forward we
cannot continue to fund redundant committees as they currently exist;
often at the industry, national, regional and international levels,
with the potential for each to produce its own unique, proprietary or
conflicting standards. (Reference the response to question 3.) However,
to participate effectively in ISO, we still need services from SAE and
ASAE in the form of US Technical Advisory Group (US TAG)
administration, plus meeting and secretariat services. Therefore we've
been working with both societies to change their financial model in
relation to our industry, from one that was based on producing
documents for sale to one of providing these services. Since the
service expectations are easily quantifiable and the cost is
predictable, the new model becomes more like a service contract where
the participants are expected to pay their share of the cost to
maintain the service. The model appeals to industry participants and
the societies in that it simplifies the funding, makes it more
predictable and manageable as an ongoing cost of doing business. The
model is not a new one as it has been utilized in other sectors
successfully for some time; however it does represent a change to our
industry and for the societies involved.
A point worth noting is that SAE also supports aerospace and
automotive industry sector standardization needs, in addition to Off
Highway equipment. Each of these sectors is pursuing an international
standards strategy uniquely tailored to its products and market
situation. To respond effectively to multiple constituent requirements,
SAE reorganized as their historical approach no longer suited any of
their constituent industries well. ASAE is in a similar situation but
with some smaller industry sectors serving a business markets. This
speaks to the broader question on how U.S.-based standards
organizations will need to evolve and my earlier response to question
3.
The Federal Government's best response to this is to focus on
maintaining a level playing field for U.S.-based products and services
in the international trade arena. Specific actions to address this were
included in my earlier testimony and reiterated in response to question
4. Additional specificity is contained in the draft of the U.S.
Standards Strategy.
Q9. You believe there needs to be better communication between the
government and private sector. You also recommend better alignment
between the private sector and federal agencies. Could you give us some
examples what needs to be done?
A9. The Department of Commerce Standards Initiative started under
Secretary Evans, the more recent Manufacturing initiative as well as
the ongoing activities within NIST and the ITA are excellent examples
where focused dialogue between private sector stakeholders and
government in specific sector oriented workshops has improved
understanding and resulted in actionable agendas. We are pleased to see
that most of the recommendations have been endorsed and are moving
forward. These efforts deserve continued support from Congress in the
form of appropriate recognition and continued funding. However, to
ensure long-term success two things need to happen:
1. Continued dialogue is necessary to ensure private/public
sector alignment on priorities as conditions change and new
issues emerge. Such programs need to seen as on-going
processes, not a one time activities.
2. The information obtained from agency interaction with the
private sector needs to be shared more effectively across the
several agencies of government so a more common agenda can be
pursued when government to government discussions take place
relating to international trade issues. The main challenge
seems to be that many agencies do not see such coordination
activity as an element of their legal mandate. Congress needs
to more clearly provide incentives for such communication and
coordination.
This is the rationale for why; in previous testimony we expressed a
desire for more engagement from policy level executives either by
creating a new policy level mechanism or by creating incentives for
greater executive engagement in existing mechanisms.
Q10. You hit on a key point of the U.S. Standards Strategy--
implementation. Aside from Congress endorsing the Strategy, what is
required for the Strategy to be undertaken and executed efficiently?
A10. The U.S. Standards Strategy addresses the broadest cross-section
of the U.S. economy because every sector utilizes standards in one form
or another and activity, relative to standards and standardization, is
going on every day. The objective of the Strategy is to channel that
activity more productively.
Due to the decentralized nature of the U.S. Standards System,
implementation responsibility remains largely within the private
sector. If the strategic initiatives identified are judged by private
sector elements to improve competitiveness by addressing identified
problems they will likely be resourced to a level commensurate with the
perceived benefit. We anticipate, based on the response to the current
version of the U.S. Strategy, the updated version, based on more input
from an even larger cross-section of the U.S. standards community, will
result in even better response in pursuing implementation.
Government however, plays a unique and important role and what it
does or does not do to support and implement the elements of the
strategy relevant to their role in the system will have significant
impact on the private sector. For example, as indicated in oral
testimony, John Deere utilizes its resources to try to resolve problems
experienced in commerce by direct interaction as a first step. We only
attempt to enlist government support when our efforts prove
insufficient. Some of the problems we have related in hearing testimony
have reached that point. Likewise, many of the issues addressed in the
strategy, especially related to international trade, are not things the
private sector can resolve without government understanding of the
sector specific issues and direct government to government interaction
on their behalf. The caveat is in understanding sector specifics
because what may be a solution in one sector may be problematic in
another. If this is not well understood and that understanding
reflected in the government to government dialogue, the intervention
might solve the problem in one sector and wreak havoc in several
others.
Whether or not Congress chooses to publicly endorse the strategy,
if the specific recommendations it contains, many of which were also
proposed in testimony at the hearing, are not funded and implemented
there will be negative consequences on the competitiveness of U.S.-
based industry and ultimately on the whole U.S. economy.
Answers to Post-Hearing Questions
Responses by Donald R. Deutsch, Vice President, Standards Strategy and
Architecture, Oracle Corporation
Questions submitted by the House Science Committee Majority
Q1. Are foreign governments using standards in a way that is
inhibiting innovation, competition, respect for intellectual property,
and free trade in products where the U.S. is competitive, and if so,
how?
A1. Yes, industry recognizes from first hand experience that standards
are not only the domain of the technical and business communities.
Policy-makers in the U.S. and abroad are increasingly interested in and
actively influencing a range of standards and technical regulatory
issues. Governmental interest and activity plays a critical role in
today's global economy and influences the competitiveness of the ICT
industry, including innovation, competition, respect for intellectual
property, and market access.
Q2. Are foreign governments using standards policy as a mechanism to
protect their domestic industries at the expense of external
competition, including competition from U.S. companies?
A2. Yes, it is our experience that some governments do use and promote
national or regional standards as a mechanism to achieve their
industrial policy objectives. Perhaps one of the best illustrations of
this dynamic is the recent experience that our industry had when the
Chinese Government proposed the mandatory adoption of a Chinese-
developed Wireless Local Area Network (WLAN) standard, best known by
its acronym, ``WAPI.'' This example illustrates the concerns that many
industrial sectors, particularly the U.S. high technology sector, are
currently facing in China. The damaging precedent that could have been
set with WAPI, in which a government--a signatory to the WTO
agreement--mandates a technology and forces domestic production of that
technology, would have had significant, negative implications for
technological development and global economic growth. We believe this
example highlights many challenges the industry is facing, not only in
China, but also around the globe.
Q3. If the answer to any of these questions is yes, what, if anything,
should the U.S. Government be doing to respond?
A3. When asked what should be the role of the Federal Government in
standardization, we are always very careful. We believe there is indeed
a role, including in response to the actions of other governments. It
is a limited and clearly defined role that is responsive to industry
needs and performed in partnership with industry. It is an increasingly
important role. Specifically, we look to the U.S. Government to perform
two functions related to standardization--to promote the creation and
use of voluntary, market-driven standards and to stimulate openness in
trade and markets by helping to defend against the use of standards as
barriers to innovation and market access.
More specifically, we can point to three specific initiatives that
can help the U.S. Government to play that role--two that exist to a
degree and one that does not exist as yet.
First, in 2002, ITI recommended that the Commerce Department create
a high-level standards and technical regulatory policy function to work
with industry to identify and address both immediate and more long-term
commercial policy issues in countries and regions around the world. The
Commerce Department has taken steps to implement this recommendation.
We believe that it can take additional steps to strengthen the
function, including with additional staff and resources, in order to
ensure the most effective standards, technical regulatory, and market
access activity across all its agencies.
Second, in 2002 ITI also recommended that the Commerce Department
strengthen the existing Standards Attache Program. In particular, we
sought a program expansion to include attaches for China, the rest of
Asia, and Geneva to supplement existing attaches in Brussels (to deal
with European standards issues) and in Brazil. Because of the strategic
utility of this program, we also recommended that the Commerce
Department take necessary steps to ensure that it is both managed and
located within the Department to retain an exclusive focus on standards
and technical regulatory issues around the world. Moving forward, we
would like to position the program for ongoing effectiveness, and we
recommend that the Department support a formal assessment of the
Attache Program's results, its training program, location within the
department, and budgetary needs. ITI is committed to working with the
Commerce Department to continue making progress on these
recommendations.
Finally, we believe there is another potential activity for the USG
and the Commerce Department that we believe is critically important
moving forward and one that should be given serious consideration. We
think that the Commerce Department can work with industry to continue
strengthening and examining the pilot U.S.-EUICT Standards Dialogue.
Additionally, we see today even more clearly than in 2002 a critical
opportunity to support industry's standardization policy and market
access objectives around the world by working with industry to develop
a standards and market access research and analysis program to better
understand the key issues discussed at the hearing. There would be a
real policy and commercial use for some analysis of key policy issues
(e.g., defining what is the global economic impact of standards,
developing a comparison of government support and promotion of
standards, forecasting global standards participation trends, etc.).
The Commerce Department has existing staff expertise that could be
valuable in designing and implementing this research and analysis
program.
Questions submitted by Representative David Wu
Q1. The U.S. Standards Strategy lays out a series of ambitious
recommendations. Aside from Congress endorsing the Strategy, will there
be a follow-up document laying out how these recommendations should be
implemented? What resources will be required to implement the Strategy
and what does the Federal Government need to do?
A1. ITI is a member of ANSI as are several of its member companies. We
have not yet had an opportunity to review, discuss and conclude on a
position regarding the current public draft of the U.S. Standards
Strategy. We will be including the U.S. Standards Strategy on the
agenda of all of our relevant committees in the near future so that we
can arrive at a consensus position regarding the document as well as on
a possible congressional endorsement.
Q2. What do you think are the three most important things the Federal
Government needs to do in the standards and trade arena? What role do
you think NIST should play within the Federal Government and should
NIST be doing anything differently?
A2. When asked what should be the role of the Federal Government in
standardization, we are always very careful. We believe there is indeed
a role. It is a limited and clearly defined role that is responsive to
industry needs and performed in partnership with industry. It is an
increasingly important role. Specifically, we look to the U.S.
Government to perform two functions related to standardization--to
promote the creation and use of voluntary, market-driven standards and
to stimulate openness in trade and markets by helping to defend against
the use of standards as barriers to innovation and market access.
A critically important way that the Federal Government can promote
the creation and use of voluntary standards is to be actively and
appropriately engaged in the standards development process. The Federal
Government should be engaged as both a consumer of voluntary standards
and as an important technical resource. This role is identified in the
National Technology Transfer and Advancement Act and NIST keeps track
of how the Federal Government is participating in the voluntary
standards process.
In the standards and trade arena, we can point to three specific
initiatives that can help the U.S. Government to play a positive role--
two that exist to a degree and one that does not exist as yet.
First, in 2002, ITI recommended that the Commerce Department create
a high-level standards and technical regulatory policy function to work
with industry to identify and address both immediate and more long-term
commercial policy issues in countries and regions around the world. The
Commerce Department has taken steps to implement this recommendation.
We believe that it can take additional steps to strengthen the
function, including with additional staff and resources, in order to
ensure the most effective standards, technical regulatory, and market
access activity across all its agencies.
Second, in 2002 ITI also recommended that the Commerce Department
strengthen the existing Standards Attache Program. In particular, we
sought a program expansion to include attaches for China, the rest of
Asia, and Geneva to supplement existing attaches in Brussels (to deal
with European standards issues) and in Brazil. Because of the strategic
utility of this program, we also recommended that the Commerce
Department take necessary steps to ensure that it is both managed and
located within the Department to retain an exclusive focus on standards
and technical regulatory issues around the world. Moving forward, we
would like to position the program for ongoing effectiveness, and we
recommend that the Department support a formal assessment of the
Attache Program's results, its training program, location within the
department, and budgetary needs. ITI is committed to working with the
Commerce Department to continue making progress on these
recommendations.
Finally, we believe there is another potential activity for the USG
and the Commerce Department that we believe is critically important
moving forward and one that should be given serious consideration. We
think that the Commerce Department can work with industry to continue
strengthening and examining the pilot U.S.-EUICT Standards Dialogue.
Additionally, we see today even more clearly than in 2002 a critical
opportunity to support industry's standardization policy and market
access objectives around the world by working with industry to develop
a standards and market access research and analysis program to better
understand the key issues discussed at the hearing. There would be a
real policy and commercial use for some analysis of key policy issues
(e.g., defining what is the global economic impact of standards,
developing a comparison of government support and promotion of
standards, forecasting global standards participation trends, etc.).
The Commerce Department has existing staff expertise that could be
valuable in designing and implementing this research and analysis
program.
Q3. We are facing an increasingly global marketplace, how do you see
U.S.-based standards organizations evolving over the next five to ten
years?
A3. Our industry is a truly global one. For our industry, the focus is
not on how domestic standards are developed ``in the U.S.;'' but rather
on creating global technical standards that support the growth of the
worldwide ICT market. Because our industry designs and builds single
products for a global market, we actually develop international,
globally relevant standards in different venues and organizations
around the world--not simply American National standards in a U.S.
standardization infrastructure. We need that flexibility, because the
ICT sector depends on standards today more than ever. The rapid pace of
change in our sector, with product cycles measured in months, not
years, requires companies and their suppliers constantly to modify,
improve, and re-develop their technologies, products, and services in
order to satisfy worldwide consumer demands. Standards and their
development process must stay relevant and keep pace with this fast
changing, global marketplace. We expect this global focus on standards
development to remain a reality for our sector into the future.
Q4. Clearly, the commitment to technical assistance by the EU is
unmatched by the U.S. in its coordination and magnitude. Is it fair to
say that the EU and European industries believe that they can create a
competitive advantage in world markets by strongly influencing the
content of international standards? Will the mass marketing by the EU
of selected standards create a preference for European products rather
than U.S. products? If so, what should the U.S. be doing and why have
we waited so long to take any action?
A4. Regardless of the strategies and industrial policies of other
governments, our industry strongly believes in the value to the
international marketplace of global, market-led, voluntary standards
that support innovation and inter-operability. We encourage the U.S. to
redouble advocacy efforts to promote this approach to standardization.
The U.S. Government should directly engage with other governments about
how internationally recognized, market-led technology and standards can
grow economies and benefit all parties.
From our various experiences with standards policy issues in
markets around the world, we have learned that our industry needs to
engage in an ongoing basis at the policy level directly with our
government and other governments, particularly in emerging markets,
about how technology and standards can help grow their economies and
why it is in their interest to adopt and deploy internationally-
recognized, voluntary, market-driven standards. We need to redouble our
already considerable efforts promoting processes that support such
standards since they address user needs and promote innovation and
inter-operability. We need to encourage market access so that
consumers, industry, and economies around the world can benefit from
innovative technological advancements.
Q5. Do China's laws and regulations concerning the recognition and use
of ``international standards'' comply with their commitments under the
WTO? If not, is this discrepancy a problem for U.S. industry and has
the U.S. Government taken any action to respond to industry concerns?
A5. The Chinese and U.S. ICT sectors are large, important, and growing
parts of the global economy. China's approach to and use of standards
is a complex set of issues. Our sector has worked very closely with the
U.S. Government on a range of China standards and technical regulatory
issues that can be integral parts of broader industrial policies and
directly impact trade flows and market access.
The WAPI example discussed at length at the hearing illustrates the
concerns that many industrial sectors, particularly the U.S. high-
technology sector, are currently facing in China. The damaging
precedent that could have been set with WAPI, in which a government--a
signatory to the WTO agreement--mandates a technology and forces
domestic production of that technology, would have had significant,
negative implications for technological development and global economic
growth.
With this example, ITI worked closely with our government to make
sure this issue was on the agenda of both the Administration and the
Congress. After considerable dialogue culminating in the April 2004
meeting of the Joint Commission on Commerce and Trade, the Chinese
Government agreed to indefinitely suspend implementation of this
mandatory standard, revise the standard based on comments from foreign
and domestic firms, and participate in international standards bodies.
Q6. The National Technology Transfer Act promotes the use of private
standards by U.S. Government agencies. How successfully has this Act
been implemented and what improvement could be made to the Act?
A6. We support the promotion and use of voluntary, market driven
standards by the U.S. Government as described in the NTTAA. We
encourage even greater participation, where appropriate and as a
standards consumer and technical resource, in the standardization
process by the U.S. Government.
Q7. Dr. Deutsch, when the Chinese ``WAPI'' standard first became an
issue for U.S. industry, how prompt was the U.S. Government in
responding to industry's concerns? What could the government have done
better?
A7. ITI worked closely with several U.S. Government agencies on this
issue--which transpired relatively rapidly and which demanded
significant private and public sector attention and action.
The Chinese Government issued the compulsory ``WAPI'' security
standards initially in May of 2003. After considerable dialogue over
the course of not even one full year, at the April 2004 meeting of the
Joint Commission on Commerce and Trade, the Chinese Government agreed
to indefinitely suspend implementation of this mandatory standard,
revise the standard based on comments from foreign and domestic firms,
and participate in international standards bodies.
We believe that the private and public efforts on this issue were
both appropriately collaborative and effective.
Q8. Dr. Deutsch, you recommend that the Commerce Department's
Standards Attache program needs to be strengthened. What should be the
duties of a Standards Attache and what sort of skill set are needed by
the Attaches? How many of these Attaches do we need and where should
they be located?
A8. ITI believes that the USG should strengthen the current Standards
Attache program at the Department of Commerce by expanding the program
to include attaches for China, the rest of Asia, and Geneva to
supplement existing attaches in Brussels (to deal with European
standards issues) and in Brazil. Because of the strategic utility of
this program, we also recommend that the Commerce Department take
necessary steps to ensure that it is both managed and located within
the Department to retain an exclusive focus on standards and technical
regulatory issues around the world. We believe that the Commerce
Department should take necessary steps to make certain that the
program's personnel selection, performance criteria, incentives, career
path definition, and training all reinforce the goal of providing
effective standards attaches for industry. Finally, ITI would like the
USG to position this program for ongoing effectiveness, and so we also
recommend that the Department support a formal assessment of the
Attache program's results, its training program, location within the
department, and budgetary needs.
Answers to Post-Hearing Questions
Responses by Joe S. Bhatia, Vice President and Chief Operating Officer,
Underwriters Laboratory
Questions submitted by the House Science Committee Majority
Q1. Are foreign governments using standards in a way that is
inhibiting innovation, competition, respect for intellectual property,
and free trade in products where the U.S. is competitive, and if so,
how?
A1. Underwriters Laboratories Inc. is a standards development and
product testing and certification organization, and as such cannot
speak to whether foreign governments' standards inhibit innovation in
products where the U.S. is competitive. This information perhaps can be
best supplied by industry. However, there are cases in which foreign
governments' testing requirements duplicate testing already conducted
under internationally recognized schemes. Having to duplicate the tests
increases costs for manufacturers and thereby affects their
competitiveness. China's in-country testing for electromagnetic
compatibility (EMC) is one such example. (See page 8 of written
testimony for details.)
Q2. Are foreign governments using standards policy as a mechanism to
protect their domestic industries at the expense of external
competition, including competition from U.S. companies?
A2. Underwriters Laboratories Inc., due to the nature of its work,
cannot corroborate the use of standards policy as a mechanism to
protect domestic industries. However, the often top-down approach to
standards development in many countries means that processes are
sometimes not open and transparent, and not all interested stakeholder
groups can participate. Resulting standards can thus sometimes have
unintended or unanticipated consequences, which may affect the
competitiveness of U.S. products.
Q3. If the answer to any of these questions is yes, what, if anything,
should the U.S. Government be doing to respond?
A3. The U.S. Government should aggressively negotiate market access for
U.S. testing and certification providers in all free trade agreements
(FTAs) and future rounds of the World Trade Organization (WTO). The
ability to offer testing and certification services to local
requirements means that companies like Underwriters Laboratories Inc.
can bundle testing for customers and help reduce manufacturers' global
compliance costs.
The U.S. Government should better fund standards and certification
education and outreach. For instance, all current and future U.S.-
negotiated FTAs should incorporate technical assistance (and
corresponding funding) for standards and certification. The National
Institute of Standards & Technology (NIST) Standards in Trade (SIT)
workshops should be better funded to increase the number of workshops
held annually.
Consideration should be given to funding additional standards
attache positions within the U.S. Department of Commerce (DOC) in
select countries or regions, including Saudi Arabia and Korea. The
standards attaches currently in place in Mexico and Brussels have
proven pivotal in helping to identify potentially troublesome trends
and in helping U.S. companies work through related regulatory issues.
Questions submitted by Representative David Wu
Q1. The U.S. Standards Strategy lays out a series of ambitious
recommendations. Aside from Congress endorsing the Strategy, will there
be a follow-up document laying out how these recommendations should be
implemented? What resources will be required to implement the Strategy
and what does the Federal Government need to do?
A1. The proposed U.S. Standards Strategy (USSS) encourages individual
sectors and organizations to develop their own specific implementation
plans and tactics as well as their own strategic documents. This
approach helps amplify and supplement specific elements of the USSS
while at the same time respecting individual organizations' own needs.
The work recently completed by the Aerospace Sector, outlining its
strategy provides an excellent example. ANSI will help track the
specific strategies and tactical initiatives as they are reported and
issue an annual status report. Most, if not all of the recommendations
presented and discussed in the hearing are included in the proposed
strategy document.
The resources required to implement the USSS must come from a
combination of private and public constituencies. Some of the
recommended initiatives are new but most are extensions and expansions
of efforts already underway that need to be more robust and better
funded.
Consideration of a Congressional earmark of $2 million for ANSI
implementation efforts and international standards outreach would be
appropriate. In 2001, a grant of $2 million was requested through NIST.
The result was a $500,000 grant for three years (2001-2003). The grant
lapsed in 2004 in light of NIST budget constraints.
Q2. What do you think are the three most important things the Federal
Government needs to do in the standards and trade arena? What role do
you think NIST should play within the Federal Government and should
NIST be doing anything differently?
A2. The three most important things the U.S. Government should to in
the standards and trade arena include:
1. Aggressively negotiating market access for U.S.-domiciled
testing and certification providers in free trade agreements
(FTAs) and in current and future rounds of the World Trade
Organization (WTO). The corollary to this is ensuring trade
partners' compliance with related obligations. (See written
testimony for additional details.)
2. Enhanced funding for the U.S. Department of Commerce (DOC)
(a) International Trade Administration Standards Liaison Office
(b) standards attaches and (c) NIST Standards in Trade (SIT)
workshops. (See written testimony for additional details.)
3. Technical assistance/capacity building components
(including funding) in FTAs, Trade & Investment Framework
Agreements (TIFAs), and other bilateral and regional trade
agreements.
With respect to standards in trade, NIST plays an important role as
the U.S. WTO enquiry point for Technical Barriers to Trade (TBT). It is
a rich resource for U.S. companies seeking timely information regarding
standards and regulatory developments.
NIST also plays an important role in the commercialization of new
technologies developed in the United States; this is through the
development of related measurement standards. Fuel cells,
nanotechnology and biometrics are areas in which NIST's measurement
standards work needs to be sustained, and perhaps enhanced.
Q3. We are facing an increasingly global marketplace, how do you see
U.S.-based standards organizations evolving over the next five to ten
years?
A3. Paths will vary for the evolution of U.S.-based standards
organizations, in large part because trends and issues vary by sector.
But in general, standards development processes increasingly adapt to
reflect time-to-market sensitivities of technology-driven sectors;
technology itself is being used to improve the standards development
process.
One thing that should be enhanced and not changed is acceptance
internationally of standards developed by U.S.-domiciled standards
development organizations (SDOs) in accordance with internationally
accepted principles outlined in the World Trade Organization (WTO)
Technical Barriers to Trade (TBT) Annex 4. The key tenants of standards
development--openness, balance, consensus, and due process--similarly
will not change.
Underwriters Laboratories Inc. (UL)'s own approach to standards
development has evolved in recent years. It has adopted a more
aggressive policy toward standards harmonization within the IEC and
ISO. U.S. manufacturers are realizing that they have an increasingly
global marketplace for their innovative and creative products. UL's
harmonization priorities rely largely on what industry perceives as
priority areas for harmonization.
When developing new standards or harmonizing UL's standards at the
regional or international level, however, it is paramount that
essential U.S. safety principles are protected and not compromised,
even if this means developing National Differences, a practice that is
not unique to the United States. UL considers the merit(s) of
harmonizing existing standards, whether by acceptance of IEC and ISO
requirements or by advocating a UL standard or its essential
requirements as the basis of the harmonized standard. UL will also
develop ``globally'' relevant standards in areas where standards do not
exist.
U.S. standards development organizations (SDOs) should also take
the lead in submitting standards development proposals and requesting
recognition of U.S. documents at the international level in such
emerging national priority areas as homeland security and
nanotechnology. Radio Frequency Identification (RFID) is another such
area where the impact of standards on trade is potentially staggering.
Q4. Clearly, the commitment to technical assistance by the EU is
unmatched by the U.S. in its coordination and magnitude. Is it fair to
say that the EU and European industries believe that they can create a
competitive advantage in world markets by strongly influencing the
content of international standards? Will the mass marketing by the EU
of selected standards create a preference for European products rather
than U.S. products? If so, what should the U.S. be doing and why have
we waited so long to take any action?
A4. Yes, the European Union aggressively tries to influence the content
of international standards, which can provide an advantage for related
EU products in the region and globally. The promotion of EU standards,
especially if codified in IEC and ISO standards for which U.S.
standards are not harmonized, means that U.S. manufacturers must adapt
products typically produced according to U.S. standards if they want to
compete in markets whose conformance systems are based on EU (and EU-
based IEC and ISO) standards.
The U.S. Government should incorporate technical assistance
components--that specifically address standards, technical regulations,
and conformity assessment systems--in all FTAs, TIFAs, and other
bilateral and regional trade agreements with U.S. trade partners.
Q5. Do China's laws and regulations concerning the recognition and use
of ``international standards'' comply with their commitments under the
WTO? If not, is this discrepancy a problem for U.S. industry and has
the U.S. Government taken any action to respond to industry concerns?
A5. UL has not undertaken an evaluation of China's laws and regulations
concerning standards and whether they comply with WTO obligations. UL
understands, however, that China has publicly expressed a preference
for IEC and ISO standards (in general, but not across all sectors) and
that it does not share the U.S. interpretation of WTO language defining
``international standards.''
With respect to testing and certification, China is obligated under
its WTO accession commitments to accredit or recognize testing and
certification organizations not domiciled in China for the purpose of
administering its CCC mark. To date, no timeline has been outlined to
phase in these commitments, and existing PRC certification and
accreditation regulations preclude non-Chinese entities from providing
CCC mark testing and certification services. UL thus would like to see
increased dialogue under both the WTO accession Transitional Review
Mechanism and the Joint Commission on Commerce and Trade to develop a
timeline for implementation of national treatment commitments
referenced in Paragraphs 194 and 195 of China's Working Party Report.
When new PRC regulations took effect in early 2004, the Office of
the U.S. Trade Representative (USTR) and DOC both worked with UL to
clarify their scope. In working bilateral meetings, it is UL's
understanding that the issue has been raised, with no hard and fast
commitments from the Chinese.
Q6. The National Technology Transfer Act promotes the use of private
standards by U.S. Government agencies. How successfully has this Act
been implemented and what improvement could be made to the Act?
A6. The fundamental intent of the Act--to promote the use of voluntary
consensus standards, wherever appropriate--is on mark and should not be
altered. Implementation varies by agency, but it is clear from the
practice of the Department of Defense (DOD) and the Consumer Product
Safety Commission (CPSC) that the NTTAA has been effective in
increasing U.S. Government reliance on voluntary consensus standards,
whenever possible, for both procurement and regulatory purposes.
With respect to improving implementation, NIST already is actively
engaged with private sector stakeholders to evaluate options for
enhancing implementation. One of the thoughts to emerge from that
dialogue is improving the role of the Standards Executive within each
federal agency. This includes adequate funding for their participation
as subject matter experts in related private sector standards
development processes, as well as addressing some of the organizational
structure issues that can frustrate their responsibilities.
Q7. We are having conformity assessment problems with the European
Union, Mexico and China. Why is this a problem for U.S. industry? How
effective has the Federal Government in solving these problems for U.S.
industry? What should we be doing differently?
A7. The ``conformity assessment problems'' from UL's perspective relate
to accreditation of testing and certification organizations not
domiciled in the country in question. ``U.S. industry'' consists of the
product manufacturers for which organizations like UL conduct testing
and certification. If current practices in Europe, Mexico, and China
(or other countries with local product certification schemes, for that
matter) delay or preclude the participation of testing and
certification organizations domiciled in other countries, then the
``problem for U.S. industry'' is that they must use multiple testing
and certification organizations to obtain the multiple certification
marks needed to sell their products globally. Allowing local
accreditation of U.S.-domiciled testing and certification organizations
means that manufacturers can reduce the number of certification
organizations used globally and that organizations like UL can bundle
testing and help manufacturers reduce their overall global compliance
costs.
DOC and USTR have been very helpful to date in resolving issues in
Mexico. UL continues to work with DOC and USTR on issues in Europe and
China. As noted in responses to questions (2) and (5) above, UL would
like to see the U.S. Government take a more aggressive negotiating
stance on market access for testing and certification organizations
within the services schedule of FTAs and future rounds of the WTO.
Q8. You recommend that U.S. stakeholders should work to ensure that
trade partners comply with WTO principles of openness, transparency,
and advance notice. I couldn't agree more, we need to ensure that our
trading partners meet their obligations. Could you provide us with some
specifics of what needs to be done by both industry and government to
implement your recommendation?
A8. Industry needs to improve cooperation with foreign counterparts in
international forums to support and encourage compliance with WTO
principles. Industry should also use such multinational events as OECD-
sponsored conferences as a platform for improved compliance. Industry
should also promptly bring non-compliance issues to the attention of
appropriate authorities in the U.S. Government.
UL recommends that the U.S. Government highlight and emphasize WTO
Technical Barriers to Trade Agreement compliance principles in all
negotiated agreements. Emphasis should also be placed on education and
technical support through such organizations as the U.S. Agency for
International Development (USAID) that would concentrate on best
practices for meeting elements of trading partners' commitments.
Related compliance issues should be elevated to the highest levels of a
counterpart's government to facilitate prompt attention and resolution
of the issues brought forward by industry and others.
Q9. Mr. Bhatia, you recommend increasing funding for existing
government standards programs. Which programs require increased funding
and how much more funding do they need? Also, what additional
activities need to be undertaken with this additional funding?
A9.
NIST Standards in Trade (SIT) Workshops: Recommend at
least doubling the funding (and staff, as appropriate) to
accommodate at least 3-4 additional programs per year. UL would
like to see sufficient funding that permits 3-4 workshops each
year focused on new sectors/regions and an equal number of
workshops that build on previous programs. The follow-on
programs help sustain momentum built in the initial sessions.
DOC International Trade Administration (ITA)
Standards Liaison: UL recommends authorizing funds that would
enable the ITA Standards Liaison office to develop and
implement a comprehensive training program for all ITA-
affiliated staff, including those in the Commercial Service.
The pilot programs have proven successful, but they have
focused on foundational concepts, which by themselves are
insufficient. The funding should facilitate continuation of the
core 101-level programs, while enabling the development of
programs targeting specific sectors and/or specific regions and
countries. Funding should accommodate both classroom-style and
web-based training sessions. Adequate funding also means
covering travel costs for U.S. Embassy and U.S. Consulate-based
staff to participate in U.S.-based or region-based classroom-
style sessions.
Standards Attaches: UL recommends that additional
funding be allocated to DOC for additional standards attache
positions in strategic U.S. embassies. Re-instating the attache
in Saudi Arabia and adding a new attache in Korea would be of
particular interest to UL.
ANSI: Funding should be provided as outlined in the
response to question (1) above.
Answers to Post-Hearing Questions
Responses by David Karmol, Vice President, Public Policy and Government
Affairs, American National Standards Institute
Questions submitted by the House Science Committee Majority
Q1. Are foreign governments using standards in a way that is
inhibiting innovation, competition, respect for intellectual property,
and free trade in products where the U.S. is competitive, and if so,
how?
A1. As reflected in my testimony, the actions of some governments could
be seen to be anti-competitive. Since most countries are WTO
signatories, however, standards actions are almost always cast as
necessary for national security or to reflect regional or national
needs, which are recognized as permissible under the WTO TBT agreement.
It is difficult for ANSI to describe specific instances where U.S.
products have been specifically disadvantaged, however, in those few
cases that have been notified to us, it was because Europe generally
develops design specific standards whereas the United States develops
performance based standards. Specific designs can become technical
barriers to trade.
Q2. Are foreign governments using standards policy as a mechanism to
protect their domestic industries at the expense of external
competition, including competition from U.S. companies?
A2. As reflected in my testimony, ANSI does not believe that other
countries are specifically using standards policy to shelter domestic
industries However, these countries may well be attempting to advantage
their domestic producers in foreign markets through the aggressive
promotion of their domestic or regional standards, in the same way the
U.S. attempts to assist its industry by promoting U.S. developed
standards, through outreach to developing and less-developed nations.
Q3. If the answer to any of these questions is yes, what, if anything,
should the U.S. Government be doing to respond?
A3. As I indicated in my written and oral testimony, ANSI believes that
three government actions would be useful in addressing the standards
challenges we currently face:
1. Direct support for the U.S. standards system, including
support for ANSI participation in international standards
forums, support for outreach and standards distribution
efforts, and increased education and training of foreign
service and foreign and commercial service officers in
standards.
2. Increased coordination between the several U.S. Government
agencies engaged in standards activities, and their private
sector counterparts and partners.
3. Congressional endorsement of the U.S. Standards Strategy, a
document reflecting input from the private and governmental
sectors, which lays out responsible and practical strategies to
address current standards challenges that can be implements
jointly by the private sector and the government, working in
close harmony.
Questions submitted by Representative David Wu
Q1. The U.S. Standards Strategy lays out a series of ambitious
recommendations. Aside from Congress endorsing the Strategy, will there
be a follow-up document laying out how these recommendations should be
implemented? What resources will be required to implement the Strategy
and what does the Federal Government need to do?
A1. With respect to the initial National Standards Strategy, issued in
2000, ANSI maintained a web-based tracking document to track specific
actions taken in furtherance of the strategy, both by ANSI and ANSI
staff, and by government and private sector standards participants. We
anticipate using a similar system to monitor actions taken pursuant to
the U.S. Standards Strategy.
We do not believe significant new resources are needed to implement
the U.S. Standards Strategy, as most of the principles of the strategy
reflect improved or coordinated efforts where current efforts are
ongoing. However, it would be helpful if the Federal Government would
take on some additional responsibility to support outreach on
standards, in terms of making selected standards available in U.S.
Embassies, supporting additional direct outreach programs, and
encouraging better cooperation between agencies currently engaged in
promoting use of U.S. standards. We think that for approximately $10
million, a significant desktop-downloadable, U.S. standards collection
could be placed in every embassy.
Q2. What do you think are the three most important things the Federal
Government needs to do in the standards and trade arena? What role do
you think NIST should play within the Federal Government and should
NIST be doing anything differently?
A2. As I indicated in my written and oral testimony, ANSI believes that
three government actions would be useful in addressing the standards
challenges we currently face:
1. Direct support for the U.S. standards system, including
support for ANSI participation in international standards
forums, support for outreach and standards distribution
efforts, and increased education and training of foreign
service and foreign and commercial service officers in
standards.
2. Increased coordination between the several U.S. Government
agencies engaged in standards activities, and their private
sector counterparts and partners.
3. Congressional endorsement of the U.S. Standards Strategy, a
document reflecting input from the private and governmental
sectors, which lays out responsible and practical strategies to
address current standards challenges that can be implements
jointly by the private sector and the government, working in
close harmony.
Q3. We are facing an increasingly global marketplace, how do you see
U.S.-based standards organizations evolving over the next five to ten
years?
A3. U.S.-based standards developers, following the U.S. Standards
Strategy, will continue to develop market relevant and globally
relevant standards in future years, in accordance with requirements of
the WTO Technical Barriers to Trade Agreement. They will continue to
evolve to meet market requirements, as they have in the past.
Q4. Clearly, the commitment to technical assistance by the EU is
unmatched by the U.S. in its coordination and magnitude. Is it fair to
say that the EU and European industries believe that they can create a
competitive advantage in world markets by strongly influencing the
content of international standards? Will the mass marketing by the EU
of selected standards create a preference for European products rather
than U.S. products? If so, what should the U.S. be doing and why have
we waited so long to take any action?
A4. Standards can be used to facilitate trade or to create barriers.
European companies and governments, like U.S. companies and our
government, would like to see standards adopted that favor their
respective businesses and products. The Europeans have become more
aggressive in recent years, but it is not correct that the U.S. has
``waited too long to respond.'' It is more accurate to say that the
Europeans have succeeded in catching up, and are now playing the
standards game aggressively. The U.S. traditionally had been the world
leader in standards, influencing most other nations. Now there are
several centers of influence, including both Europe and China. However,
the European Commission is clearly subsidizing the voluntary standards
development system in Europe, and promotion of the European Standards
around the world. U.S. Government funding assistance of the U.S.
standardization system would help to counterbalance the EC funding
program.
Q5. Do China's laws and regulations concerning the recognition and use
of ``international standards'' comply with their commitments under the
WTO? If not, is this discrepancy a problem for U.S. industry and has
the U.S. Government taken any action to respond to industry concerns?
A5. China appears to be attempting to comply with the WTO/TBT
agreement, but at the same time is at times applying a somewhat
stretched interpretation of several WTO/TBT provisions, in order to
help domestic industry. We believe the way to address this issue is
through continuous engagement of the Chinese, and a uniform and
consistent approach when dealing with them. There must be, and is, good
coordination between the U.S. Government and the private sector
participants in the standards community.
Q6. The National Technology Transfer Act promotes the use of private
standards by U.S. Government agencies. How successfully has this Act
been implemented and what improvement could be made to the Act?
A6. We believe that the NTTAA has been a great success, and has
demonstrably and dramatically increased the number of standards adopted
by and used by Federal Government agencies. The implementation has been
good, and appears to be increasingly more effective as time passes and
participants and agencies gain more experience and understanding of
voluntary standards. We think that at some point language might be
added to require that federal agencies also use Conformity Assessment
services (Certification and Accreditation of Certifiers) from the
private sector, in the same way that the law now requires the use of
voluntary consensus standards from the private sector. Many agencies
are already using such services, but the law would encourage further
use of this tool. This is a natural extension of the law, and would
complement the use of private sector standards.
Q7. You point out that the U.S. standards community does not have the
resources to match the investment of the EU. You recommend that the
Federal Government provide funding for research, education, and
technical support and for representation at international standards
meetings. How much funding is required for this agenda and, among the
numerous standards development organizations, who should receive
federal funding?
A7. As stated above, we believe an initial amount of $10 million would
fund the set-up and implementation of an on-line standards resource in
the U.S. embassies around the world, and perhaps five million dollars
per year beyond that for maintenance costs. This could be paid to ANSI,
since a standards collection is available from ANSI, but a large
portion of the funding would be passed through to the standards
developers, both ANSI accredited and not, who own the various
collections of standards hosted on ANSI's website. This way the funding
would go to those groups whose standards were most sought after and
used, rather than a more arbitrary funding formula.
Q8. Over the past 10 years what has been the trend of participation in
U.S. standards setting activities? If decreasing, why do you think
there has been less participation and what does this mean for U.S.-
based standards organizations in the long-term?
A8. Unfortunately the trend appears to be one of decreasing
participation. We believe this is a result of number of factors,
including the downsizing and merging of corporations over the last ten
to fifteen years, the retirement of experienced standards participants,
without such participants being replaced, the lack of understanding of
the strategic importance of standards in company executive suites, and
the general move to cut cost where the activity cannot be shown to
contribute directly to the bottom line. We believe that this trend must
be reversed, or U.S.-based standards developers will have increasing
difficulty producing the high quality standards that the U.S. is known
to produce.
Q9. As we are trying to engage the Chinese in international standards
committees, I understand that they have had trouble obtaining entry
visas for meetings in the United States. What is the problem?
A9. Yes, we are fully engaging the Chinese in international standards
activities and forums. There have been some recent problems with visas,
which apparently arise from a number of causes and are being addressed
aggressively by ANSI, working cooperatively with our government
partners in the Departments of State and Commerce. Some of the problems
can be traced to the fact that applications were not made with
sufficient lead time by the Chinese delegates involved. Other problems
apparently were a result of slow processing of the applications by the
Chinese authorities involved in processing the applications internally.
Still other problems apparently arose from delays in the processing of
applications by the relevant U.S. agencies and offices. All of these
problems are being addressed as appropriate. The Department of State
has been responsive in assisting ANSI address the problems, where they
had the ability to assist.
Appendix 2:
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Additional Material for the Record
Deere Responses to the Department of Commerce Workshop Questions
Deere provides a broad variety of equipment for off-highway
applications in markets around the world. The responses to the
questions posed by the Department of Commerce are often different based
upon the particular type of equipment. We differentiate between
Agricultural Tractors, Agricultural Harvesting Equipment, Construction
and Earthmoving Equipment and Grounds Care machines. Even on a global
basis, the markets for this type of equipment is relatively low volume
and capital intensive so the ideal situation for us is a portfolio of
globally accepted standards and harmonized regulations by product type
where compliance would allow us to market our equipment anywhere in the
world without modification and we could self-declare our compliance.
Any unique requirement, whether a standard, regulation or test adds to
our and therefore our customers cost and is something we strive to
avoid. As a result, we have been active in trying to create standards
portfolios in ISO to best meet both technical and political
requirements and minimize trade related issues. Based on equipment
types, not all ISO portfolios provide complete machine family coverage
or are current with the latest technology. In responding to the
questions below, we will highlight those differences in more detail.
One other point is worth mentioning up front. The Off-highway Heavy
Equipment industry, in comparison with other industries such as
Aerospace or Automotive is lightly regulated and as an industry, we
prefer it that way. We have a long history of involvement in voluntary
standards activities as a means of self-regulation to meet societal
concerns including safety health and the environment. We have been
actively involved in standards development at both the national and
international level for more than 50 years. For that reason, many of
our responses are based upon real experience within the standards
system.
1. What are the highest priority standards issues facing your
industry?
There are two areas of concern: First are the horizontal type
standards proposals using a common approach or setting requirements on
broad, dissimilar types of off highway equipment. Examples include
Environmental type standards (and Regulations) on Engine Emissions,
Fuels, Environmental Noise, and ``End of Life'' standards that place
additional burdens on manufacturers. While we are not opposed to goals
and objectives of some of these initiatives, we have concerns that some
proposals will not yield the desired results and some timetables put
our industry at risk of survival in terms of our abilities to recover
the cost of the R&D investment while remaining competitive in the
marketplace. The impacts will be substantially higher product cost to
the consumer and with little direct value perceived by the customer,
even though society in general may benefit. We would prefer a more
vertical product oriented approach to standards and regulation so the
solutions can be more effectively tailored to product use.
The second concern is the pace of standards development covering
use of emerging technologies. For example, the development of
intelligent agricultural systems is far out-pacing the development of
standards for such applications. The concern is not about the
technology, it is about the availability of expert resources and the
pace of standards development to fill gaps in the portfolio. Our
inability to keep pace with voluntary standards may give rise to
regulatory proposals.
2. Are there adequate national and/or international standards to
satisfy your industry's trade/export-related needs?
For Agricultural Tractors: No. International standards are either
lacking, unacceptable due to being design specific as opposed to
performance based, or are biased to the European approach based on the
European regulations for Agricultural Tractors. Tractors made to
existing U.S. National Standards are at risk in trade due to
politically motivated preferences for European or ISO references.
For Ag Harvesting equipment, the International portfolio is
improving but not yet complete, with most of the work being done
between CEN and ISO utilizing the Vienna Agreement.
In the Earthmoving equipment sector, the portfolio of ISO standards
is meeting most of the needs and doing a good job of keeping up with
changing and emerging requirements.
3. Does your industry experience standards-related problems in
specific countries or regions, or do these problems affect multiple
regions? What is the definition of problem?
Yes and Yes. We have standards related problems regarding road
regulations across Europe for all types of equipment. Likewise we are
having country specific problems forcing machine modifications in
countries such as Japan and Australia to satisfy specific road
regulations. A harmonized approach to on-road use of off-highway
equipment would save millions. From a regional perspective, the
European Union creates the biggest challenge due to the design specific
regulations that are imposed, or with requirements that make sense in
densely populated Europe but are not relevant in other market areas
around the world.
Another problem is that some regions of the world have been
reluctant to adopt ISO standards, preferring instead to adopt unique
country or regional requirements. This is complicated by the fact that
the EU and its member states fund an active campaign to promote their
Directives and standards, seeking preference for European made products
and the U.S. has no equivalent effort.
4. Do your industry's problems result primarily from the technical
requirements contained in standards or technical regulations that adopt
such standards? Please describe specific examples where the technical
requirements resulted in market entry problems in your industry.
Both. Technical differences cause problems and expense regardless.
For example, in the European Union the regulations limit the width of a
machine to 2.5 meters. This is an old approach Directive. The John
Deere 8000T (Track) machine width exceeded the restriction by 50 mm.
Even though the width was of no consequence in other markets around the
world, the machine had to be redesigned to satisfy the EU requirement
or individually homologated with each EU member body. Additional
examples include the height from the ground restrictions on headlight
installations for European tractors, ladder step height on self-
propelled harvesting equipment such as combines that are also different
than the same requirement for tractors. The European requirement for
non-rotating guards and guards that must be fixed or require a tool to
open continue to contentious issues as far as global relevancy of the
requirement is concerned.
Another very current example involves CEN 474-3 Loaders, currently
under revision. In the revision the secondary exit opening is being
reduced from the dimensional criteria of ISO 2867. This change will
result in the secondary exit opening of compact machines (such as skid
steer loaders) currently in production and use without reported or
known problems being considered inappropriate for the EU market. This
trade barrier will permit one major manufacturer (JCB in UK) to be in
compliance because their design configuration currently meets the new
requirement. There are many other specific examples that can be cited.
5. Do your industry's problems result from how compliance with
technical requirements is assessed? Do you have examples of cases where
either the technical requirements or the assessment process resulted in
market entry problems for your industry?
Conformity Assessment requirements are an issue. The European Union
``Old Approach,'' which still covers Agricultural Tractors mandates
third-party certification and ``Type approval'' for products to enter
their market. Australia has recently started to require ``risk
assessment'' decisions to be documented and approved before products
can be offered for sale. Taiwan has proposed mandatory ISO 9000
certification for Companies who want to sell in their market. Several
South American countries are considering similar requirements.
We believe strongly in the principle of Supplier's Declaration of
Conformity or SDOC. This applies to all of our products as well as our
internal processes. We've spent nearly 167 years building our brand
reputation internationally and see little added value in third party
assessment that is not as robust as our own testing. Any requirement
for mandatory third-party assessment by any government around the world
gets our attention. We further support the principle of one test
accepted everywhere and offer the acceptance of OECD tractor tests
(even though it is a third-party certification methodology) by 30
countries around the world as an example of a success story in this
regard.
6. Has your industry been able to take an effective approach to
address international standards issues? What steps have produced the
most benefit? Could other industrial sectors benefit from using these
approaches?
The Construction and Earthmoving Equipment industry sector has for
years been actively participating and leading the creation and adoption
of ISO standards for Construction and Forestry equipment. As a result,
that industry sector has a portfolio of ISO standards in place. This
approach has been very effective and has included the EU member states
in the process. The key to effectiveness has been the commitment of
subject matter experts to key committees (TC 127 and its subcommittees
and working groups), staying involved on a continuous basis and taking
leadership roles occasionally to keep the agenda moving. The only
problems we've experienced with this approach has been since the
development of EU New Approach. The EU members often take a position
that the ISO standard should mirror the regional requirements of the
EU. If they are unsuccessful, they adopt ``amended'' ISO standards with
regional differences or they create CEN standards because the ISO
standards will not meet their regional requirements. This is done after
the global community has rejected the EU proposals as not performance
based but design based or purely regional opinions. The EU process for
creating ``amended'' ISO standards or CEN standards is limited to EU
member bodies and prohibits review or comments from other industry
experts outside the EU member bodies during development. In spite of
this concern, which we have been attempting to address with both CEN
and ISO through ANSI, this is an excellent model for other sectors to
emulate.
On the other hand, the agricultural machinery sector has not been
very serious in the development of globally acceptable international
standards. Differences in regional farming practice led to the
development of regional or national standards. Within the last few
years however, globalization of markets, economic pressures and
industry consolidations have made a portfolio of globally accepted
standards for Agricultural Equipment an important priority. Just
recently changes have been initiated in the industry SDO (ASAE) to
adopt procedures for the national adoption of ISO standards. In
addition, the SDO standards committee structure has been reorganized in
order to allow for the integration of the U.S. TAG with the associated
ASAE committees. While it is premature to evaluate the benefits, it is
expected to improve focus on the development of an international
portfolio. The approach is now similar to the Earthmoving equipment
model and certainly could be applied to other sectors. Again, the key
is committing subject matter experts from industry to participate but
this has become somewhat problematic as the economic conditions within
the industry and consolidation of equipment producing companies has
reduced the pool of resources as well as the economic support for the
standards development organizations.
7. Has your industry been able to take an effective approach to
address national standards issues? What steps have produced the most
benefit? Could other industrial sectors benefit from using these
approaches?
Over the years our industry has gotten good service from the SDOs
we've chosen to use in the U.S. national arena. The Society of
Automotive Engineers (SAE) and the American Society of Agricultural
Engineers (ASAE) have been our primary SDOs, with ASTM, ASME, NFPa,
IEEE and others playing lesser more focused but none-the-less important
roles. The American National Standards Institute (ANSI) also plays a
key role. Populating key committees with subject matter experts and
taking leadership roles has been most productive in producing the
standards that meet our business needs as well as those of society in
general. Needs change however, and now, with few product offerings
being produced exclusively for national markets only, national
standards are becoming less relevant for the reasons implied in the
opening paragraph. Building products to standards acceptable in more
markets just makes good economic sense. That said, the ability of
International standards bodies (ISO and IEC primarily) to develop or
maintain standards fast enough to keep up with technology and
technology application development is not good enough to eliminate a
role for other standards developers. Therefore we will continue to
support some key nationally based standards developers and, where their
documents are globally accepted and utilized, support them as
internationally acceptable.
We also believe strongly that the American National Standards
Institute (ANSI) plays a strategic and indispensable role in addressing
both national and international standards issues. As a private sector
federation of standards producers (SDOs), users (Industry and
Government) as well as consumer interests, ANSI represents a
consistently available forum for discussion and debate on standards
issues by a broad cross section of stakeholders, and the one best place
to develop a single U.S. position on international issues. As our
national member body to ISO and IEC, they are both a source of
intelligence for global standards issues and represent the only channel
for direct representation of U.S. positions on key international
standards committees. Because of our interest in globally acceptable
technical standards for the Earth-moving industry, we found value in
ANSI membership relatively early in our involvement with standards.
Now, with an even greater array of our industry's products impacted by
a globally relevant and acceptable technical standards portfolio, we
see even greater value in ANSI participation.
8. Do you have examples of a problem experienced by your industry
where the Federal Government has been effective in resolving the
issues? What steps taken by Federal Government officials were effective
in resolving the issue, and why were they effective? Would such steps
or approaches be applicable in other cases or were their success unique
to a specific problem? What steps were ineffective or less effective,
and why do you think that this was so? Was it the unique nature of the
problem, or would such steps have been equally ineffective in most
cases?
Deere (and the off highway heavy equipment industry) has been and
continues to be supportive of the TABD process. TABD brings industry
leaders from the U.S. and Europe together with government officials
from both continents to identify priority issues around standards and
regulatory harmonization, then set timetables and provide project
management oversight for quick resolution to improve trade and
commerce. Our experience has shown that government to government
discussions, when focused on the right issues and aligned with standard
and regulatory discussions at the working level, can clear away the
often bureaucratic obstacles that slow down or stall problem resolution
at the industry level.
TABD discussions initiated efforts to harmonize requirements and
timetables for Diesel Engine Emission requirements between the U.S. and
the EU with some success so far. Another example of success from
government involvement was the postponement of Metric labeling
requirements that were to be imposed by the European Union until 2009.
There have been many others.
We believe that to overcome systemic differences in approaches to
standards and regulation between the U.S. and our overseas trading
partners requires more government understanding of Industry issues and
better coordination of strategies to protect U.S. based company
competitiveness abroad. However, success will only come from
understanding and respecting the differences between the sectors. As
indicated above, even within one definition of industry sector (like
Off-highway Heavy Equipment) one size does not fit all when it comes to
standards and regulations. Requirements vary by product, their intended
uses by customers and the environment where they are used. The
differences are even more pronounced between industry sectors like
Automotive, Aerospace, Information Technology or Telecommunications.
Too often we seem to want a ``one size fits all'' approach with a
result that satisfies no one.
9. What actions would you recommend the Department undertake? Would
your industry be willing to help to improve the situation encountered
with respect to problems associated with standards and conformity
assessment?
Our experiences to date with the responsiveness of the DOC, the ITA
and the USTR have been positive. Our frustrations stem from the lack of
similar responsiveness from other regulatory agencies such as EPA, MSHA
and OSHA to trade related issues. Interagency coordination must improve
if we are to have any hope of success in keeping U.S. manufacturing
competitive and the global playing field level in terms of standards
and regulations. We believe it will take a commitment to coordination
at the Cabinet level to substantially improve cooperation.
Another issue is the depth of understanding of industry sector
differences within the Agencies. As indicated above, different sectors
and even different product oriented sub-sectors have different needs in
terms of problem resolution relating to standards, regulations and
conformity assessment. The Department may need to consider more
specific focus and/or training of its resources to more effectively
provide response to issues.
A third issue is a reactive mindset as opposed to a proactive one.
Industry, driven by performance requirements to keep investors happy,
tends to avoid problems through pre-emptive action. Government seems to
be set up to respond only when problems occur, not to prevent them from
occurring. We would recommend working more closely with industry,
relative to standards, regulations and conformity assessment to head
off problems more effectively.
We believe our industry has a very positive track record, providing
resources and working both nationally and internationally to resolve
our own problems when it comes to standards, regulations and conformity
assessment. We are only calling on government to assist us in knocking
down barriers or resistance we have been unsuccessful in resolving by
ourselves. Consistent with our track record, we are certainly willing
to cooperate with the DOC and other key agencies to improve the
effectiveness of U.S. influence in standards and conformity assessment
in both the national and international arena.
Statement of William Primosch, Senior Director
International Business Policy
National Association of Manufacturers
On behalf of the National Association of Manufacturers, I thank the
Subcommittee for providing the opportunity of submitting a written
statement for the record on how the United States should respond to
trade barriers arising from technical standards in Europe and China.
The NAM is the Nation's largest multi-industry trade association,
representing small and large manufacturers in every industrial sector
and in all 50 states. In recent years, our members have expressed
increasing concern about the impact that international standards and
government-mandated technical requirements, and their application, have
on companies' ability to market their products and services abroad and
access foreign products here at home.
As the Senior Director for International Business Policy, I have
responsibility for helping members address these concerns and
coordinating a special NAM Working Group on International Standards and
Regulatory Policies. I also serve on the Board of Directors of the
American National Standards Institute (ANSI) and the U.S. Government's
Industry Trade Advisory Committee for Standards (ITAC 16).
Importance of Standards and Technical Regulations in Trade
Technical standards play an essential role in the manufacturing
sector, ensuring inter-operability, consumer acceptance and fulfillment
of health, safety and environmental requirements. Standards facilitate
the sale of manufactured products within the national economy and in
foreign markets around the world and enable our companies to achieve
enormous production efficiencies through the operation of global supply
chains.
About two-thirds of all U.S. exports and imports are manufactured
goods so standards play a vital role in our nation's international
trade. When standards and technical regulations become impediments to
trade, this is a concern for not only the manufacturing sector but also
the broader U.S. economy.
The WTO Agreement on Technical Barriers to Trade (TBT Agreement)
established disciplines aimed at ensuring that countries do not use
standards, technical regulations and their application through
conformity assessment procedures to create unnecessary obstacles to
international trade. The TBT Agreement includes a number of provisions
important for U.S. manufacturers, notably in Article 2 relating to the
preparation, adoption and application of technical regulations by
central government bodies. For example, the agreement specifies that
technical regulations ``shall not be more trade-restrictive than
necessary to fulfill a legitimate objective.'' Also, where
international standards exist or are imminent, the agreement requires
that these standards be used instead of unique national standards,
unless justified by specific reasons. Another useful guideline in the
agreement is that WTO members are expected to specify technical
regulations based on product requirements in terms of performance
rather than design.
The TBT Agreement has helped to prevent egregious attempts by
governments to use standards and technical regulations as tools to
limit market access and protect local industry. But problems, often of
a serious nature, persist. Our members encounter trade barriers related
to standards, technical regulations and conformity assessment
procedures in markets around the world, including with our NAFTA
partners. However, problems in China and the European Union are of
special concern because of the volume of trade affected and the
prospect that these problems will worsen in the years ahead.
China
In little over a decade, China has emerged as one of the largest
global producers of manufactured goods and one of the largest global
traders. In 2004 China ranked third in world trade, with exports and
imports totaling $1.2 trillion. China benefits enormously from the
international standards system. By manufacturing to international
standards, Chinese products are accepted around the world and are now
integrated into the global supply chain of many U.S. retailers and
multinational manufacturing businesses.
Chinese exports to the United States amounted to $197 billion in
2004 and, if current trends continue, will increase to around $250-$270
billion in 2005. U.S. exports to China, on the other hand, amounted to
only $35 billion in 2004. Even if U.S. exports grow at the high end of
projections to $45 billion in 2005, this would still leave a trade
deficit of $205-$225 billion. In 2004, U.S. products accounted for only
eight percent of China's total imports. In comparison, Japanese
products accounted for 17 percent of China's total imports and European
products, 13 percent.
It is in this context of a large trade imbalance and modest market
penetration that U.S. manufacturers view growing problems relating to
standards, technical regulations and conformity assessment procedures
in China. Our members are concerned about the impact that these
problems are having on market access now and how they will affect
market access to the world's fast-growing large economy in the future.
Several kinds of problems have come to our attention.
China is creating unique national standards. One
prominent example was China's attempt to set a unique national
standard for so-called WIFI or WAPI technology (WLAN
Authentication and Privacy Infrastructure) different from
international standards. As part of the requirement, U.S. firms
would have had to partner with selected Chinese companies and
share proprietary technical product specifications. China
postponed implementing the standard after strong protests from
the U.S. Government.
Obtaining the China CCC quality mark is difficult.
China has established a cumbersome and expensive system for
obtaining the China Compulsory Certification mark (similar to
the EU's CE mark) as an indication that regulatory requirements
have been met. Only Chinese testing firms can certify for the
CCC mark, and Chinese inspectors must inspect overseas
factories.
Chinese standards bodies lack transparency. Unlike
U.S. standards development organizations, Chinese SDOs do not
allow participation by foreign stakeholders and publish little
information on the standards development process until it is
nearly complete.
Market Access for U.S. testing firms is restricted.
U.S. testing and certification companies cannot operate in
China. Products must be tested by Chinese companies, often at
higher charges and with extended delays that raise costs for
manufacturers.
A broader and more fundamental concern is that China seems to be
pursuing a deliberate strategy to establish standards that gives
competitive advantage to Chinese technology and domestically produced
manufactured goods over technology and products from the United States
and other industrial countries. Efforts to establish a unique WAPI
standard is seen as one example. Others include Chinese promotion of
third-generation mobile telephone standards, use of Linux systems over
Windows operating system and work on radio frequency identification
tagging and other information technology standards.
Since China is becoming both the largest producing and consuming
market for many types of products (e.g., mobile phones, computers,
telecommunications equipment, cars and power generation equipment), it
has the potential to exert strong market power. If the Chinese were to
succeed in establishing unique Chinese national standards and promote
these standards internationally, this could have a major impact on
market access for U.S. technology and products, particularly in high-
technology sectors.
European Union
U.S. manufacturers confront a different set challenges with the 25-
member European Union (EU) trade community. Concerns about the EU
generally relate to four issues:
The EU's top-down approach to setting standards,
which differs from our more open bottom-up, market-driven
system, and its restrictions on access to standards-setting
bodies.
Approaches to health, safety and environmental
regulation that diverge from those in the United States, and
the expansion of products subject to regulation.
Its influence in international standards bodies, such
as the Organization for International Standardization (ISO) and
International Electro-Technical Commission (IEC), in promoting
standards more closely aligned to its own.
The generous financial support for outreach programs
on standards and regulation to important emerging markets
(e.g., South America, China and other newly industrializing
Asian countries) and its growing influence on standards and
regulatory policies of these countries.
Top-Down Approach to Standards-Setting
As part of its effort to create a single European market in which
products can move freely among member states, the EU has favored a more
centralized, top-down approach to standards-setting that differs
fundamentally from the U.S. system. The EU encourages European industry
to work through a small number of standards development organizations,
of which CEN and CENELEC are the two most prominent. In this way the EU
is able to develop community-wide standards that are used throughout
the EU and avoid the proliferation of national standards that may be
incompatible. The United States, on the other hand, has over 400
recognized standards development organizations based on sectoral
interests.
Some U.S. manufacturers, particularly large multi-nationals with
well established operations in Europe, find that they can participate
effectively in the EU system and protect their interests. Other
companies, notably small firms without a manufacturing presence in
Europe, complain that their access to the standards-development process
is severely limited and that the process lacks transparency. U.S.
standards development organizations tend to be sector-based and more
open to participation of all stakeholders, whether foreign or domestic.
Many manufacturers, both large and small, see the EU standards systems
as biased to the standards preferences of European industry.
Divergent Approaches to Product Regulation
Overall European industry is more highly regulated than industry in
the United States. A particularly difficult challenge for U.S.
manufacturers, however, is the growing divergence in regulatory
approaches. Divergent approaches increase manufacturing costs because
manufacturers must comply with different national regulations for
producing and selling their products. Divergent regulations can also
create trade barriers that restrict market access or block it
altogether. Here are four examples.
The EU's Restriction on Hazardous Substances in
electrical and electronic equipment (RoHS) will ban the use of
lead in 2006 in most electrical equipment and electronic
components regardless of risk. The United States effectively
employs risk assessment tools to protect consumers and the
environment and allow continued lead use. A number of U.S.
manufacturers have told us that they will have to stop
exporting to Europe because they are unable to manufacture
their products without lead or cannot obtain inputs that are
lead-free.
The EU is considering a much different approach to
testing and registering potentially hazardous chemicals than we
have in the United States. A new proposal now before the
European Parliament and EU Council of Ministers called REACH
(Registration, Evaluation and Authorization of Chemicals
Directive) would establish an expensive, complicated process of
registering and testing chemicals that experts say will not
result in greater protection of health and the environment but
will limit trade and industry competitiveness. Some small U.S.
chemical manufacturers have told us that they would have to
stop exporting to Europe because the regulatory costs would be
so great.
Despite years of discussion in the Transatlantic
Business Dialogue and official channels, the United States and
Europe have made little progress in harmonizing auto safety
standards although safety goals of regulators are quite
similar. As a result, U.S. and European auto makers must design
and build vehicles that have significantly different technical
requirements, raising production costs and making the companies
less globally competitive.
The EU continues to espouse a non-science-based
``precautionary principle'' in restricting certain kinds of
products, such as products containing genetically modified
organisms (GMOs) and hormone-treated beef, even though no
adverse health or environmental effects can be proven.
EU Influence in International Standards Bodies
Another concern of U.S. manufacturers is that European countries
appear to be more successful in promoting European standards in
international standards bodies, particularly the ISO and IEC. Too
often, some companies allege, ISO standards are more closely aligned to
European standards than to those used in the United States. The fact
that the ISO operates by a ``one-country, one-vote'' rule is cited as
giving EU members unfair advantage. The voting record in these
organizations does not reflect a pattern of ``bloc'' voting but the
perception nonetheless exists that EU members are working together to
promote European standards in these organizations. Another practical
advantage that European countries have in the ISO and IEC is that the
two organizations are located in the heart of Europe and European
governments support the budgets of European standards development
organizations, thus facilitating more active European participation.
The burden of financing U.S. participation in the ISO and IEC falls on
the private sector.
EU Support for International Outreach on Standards
Finally, U.S. manufacturers note that European governments and the
EU's European Commission provide generous funding for international
outreach to promote European standards and regulatory approaches in
emerging markets, such as China, South America, North Africa and the
Middle East. EU and national government funding pays for technical
assistance, travel of foreign standards experts to Europe and the
placement of European standards abroad. The prospect that emerging
markets may be considering adoption of EU regulatory approaches, such
as REACH and RoHS, is a matter of particular concern because they could
significantly restrict market access for U.S. manufactured products.
The NAM does not have a detailed breakdown of European funding for
outreach but knows that it runs into the tens of millions of dollars
and vastly exceeds the funding available to U.S. agencies (e.g., NIST
and USAID) for such programs.
Recommended Responses--the New ``United States Standards Strategy''
Standards and regulatory developments in China and the EU call for
a strong U.S. private sector and government response to ensure that
U.S. economic interests are protected. Under the leadership of the
American National Standards Institute (ANSI), some 50 U.S. business,
government and non-governmental organization representatives
participated in a review of the 2000 National Standards Strategy. I was
a member of the review committee and chaired the subgroup on
international issues. Reflecting on standards developments over the
past four years in the United States and abroad, including those in
China and the EU, the group substantially revised the strategy and
renamed it the ``United States Standards Strategy'' (USSS) with a view
to emphasizing the U.S. approach to developing standards for the global
marketplace, and not solely for the national market.
The USSS, which is still in the final review process, calls for
action in four areas that are relevant to China and EU standards issues
identified in this statement.
Actively promote the consistent application of
international recognized principles in the development of
standards, notably those contained in the WTO TBT Agreement.
Encourage common governmental approaches to the use
of voluntary consensus standards as tools for meeting
regulatory needs, thus reducing the possibility of regulatory
differences creating trade barriers.
Work to prevent standards and their application from
becoming technical trade barriers to U.S. products and
services, taking a vigorous pro-active approach that recognizes
the growing importance of standards for market access.
Strengthen international outreach programs to promote
understanding of how voluntary, consensus-based, market-driven
sectoral standards processes can benefit businesses, consumers
and society as whole, in recognition that more needs to be done
by both the government and private sector to communicate the
U.S. perspective on standards.
We believe that, when finally adopted, the USSS will provide a
highly useful guide for developing responses to market access concerns
relating to standards not only in China and the EU but also in other
key foreign markets.
The Subcommittee's hearing provides a timely opportunity to educate
Members of Congress, government agencies, the business community and
general public on the importance of international standards and
regulation for trade and the need to ensure effective public and
private sector support for the U.S. standards system and its role in
the global marketplace. We applaud the Subcommittee for taking the
initiative on this matter.