A1110? 3mS0

NBSIR 84-2886

Benefits Perceived by U.S.

Industry From Participating in

International Standards Activities

Patrick W. Cooke

U.S. DEPARTMENT OF COMMERCE

National Bureau of Standards

Office of Product Standards Policy

Gaithersburg, Maryland 20899

September 1984

U.S. DEPARTMENT OF COMMERCE

100

.1156

84-2336

1984

NATIONAL BUREAU OF STANDARDS

NBSIR 84-2886

BENEFITS PERCEIVED BY U.S.

INDUSTRY FROM PARTICIPATING IN

INTERNATIONAL STANDARDS ACTIVITIES

Patrick W. Cooke

U.S. DEPARTMENT OF COMMERCE

National Bureau of Standards

Office of Product Standards Policy

Gaithersburg, Maryland 20899

September 1984

U.S. DEPARTMENT OF COMMERCE, Malcolm Baldrige, Secretary

NATIONAL BUREAU OF STANDARDS. Ernest Ambler. Director

Table of Contents

Page

Abstract 1

1. Introduction —•— 1

2. Background 2

2.1 Relationship to U.S. Competitiveness in Export Trade 2

2.2 Objectives 2

2.3 International Organizations Involved in Standardization 3

3. Survey Process 4

4. Profile of Companies Surveyed 4

5. Interview Proceedings 5

6. Survey Findings 5

6.1 Major Findings 5

6.2 The Motivating Factors - Why Get Involved? 6

o Technical Trade Barriers

o Competitive Strategies

o Market Influences —

o Technological Advancement 8

6.3 The Benefits - Diverse Opportunities for Participants 8

o Informed Readiness

o Market Enhancement 9

o Economies in Operation 9

6.4 Disadvantages 9

7. Other Studies Related to Benefits Perceived by Industry from

Standards Participation 9

8. Conclusions and Recommendations 11

8.1 Conclusions 11

8.2 Recommendations 12

9. Future Studies 13

10.

References 13
Tables

Table

Table

Table

Table

Characteristics of Companies 15

Needs Cited by Companies 16

Benefits from Participation 17

Disadvantages Cited by Companies 18

- iv -
BENEFITS PERCEIVED BY U.S. INDUSTRY

FROM PARTICIPATING IN INTERNATIONAL STANDARDS ACTIVITIES

Patrick W. Cooke

National Bureau of Standards

Gaithersburg, MD 20899

Abstract

This report describes the results of a limited study to assess the

extent to which U.S. industry profits by virtue of participation in

the committee activities of international standardization

organizations. The substantial trade benefits that can accrue are identified and evaluated in terms of the needs of the firms surveyed

and the potential opportunities for new or increased foreign trade.

Recommendations are given for industry to become more aware of the

cost-effectiveness of participation and to extend the potential

benefits to other firms and industries.

Key Words: Benefits; cost-effectiveness; exports; foreign trade;

international bodies; international standards; standards

development; trade barriers; U.S. industry

1. INTRODUCTION

One of the major goals of the U.S. Department of Commerce (DOC) is to "increase

America's competitiveness in the world economy" by establishing trade expansion

as a national priority. The Trade Agreements Act of 1979 assigns

responsibilities to DOC to promote a healthy U.S. economy and increased trade

opportunities for U.S. industry. The Department has delegated to the Office of

Product Standards Policy (OPSP) in the National Bureau of Standards

responsibility for carrying out specific obligations. These include tasks under

Section 413 [1] * of the Trade Agreements Act for monitoring the adequacy of

representation of U.S. interests in international standards activities,

particularly with regard to the potential impact on the international trade of

the United States.

The Standards Code and Information (SCI) Program in OPSP carries out a number

of duties associated with the Trade Agreements Act and the GATT "Standards

Code. "[2] SCI maintains a reference collection containing information on standards and certification systems and responds to requests for information;

disseminates notifications of proposed foreign regulations which might

significantly affect trade; and operates the Technical Office for

non-agricultural products. Technical activities include analyses, research,

and assistance to government and private-sector groups in commenting on proposed or existing foreign regulations in efforts to overcome or eliminate

technical barriers to trade. As part of this activity, SCI undertook to obtain

and examine the benefits and

* Numbers in brackets refer to the literature references listed at the end of

this report.

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costs of international standardization activities to U.S. industry

participants which might provide a basis for guiding future efforts in

encouraging participation.

This report is the second in a series bearing on an assessment of the adequacy

of information and of representation in activities which might be significant

to U.S. trade. An earlier report [3] identified major export categories as defined by DOC's International Trade Administration and matched them with

reported levels of standardization activity open to U.S. participation.

Although there was no evidence of underrepresentation, the emphasis was skewed

in the areas of newer technology and those product categories having high

export value. Subsequent studies in this series will examine and compare

standards-related requirements for various product categories in selected

foreign countries.

2. BACKGROUND

2.1 Relationship to U.S. Competitiveness in Export Trade

The U.S. share of world exports of manufactured goods has declined

significantly since 1980. The U.S. merchandise trade deficit for 1983 was a record $69.4 billion, and projections for 1984 indicate that the trade deficit

will exceed $100 billion. [4] These figures imply the loss of an estimated 1.3

million export-related jobs. According to Department of Commerce (DOC)

studies, two of every five jobs lost in the latest recession were due to

declining exports. Economic conditions have made clear that increases in sales

abroad are essential to American workers, corporations, and their communities.

To compete effectively in foreign markets, American companies usually must

learn to cope with unfamiliar situations. Foreign exchange, political risks,

regulations, and differences in language and culture can all pose obstacles to

exporters. In this environment, standards and related areas of technical

regulations, such as testing and certification, may have considerable impact as disincentives or barriers to U.S. trade. But such standards may also play a facilitating role in the increasingly international framework of the global

marketplace. Standards development at the international level has the

potential for many opportunities beyond the international agreements on technical issues reached in a particular field. Examples of these

opportunities include developing foreign contacts and information gathering.

Because international standards are adopted by many countries and used in their

inspection, approval, and certification systems, they tend to govern product

acceptance throughout much of the world.

2.2 Objectives

Information regarding the benefits which demonstrably or potentially accrue to

the relatively few U.S. firms [5] that have made the investment to participate

in international standardization has not previously been collected, assessed or disseminated. This study was therefore initiated to determine benefits that

may be realized from involvement, often at the cost of a significant financial

investment for some smaller companies. Specific objectives for the project

were:

1. To ascertain (quantitatively insofar as possible) how a limited number of

U.S. firms benefit or are injured by virtue of their participation in

international standards activities.

2
2. To identify any possible trends or relationships between participation in

international standards activities and trade benefits which might be

generally applicable to other industries and firms.

3. To identify potential opportunities for new or increased trade by

extrapolation of findings to other industries and firms not now involved

(or perhaps not optimally involved) in international standards

activities.

Interviews and discussions with corporate personnel having direct

responsibi 1 ity and involvement in international standards work was the source

of all project information. Companies that are not active in international

standards work or those who at one time were active and are no longer involved

were not interviewed.

2.3 International Organizations Involved in Standardization

More than 200 international organizations promulgate international standards. [6]

Of these, the International Standards Organization (ISO) and the International

Electrotechnical Commission ( I EC ) are perhaps the most widely recognized.

Standards are also developed and issued by private regional organizations, such

as the European Tyre and Rim Technical Organization (ETRTO), and regional

treaty organizations, such as the Pan American Standards Commission (COPANT).

International and regional standards organizations adopt their own membership

rules, which may or may not permit representation by or from the United States.

For example, ISO and IEC limit membership to national standards bodies (NSB):

the American National Standards Institute (ANSI) serves in that coordinating

capacity for the United States. U.S. citizens from both the public and private

sectors participate in a large number and variety of ISO and IEC technical

committees, subcommittees, and working groups, all administered by ANSI as the

U.S. member body. Other international standards organizations may allow

participation by representatives of U.S. firms, government agencies, non-profit

associations, or diplomatic representatives.

Membership classifications include voting and non-voting; full, partial, or limited membership; and observer status. The level of membership and the

degree of activity exercised by representatives is a function not only of the

organizational rules, but also of membership fees and costs attendant on travel

to meetings overseas. These factors may be influential in acceptance of

Chairmanships of committees, subcommittees, and working groups and service as Secretariats. In general, full voting membership and active participation on committees and in working groups reflect the highest degree of interest and

imply more effectiveness in influencing results than obtainable through lesser

participation.

This report relates primarily to benefits resulting from participation at the

international level, primarily in ISO and IEC activities.

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3.. SURVEY PROCESS

In conjunction with ANSI and the Industry Functional Advisory Committee on Standards of DOC, volunteers were sought from all industry sectors to

participate in the survey. Letters were sent to TAG chairmen from industry

sectors and others with known active experience in ISO or IEC technical

committees. NBS staff members who serve on technical committees of

international standards development bodies were also contacted. Preliminary

informal telephone discussions with officials of twenty-four companies led to

final detailed, person-to-person interviews with standards officials from five

firms. In one case, at least two on-site discussions took place over a number

of months. Follow-up discussions verified specific information.

4. PROFILE OF COMPANIES SURVEYED

The five firms contributing to this study represent different industrial

sectors: electronic components, process control equipment, building products

and materials, medical devices, and outdoor powered equipment. Their

characteristics are summarized in Table 1. All have been engaged in

significant export trade for many years. Total annual sales approximate $4

billion, and all but one organization have manufacturing operations abroad. The

companies have been active in either ISO or IEC technical committees for at

least 5 years, and in some cases their representatives have served as Committee

Chairman or Secretariat. None of them covers expenses for international

standards functions by a specific line item in company budgets. In three of the

companies, expenses are charged against the Quality Assurance Department, in

another the Research and Development Department, and in the fifth company all

standards work is supported by the Marketing and Product Planning Department.

In two cases, some travel expenses are partially supported by the cognizant

industry trade association. In four of the organizations, the person

responsible for international standards activities reports directly to a corporate vice president, whereas the fifth is four levels removed from senior

management. (This is a large organization with many diverse operating

divisions.) In one of the companies, the person responsible for standards

activities frequently meets with the Board of Directors to keep them abreast of

the company's actions in U.S. and multinational standards organizations.

One of the companies has been active in international standardization

activities for over 25 years. Its philosophy is that customers should be able

to buy the company's products throughout the free world and that the product

should have the same basic design and performance characteristics wherever

purchased. For this reason, the company retains strong central control over

all product design and development functions.

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5. INTERVIEW PROCEEDINGS

Information was gathered from each of the five companies during

person-to-person interviews of at least two hours each. The interview sessions

were relatively non-structured and open-ended. An outline was followed to assure that the same topics were covered with each organization's

representati ves. The discussion topics covered the following areas:

o History and extent of participation by company

o Influences and motivations - when, why, how?

o Company organizational setting

o Identification of benefits - primary/secondary

o Classification of benefits

o Product design or application/markets/competition

o Company policy, procedures, budgets

o Accountability/commitment of management

o Expenditures for participation; justifications, budgets

o Domestic impacts (i.e., U. S. product changes resulting from adoption of

international standards)

o Domestic standards vis-a-vis international standards

o Future trends

o Problems due to participation (i.e., schedules, agendas, voting policies,

meeting locations)

There was optimism at the outset of the project that quantifiable data would be

obtainable even though professionals active in standards organizations over

long periods of time cautioned that this might not be possible. As the

interviews progressed, they reinforced a growing realization that benefits are

not readily measurable. Nonetheless, the interviewees at the same time

reinforced one another's subjective views of benefits and established a pattern

which, in retrospect, substantiated a practical set of constructs which might

have been postulated in advance.

The company experts were all exceedingly frank and open in their responses to

questions and in volunteering supporting material. Their interest in the study

objectives was high, and they all desired to be informed about the outcome.

6. SURVEY FINDINGS

6.1 Major Findings

1. All of the organizations contacted in developing this study,

including the five firms interviewed in depth, unanimously indicated

that the benefits from participating in international standards

activities are substantial, but that they cannot be quantified. There

is no truly suitable method of accounting readily available to

monitor all the costs and benefits involved. All respondents

independently emphasized that the benefits from participation in

international standardization activities, though substantial, do not

lend themselves to direct evaluation because of the elusive nature of

the activity and the variety of interfaces, particularly for

multinational corporations.

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2. The companies maintained that quantitative calculation of direct

benefits is not possible because of the wide dispersion of benefits

as well as a large number of intangible qualities. It does not

appear to be possible to attribute simple profitability, similar to

other business investment situations, because of inability to collect

(or even estimate) the appropriate revenue and cost data necessary.

One firm initially volunteered to collect cost and benefit data for

this study over a nine month period. At the final interview,

however, the company reported that it had not been feasible to

collect and report such data in any meaningful fashion.

3. The companies individually and collectively were capable of

identifying the nature and variety of a number of perceived benefits

even though quantification was not possible.

4. Even if "return on investment" figures or data on "increased sales" were available, such indices would reflect only a small part of the

value of participation as experienced by these companies. Each member

of the group stated that the intangible and other undocumented

benefits were sufficiently substantial to make continued

participation worthwhile. In addition, they maintained that their

involvement in international standards bodies was a necessary part of

their business abroad. Some indicated that it would be impossible to

calculate the extent of financial and other effects on foreign sales,

markets, product recognition and company good will that would have

resulted from lesser participation in international standardization

activities.

5. All interviewees strongly intend to continue participation in the

work of international standards bodies. In this resolve they reflect

strong support and backing of their respective corporate managements

and, in one instance, from the corporate Board of Directors.

6. Companies expressed interest in international product standards and

test methods as doubly beneficial to U.S. industry sectors, both for

permitting export on a world-wide basis and for establishment of

profitable manufacturing operations abroad.

6.2 The Motivating Factors -- Why Get Involved?

The individuals interviewed and their organizations are motivated to

participate in international standardization efforts in a variety of ways. Some

commonality of needs can be cited, whereas some reasons are quite specific to

individual organizations. Table 2 summarizes needs indicated in the five

interviews. For the discussion and analysis which follow, these needs have

been arranged into four basic, but closely related, categories:

Technical Trade Barriers (T); Competitive Strategies (C); Market

Influences (M); and Technological Advancement (A).

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- Technical Trade Barriers

The predominant perceived needs or problems were related to technical

barriers to trade. Almost one-half of the mentioned factors were in this

area. There was unanimous agreement on the desirability of obtaining

universally recognized product or test method standards so that a company

could ship its products anywhere in the world, rather than having to deal

individually with the complex array of regulations now in place in many

different countries. Other factors that contribute to technical trade

barriers are in the area of national regulations requiring type

certification, product testing and other regulatory approvals which differ

from country to country. For example, national medical device regulatory

processes differ significantly even after the adoption of international

standards. Clinical procedures, sterilization requirements, approved

compounds lists, approvals by various health ministries, etc., differ from

one country to another and from culture to culture. Similarly, for

building products most countries still have their own national tests for

evaluating fire performance and a maze of other buildings codes and

standards at the national or local level. U.S. companies exporting to

these markets are required to follow many separate testing programs

because there is no basis for recognizing equivalency among the different

test regimens of the various countries involved.

- Competitive Strategies

After concerns about perceived technical (non-tariff) barriers, the

respondents most frequently cited factors characterized here as "competitive strategies," accounting for approximately one-fourth of the

total. These reasons include defensive actions taken to counter foreign

competitors who make inroads into domestic and other markets through

cross-licensing arrangements and as vendors to manufacturers of integrated

equipment and systems. Companies have also found that domestic

competitors who are successful in export trade are frequently involved in

international standardization activities. They feel compelled to

participate too, if only to keep up with their competition, whether

foreign or domestic or both. Some firms characterized this as a purely

"defensive action" to meet or beat the competition in the area of

standards. Others stated that they need to know what others in their

business are doing. Harmonizing international standards with U.S.

standards was also considered a competitive strategy.

- Market Influences

The category entitled "market influences" includes such factors as the

need for market expansion because domestic market share was becoming fixed

and the rapid movement of large-customers (end-item users) to adopt

international standards in their procurement specifications. These

influences also require the companies to maintain product compatibility

through electro-mechanical interfaces in order to market abroad. Some of

the companies have an essential need to be aware of all user (i.e.,

customer) requirements regarding the technical application of their

products. In this regard, some users exert significant influence in

international standards activities which, in turn, eventually affects U.S.

domestic standards. One company's policy is dictated by marketing

conditions to centralize product design and development activities so that

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its customers can buy their products anywhere in the world and be assured

of the same performance characteristics. Other market influences included

the fact that a company had a long established overseas presence in

several markets. Their involvement was predicated on their concern to

protect existing overseas markets.

- Technological Advancement

The three technology-intensive companies gave state-of-the-art advances in

technology as a prime reason for being active in international standards

work. In their industry sectors, the rapidity of technology advances may

lead to the development of foreign national, regional, or international

standards which could profoundly affect trade overseas. These

organizations find it imperative to learn through participation the nature

of technological advances and their prospective impact on the companies'

ability to adapt and compete. They expect to prosper by working for

adoption of provisions favorable to their own technological approaches or by modifying their processes as may be necessary. Others may employ

strategies to slow down technology improvements via standards.

6.3 The Benefits -- Diverse Opportunities for Participants

The companies mentioned a number of advantages deriving from their

participation in international standardization. These are individually listed

by company in Table 3. As indicated above, the benefits are for the most part

intangible. Although they believe that economic gains accrue from involvement,

they were not able to document them quantitatively. For instance, they all

felt that removal of technical trade barriers broaden their available market

base for exporting and puts all suppliers on a fairer competitive basis. Other

business factors also contribute to the expansion of markets - not all market

gains can be attributed solely to removal of technical trade barriers via

international standards. Other reported economic gains result from reduced

manufacturing and design costs and the efficiencies from not operating parallel

production lines to meet multiple product designs for foreign and domestic

markets.

The individual benefits from those given in Table 3 can be classified as Informed Readiness (R), Market Enhancement (M) and Economics in Operation (E).

- Informed Readiness

The most significant advantage cited has been classified as "informed

readiness." The benefits in this category were not given a dollar value,

but the respondents held them to be invaluable to their international

business operations. These benefits include influencing the business

affairs of standards committees ( i . e . , agendas, voting, scheduling of

meetings, etc.); making contacts with key regulatory personnel in each

country "whose hoops they have to jump through;" and understanding the

regulatory climate in foreign markets. Their ability to develop rapport

with authorities along with the knowledge about regulations, approval

cycles, and regulatory agency operations, gives them a definite advantage

in gaining access to new markets. One company labeled this benefit as an "opportunity cost" which to them meant a saving because of the shortened

time to have new product designs approved and marketed overseas due to

early access to knowledge not possessed by their competition.

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- Market Enhancement

All of the companies also cited a number of benefits which are classified

as "market enhancement" because of their potential for improving product

sales. These include such subtle, yet significant, advantages as product

recognition, exchange of technical data, outlets for publicity, and the

opportunity to influence provisions in standards in favor of U.S.

products.

- Economies in Operation

Time and money are saved at many stages of design, tooling, production,

and testing because procedures are improved and simplified. Large numbers

of slightly different parts or subassemblies, for example, can be reduced

to a relatively small number of standard parts to meet all needs.

Efficiencies result in the production, stocking and marketing of products

for a wider range of foreign markets.

6.4 Disadvantages

The interviewees did point out some disadvantages that can result from active

participation in international standards work. These are listed in Table 4.

For the most part, the firms felt that they were more likely to disclose

proprietary information and also expose potential trade information to others,

possibly their competitors. The adoption of international standards also left

their markets vulnerable-even in the U.S. One company felt that too many

restrictive or unnecessary provisions in a standard tend to reduce available

design and development freedom. The use of standards provisions to solve

non-problems, address political problems, or the adoption of provisions without

a sound technical or scientific base were also cited as disadvantages which can

and sometimes do exist in the international standards area.

However, all the interviewees indicated that the benefits they have experienced

far outweigh the disadvantages and costs of participation. By aggressive

action and prudent maneuvering in standards committees, many of the

disadvantages can be negated and strategies adopted to turn them into benefits.

7. OTHER STUDIES RELATED TO BENEFITS PERCEIVED BY INDUSTRY

FROM STANDARDS PARTICIPATION

The author has been unable to locate or identify any earlier studies that have

examined the economic benefits of participation in international

standardization activities. In view of the reported difficulty of directly

quantifying the benefits from participation in such activities, it is hardly

surprising that there are wide variations in the benefit-cost ratio figures

given by various firms in the U.S. and other countries from their own "in-house" standards programs. A Canadian study, [7] for example, has reported

returns as high as $50 per $1.00 spent on standards work. Other survey results

over a wide range of companies, however, suggest that a return of $5 per $1.00

invested in standards activities is a more reasonable expectation.

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A survey [8] concerning the benefits of standardization in nearly 900

companies in France showed that about 50% of the savings were in the area of

production, with the remainder split between purchasing and stocking.

Studies [9] in the Federal Republic of Germany indicated that the overall

return on investment was in the order of 7:1 when all direct and indirect

costs were taken into account. In the USSR, the national average ratio was reported as 7.5:1, based on:

o Electrotechnical industries 35:1

o Mechanical engineering, transport,

electronics and telecommunications industries. .. .4.6 to 7.9:1

o Construction, timber & chemical industries 0.6 to 2.1:1

In 1976, the Aerospace Industries Association (AIA), recognizing the need for

undertaking an active leadership role in international standardization,

assumed the secretariat of the key international committee for aerospace

standardization. Technical Committee 20, "Aircraft and Space Vehicles," of

the International Organization for Standardization. A report issued in

1982 [10] predicts that international standards will play an increasingly

important role in the future of the U.S. aerospace industry.

In a paper presented at the Thirty-second Annual Conference of the Standards

Engineering Society, it was indicated by a Senior Standards Engineer from

Honeywell, Inc. that "many of the benefits of standardization are intangible

or at best difficult to measure" [11] and that there are unexpected side

benefits from standardization.

A book published by the International Organization for Standardization (ISO)

entitled "Benefits of Standardization" [12] discusses in general the value of

all types of standards. Various methods and concepts for applying complex

economic structures are offered for the evaluation of impact at the company,

national or international level. These might be useful to analysts seeking a quantitative approach, assuming that data are available.

Thirty years ago, the American Standards Association (now ANSI - American

National Standards Institute) conducted a series of wide-ranging surveys to

obtain data on savings derived from the use of standards by American

industry. Their first report [13] describes a body of savings based on 79

documented case studies covering 27 industrial fields. There was unanimous

agreement that standards were essential and the interviewed companies

generally recognized that savings resulted from standards work whether or not

they could be measured. The 1959 study [14] provides survey findings from

209 companies, 34 of which reported actual dollar savings ranging up to $50

saved per dollar spent on standards work.

Another paper [15] describes the development of NationalAerospace Standard

(NAS) 1524 [16] and additional cost factors based on industry-wide surveys

and specialized sources. NAS 1524 is a compilation of accepted methods of

calculating the costs and benefits of standardization and is recognized as an early guide to the application of economic analysis to standardization.

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A recent monograph [17] addresses the relationship between economics,

standardization and management in an organization. It is intended as a primer for management providing basic principles which can be tailored to

specific circumstances and requirements. Other approaches at characterizing

the benefits yielded via standardization are discussed in a 1975 text on industry standards. [18] These benefits include interchangeability, economy

of scale and information benefits.

8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions

All the firms interviewed (and the others initially contacted) have a strong

management commitment and strategy for involvement and a stake in the

outcome. They realize that standards will be published by international

organizations whether or not U.S. industry participates in their development.

If American companies express no interest or make no attempt to present their

points of view in the writing of such standards, they and their industries

will likely forgo the benefits identified by this study. In contrast, the

industries of almost all other nations, acting in what has become a fiercely

competitive international market, emphatically represent their own best

interests on every possible occasion. Even though the benefits and the costs

cannot be directly measured by dollars and cents on the profit and loss

statements, their effect is considered to be significant. All interviewees'

companies intend to maintain their involvement and active participation in

the future. However, it is apparent from discussions with the many firms

contacted and those five actually interviewed, and also from discussions with

ANSI staff members, that we do not have a good measure on how much money

American industry invests in international standardization activities. This

seems to indicate that most U.S. firms do not financially monitor their

standards work as an explicit budget item (profit center), nor are they aware

of the potential benefits that can accrue from participation in international

standards activities. Other conclusions that can be substantiated are as follows:

1. Underwriting the costs of participating is not reported as a problem area. In part, this may be due to the fact that the firms

surveyed are internationally structured with existing overseas

marketing and/or manufacturing operations. The participation

budgets are generally included in the company's other cost centers

rather than as single line items. Most often, these costs are charged to centers related to products under the heading of quality

(quality assurance) or product development and planning, but not

under research and development, for example.

2. The motives for involvement are related to meeting or beating

domestic and foreign competitors in export markets and to defend

against the strategies of competitors to influence standards

actions. These companies seek to exploit their own technological

strengths; recognize and adapt to "acceptable" developments

elsewhere; or strive to prevent adoption of "undesirable" proposals

made by others. In effect, there is considerable concern that

international standards written without U.S. participation may

adversely affect the export of U.S. goods and services.

11
3. Participation provides an opportunity to keep informed of what

others are doing and to be aware of the different cultural

backgrounds of consuming countries.

4. The interviewed companies consider the benefits of participation to

be significant even though not demonstrated in a quantifiable

sense. Adoption of international standards puts all suppliers on a fair competitive basis, thereby stimulating competition.

5. The anticipated benefits — enhanced markets, informed readiness

and economies in operation can be achieved only by continuing

(stable) representation on appropriate international groups by

committed industry experts.

These results suggest that planned company activities in standardization

programs are an effective means of producing real economies or for increasing

trade. U.S. industry should consider participation in the development of

international standards to ensure that they incorporate the viewpoint of U.S.

interests and recognize U.S. standards and engineering practices.

8.2 Recommendations

1. Participate in those committees and working groups of international

standards-making organizations where U.S. economic interests are appreciable.

2. Ensure continuity of expert representation at committee and working

group meetings to express U.S. viewpoints and technical positions

effectively.

3. Seek to discover parallels with successful experiences in domestic

standards activities that may be applicable to international

activities as possible reinforcement of the benefits of

participation reported herein.

4. Explore in future studies the successes of U.S. delegations to

various international standards bodies as related to the trade

characteristics and growth trends of the industries they serve; the

competency, skills and commitment of individuals attending

technical meetings and their impact on protecting or expanding

markets; and whether affected industries are internationally

structured or primarily national in character.

5. Supplement the findings of this study of large firms with extensive

overseas markets or manufacturing operations by examination of the

participation by small and medium size firms that do not have

manufacturing operations overseas.

6. Consider whether it is to the best interest of industry groups,

technical societies and trade associations to underwrite some of

the expenses of delegates to international standards meetings to

help smal 1 -to-medium size firms meet participation costs, which

have risen dramatically as a result of inflation and the

accelerated pace of international standards activity.
7. Provide coverage for possible new or increased trade opportunities

for U.S. businesses that result from such meetings through reports

prepared by delegates upon return from technical committee or working group meetings. Even the most subtle information on foreign markets or customs may provide an otherwise overlooked

trade opportunity for a U.S. company.

9. FUTURE STUDIES

The NBS Office of Product Standards Policy will compile further information

on the economic benefits and costs that U.S. industry has realized from

international standardization activities; hence, individual companies or trade associations are encouraged to report on their experiences in expanding

trade or protecting markets through involvement in international

standardization. Documented examples of benefits are especially desired.

Future studies in this series will include examples of information received

in response to this request. Presentation of individual case studies will

protect names of firms, individuals and products if the provided information

is identified as confidential or proprietary. The underlying precept is that

the potential economic or other benefits of involvement in international

standards development activities can be extended in many cases across company

and industry lines to the mutual benefit of all concerned.

10. REFERENCES

[ 1] Sec. 413. - Representation of U.S. Interests Before International

Standards Organizations.

[2] The Agreement on Technical Barriers to Trade (popularly called the

"Standards Code") entered into force in 1980.

[3] "Report on Major United States Export Areas and International Standards

Activities," National Bureau of Standards, Office of Product Standards

Policy; April 1983.

[4] Business America , U.S. Department of Commerce, International Trade

Administration, February 20, 1984, p. 2.

[5] The American National Standards Institute (ANSI) estimates that

representatives from between 1500 and 2000 U.S. firms make up the 2200

Technical Advisory Groups (TAG's) responsible for participation in

technical committee work of international standardization bodies. Large

corporations with multi-national interests seem to predominate in this

group of most-actively involved U.S. firms.

[6] "Directory of International and Regional Organizations Conducting

Standards Related Activities," SP-649, National Bureau of Standards,

April 1983.

[7] "Standardization is Good Business," R. P. Preston, Standards Council of

Canada; Ottowa; June, 1978, p. 7.

13
[8] Ibid., p. 9.

[9] Ibid., p. 10.

[10] "Impact of International Standardization Trends in the U.S. Aerospace

Industry," Aerospace Industries Association of America, Inc.;

Washington, D.C.; June 1982.

[11] Joshi, Mohan N. "Planned Standardization — A Key to Productivity,"

Proceedings, Thirty-Second Annual Conference, Standardization

Engineering Society, September 1983, Dayton, OH pp. 53-61.

[12] "Benefits of Standardization;" International Organization for

Standardization; Geneva, 1982.

[13] "Dollar Savings Through Standards," American Standards Association,

New York, 1955.

[14] "Company Standardization, Organization, Costs and Savings," American

Standards Association, New York, 1959.

[15] Toth, Robert B., "The Economics of Standardization: Credits vs. Debits." Standards Engineering, Vol. 24, No. 2, April 1972.

[16] Aerospace Industries Association, National Aerospace Standard 1524,

Standardization Savings, Identification and Calculation , Revision 3,

Sept. 1971.

[17] Toth, Robert B., "The Economics of Standardization — A Pragmatic

Approach," McLean, VA, 1983.

[18] Hemenway, David, "Industrywide Voluntary Product Standards", Ballinger

Publishing Co., Cambridge, MA.

14
Table 1. Characteristics of Companies

Company

A

Company

B Company

C

Company

D Company

E

PRODUCT LINE Electronic

Components

Process

Control

Systems

Building

Products

Medical

Devices

Portable

Equipment

TOTAL ANNUAL SALES

($ in Millions) $170 $600 $1300 $340 $1500

NO. MANUFACTURING

PLANTS (U.S. /Foreign) 6/4 15/7 39/10 7/4 60/0

NO. EMPLOYEES

(U.S. /Foreign) N/A 9000/3500 21000/Total 4700/Total 11000/0

MAJOR OVERSEAS

MARKETS

Europe

Japan

Canada

Europe

S. America

Canada

Europe

Canada

Austral ia

Europe

Japan

Latin Amer.

Europe

Canada

Australia

INT'L STDS. (No. of ISO

PARTICIPA- Tech. IEC

TION Cmtes.) Other

2

12

1

1 12

1

15
Table 2. Needs Cited by Companies

MOTIVATING FACTORS/PERCEIVED

NEEDS FOR PARTICIPATION:

Company

A

Company

B Company

C

« Company

D

Company

E CAT. NO.

o Defensive Action (Taken to

Counter Foreiqn Competition) + + + C 3 o Need for Universal Product

or Test Method Standard + + + + + T 5 o Advance U.S. Position in

Standards Development + + + + C 4

o U.S. Markets Stabilized - Expand Sales Via Exports + + M 2 o U.S. Competitors Involved

in Export inq + C 1 o Influence of End-Item Users

in Adoptinq Int'l Standards + M 1 o Maintain Product Compatibility (e.g., Electro-Mech.

Interfaces) + M 1 o Inadequate U.S. Standards

Available + T 1

*

o Centralized Control of Product

Design/Performance for All

Markets + + M 2 o Long Established Overseas

Presence + M 1 o Rapid State-of-Art Advances

in Technology + + + A 3 o Desire to Minimize Regulatory

Surprises + + + T 3 o Substantial Budget for Product

Testing for Regulatory Approvals + + T 2 o Regulatory Approval Process

Differs Significantly Among

Countries + + T 2 o Interpretation Conflicts in

Standards Cause Expensive Delays + + T 2

TJ

Summary

Primary Motivating Factors:

No. of Times % of Total Times

Category Title Category Cited Category Cited

II ll Technical Trade Barriers . . .... 15 45

"C" Competitive Strategies . . . .... 8 24

»M" Market Influences .... 7 21

"A" Technological Advancement . .... 3

~1T

9

16
Table 3. Benefits from Participation

SUMMARY OF BENEFITS CITED: Company

A

Company

B Company

C

Company

D Company

E CAT. WT

o Influence/Control Committee

Business (Agendas, Ballots,

Timinq, etc.) + R 1 o Reduced Costs for Design,

Tooling, Production, Testing + + E 2 o Contributes to Broader

Market Base for Exports + + + + E 4

o Eliminates Need for Dual

Production Lines + E 1 o Source of Knowledge on Foreign Technology + + + + R 4

o Better Recognition of Products

in Marketplace + + M 2

o Shortened Time Interval to

Market New Designs + + E 2 o Basis for Establishing Equivalency for Similar but Different

Products(Functional Equivalency) + M 1 o Facilitates Product Approval

Process in Foreiqn Governments + + R 2 o Improves Access to Regulatory

Authorities + + R 2 o Well-Informed Compliance

Facilitates Sales + + R 2 o Establishes Contacts for

Potential Entry Into New Markets + + + M 3 o Provides Outlet for Marketing

Info, on Foreign Cultures,

Preferences, etc. + M 1 o Provides Forum for Exchange of

Ideas + + R 2 o Higher Quality Standard Results

From U.S. Presence + + + M 3

32

Summary

Allocation of Benefits:

No. of Times % of Total Times

Category Title Category Cited Category Cited

HR" Informed Readiness . . . , 13 41

"M" Market Enhancement . . . 10 31

11 E

11 Economics in Operation . , 9 28

17
Table 4. Disadvantages Cited by Companies

SUMMARY OF DISADVANTAGES' CITED: Company

A

Company

B Company

C

Company

D

Company

E No

o Allows Access to U.S. Markets

By Foreign Competitors + + + + 4

o More Likely to Share/Expose

Proprietary Information + + 2 o Standards May Reduce "Degrees

of Freedom" for Co. and Design

Liberties + 1 o Some Standards Developed w/o

Scientific Rationale or to

Solve "Non-Problems" + 17
NBS-114A (rev. 2 -80) U.S. DEPT. OF COMM.

BIBLIOGRAPHIC DATA

SHEET (See instructions)

1. PUBLICATION OR

REPORT NO.

NBSIR 84-2886

2. Performing Organ. Report No. 3. Publication Date September 1984

4. TITLE AND SUBTITLE

Benefits Perceived by U.S. Industry from Participating in International

Standards Activities

5. AUTHOR(S)

Patrick W. Cooke

6. PERFORMING ORGANIZATION (If joint or other than N BS, see instructions)

national bureau of standards

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

7. Contract/Grant No.

8. Type of Report & Period Covered

Final

9. SPONSORING ORGANIZATION NAME AND COMPLETE ADDRESS (Street, City, State, ZIP)

Same as in Item 6 above.

10. SUPPLEMENTARY NOTES

Document describes a computer program; SF-185, FIPS Software Summary, is attached.

.

11.

ABSTRACT (A 200-word or less factual summary of most significant information. If document includes a si gn i fi cant bibliography or literature survey, mention it here)

This report describes the results of a limited study to assess the extent to which

U.S. industry profits by virtue of participation in the committee activities of

international standardization organizations. The substantial trade benefits that

can accrue are identified and evaluated in terms of the needs of the firms surveyed

and the potential opportunities for new or increased foreign trade. Fecarmendations

are given for industry to became more aware of the cost-effectiveness of

participation and to extend the potential benefits to other firms and industries.

12.

KEY WORDS (Six to twelve entries; alphabetical order; capitalize only proper names; and separate key words by semu.o i< ns Benefits; cost effectiveness; exports; foreign trade; international bodies;

international standards; standards development; trade barriers; U.S. industry

13.

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