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China and Huawei have proposed a “redesign” of the internet to the International Telecommunications Union (ITU), the international body that oversees global communications, according to a recent Financial Times report. Ostensibly, the change better incorporates new technologies enabled by 5G capabilities. Systems engineers caution, however, that the proposal would transform the internet from the current free and open architecture to one more capable of being controlled by governments.

The “New IP” proposal is the most recent offensive in the battle over the evolution of the architecture of the internet. While its outcome may determine global leadership in high technologies, I want to focus here on how this struggle is playing out, rather than the particulars of the Chinese white paper.

The proposal is an attempt at “standard setting,” a little understood and even less appreciated dimension of international engagement. Neglect is dangerous as standards can shape — if not predetermine — critical outcomes. Japan, like other countries, must pay more attention to international standard setting to protect itself in a world of greater integration and accelerating technological change.

Standard setting is largely ignored, even though it has been a critical enabler of economic growth and globalization. Standard gauges allowed railroads to cross national borders; standardized plugs were essential for electric devices to be portable; standard ports were required if all the devices of the digital world were to be interconnected. The Windows operating system is the standard for most business computing systems, providing a uniform foundation for applications. Standards are, writes Hilary McGeachy a fellow at the U.S. Studies Center in Sydney, “the connective tissue between technology and the market, providing specifications for products, services and systems.”

Or, as the ITU explained somewhat more drily, they “establish norms and requirements for technical systems, specifying standard engineering criteria, methodologies or processes.” Standards allow connectivity in everything from physical trade to the bits and bytes of internet protocols. And they matter. Management guru W. Edwards Deming once noted, “If you control an industry’s standards, you control that industry lock, stock and ledger.”

Standards are generally set in one of two ways. The bottom-up, industry-led, market-driven approach — de facto standard setting — allows first movers to set standards and others are obliged to follow. Crudely put, this is something of a popularity contest and the best standard doesn’t necessarily prevail if it can’t reach critical mass, as Sony learned to its chagrin when its Betamax video tape standard was bested by VHS.

The second approach is a top-down model in which a government or international institution such as the ITU endorses a standard that is then adopted by market participants. As governments have become sensitized to the importance of standard setting, more attention is being devoted to those institutions and their activities. And, as in so many other pieces of the digital economy, standard setting has become a front line in the contest between China and the West.

A 2018 report by the U.S.-China Economic and Security Review Commission concluded that “China sees technology development as a decisive strategic resource and believes other countries’ control of key technologies is a significant strategic liability.” As a result, setting standards is “a critical part of China’s ambitious state-directed plan to achieve dominance.”

While the commission report, like all its work, is hawkish in tone, it’s not an outlier in its conclusions. A February report from a German think tank concurs, noting that Chinese efforts “have the potential to reshape the future technical standardization order, from one that is largely driven by private self-regulation to a more sovereignty sensitive one that is shaped by nation states.”

China’s behavior matches that detailed in the reports. On the domestic front, McGeachy notes that Beijing has issued more than 300 national standards related to cybersecurity and requirements dealing with the secure and controllable use of information technology.

The Standardization Administration of China is developing a “China Standards 2035” strategy to better control and direct the use of standard setting to advance national goals.

Those national efforts have an international impact because of the size of the Chinese market: Non-Chinese companies will tailor products or services to Chinese requirements so they can compete there, allowing China to create the de facto standard that U.S. companies historically generated. First movers should then dominate markets, with all the advantages that follow from leadership in new technologies.

Japan set domestic standards during the 1970s and 1980s, but they were primarily to shield companies from foreign competition, not encourage outsiders to adapt to the Japanese market. Moreover, that market was never big enough to entice foreigners to make changes to compete; China’s home market is multiple times larger.

Internationally, Chinese-led technical committees or subcommittees in the International Organization for Standardization (better known as the ISO), one of the largest standards-setting organizations, increased 75 percent from 2011 to 2019.

The head of the ITU is a Chinese, as is the president-elect of the International Electrotechnical Commission (IEC), as was the past president of the ISO. One of the two top candidates in the recent election to head the World Intellectual Property Organization was Chinese (she lost). And China is pressing its “Digital Silk Road” as part of the Belt and Road initiative to “build in” Chinese standards among recipients of its aid.

Don’t hyperventilate, however. Yu Jie, an expert on Chinese foreign policy at Britain’s Chatham House, argues that China’s primary reason for creating status is raising the quality of indigenous innovation. (That doesn’t undercut concern about setting standards de facto, and the implications for global leadership.) When it shifts focus to international forums, she notes that Chinese companies and institutions follow accepted rules.

Wang Binying’s defeat in the WIPO ballot is proof that China is not an unstoppable juggernaut. And, observes Bjorn Fagersten, author of a Swedish report on China’s standard setting, most standards are voluntary and Chinese proposals have been of low quality and therefore are not adopted.

Japan has been alert to the importance of standards, not only using them to protect its home market from foreign competition but to engage internationally as well. It has participated in the ISO and the IEC since the early 1950s, and it remains actively engaged. The Japan Industrial Standards Committee made 96 proposals for new international standards at the ISO in 2017.

Japan’s most important contribution is in promoting international standards through multilateral initiatives like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which includes provisions that regulate the digital economy. Prime Minister Shinzo Abe made digital trade a focus when he chaired the Group of 20 summit last year. Both efforts are works in progress, but they are a start.

Tokyo has also been pressing for reform of the World Trade Organization to modernize that institution and facilitate standard setting on previously ignored digital concerns. That, too, has a long way to go. Importantly, however, all those initiatives underscore the nexus of trade, rule-making and national security, which is key to understanding the importance of this issue.

Japan should excel in this field. Its trade bureaucrats aggressively promote rule-making at home and abroad. There is a more congenial relationship between government and business in the regulatory arena, and less inclination among Japanese businesses to see the government as an antagonist as in the United States. Japan’s diplomacy in the Indo-Pacific and beyond should work harder to promote dialogue with partners like Australia and Europe, along with and inside regional standards organizations, developing standards as well as building capacity among Southeast Asian nations.

Japan’s expansive definition of national security, one that has included economic concerns, well prepares it to understand the significance of standard setting. With its new emphasis on national economic statecraft, the National Security Council is well suited to ensure that Japanese diplomats and bureaucrats are deeply engaged in these efforts. They are not just setting standards but laying the foundation for the future.

Brad Glosserman is deputy director of and visiting professor at the Center for Rule Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions.”

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