Identity in a Multi-polar World and China’s 2035 Standards
By: Carsten Stöcker
Tags: Trade, Supply Chain, Standards, Identity, China

Identity in a Multi-polar World and China’s 2035 Standards

Management Summary; TL,DR

Last year China released a bold 15-year ‘China Standards 2035’ blueprint that describes its strategy to set the global standards for the next-generation of technologies including digital identity.

This article highlights the economic-industrial & geopolitical importance of standards, their industrially-oriented open coordination and controlling their adoption in shaping digital ecosystems and markets while establishing competitive advantages on a global level.

Historically, Standard Developing Organizations (SDOs) were instrumental in coordinating the development of standards. Early industrial standards were primarily driven by European countries including Germany when decades ago DIN Standards were adopted globally. Today standards for the internet — as we know it — are dominated by the North American standard setting ecosystem.

Building on ‘Made in China 2025’ (MIC 2025), Beijing is now stepping up its efforts to define the standards for the 4th Industrial Revolution with a 15 years strategic economic development program: China Standards 2035. With the Belt and Road Initiative (BRI) in place, China has the vehicle and leverage to drive large scale adoption for global supply chain and trade processes across the 138 countries that are part of the BRI.

China’s Standardization Administration describes it neatly: “First-class companies do standards. Second-tier companies do technology. Third-tier companies do products.” Standards allow a company or an ecosystem to control technologies and products — in an enduring, monopolistic manner. Such a uni-polar, monopolistic platform must be avoided to eliminate the risk of unfair exploitation of platform participants by one or two dominating geopolitical powers.

The North American standard setting ecosystem and some players in Europe are working on similar technology standardization initiatives. The combination of these initiatives should result in a standards-driven multi-polar meta-platform. If done properly, a supply chain and trade meta-platform can be adopted by all geopolitical players without any suspicion that a single player can benefit from the platform in an unfair way.

By following W3C DID/VC standards for a meta-platform approach, any two Sino-Western business partners that rely on their respective Chinese or Western infrastructures have the tooling to establish trust across their cross-border business processes and their cloud-based infrastructures.

On such a platform all materials and products will have a digital twin data supply chain to establish verifiable information to provide and end-to-end provenance tooling for origin, quality, safety, ethics, and environmental transparency of supply chain transactions and trade items.

Note: We summarized English translations of China Standards 2035 objectives with direct relevance for Identity, E-commerce and Global Trade. These translations are valuable insights into Beijing’s standards strategy [1].

Photo by Theodor Lundqvist on Unsplash

The China Standards 2035

Standards have a major impact on business performance and technological efficiency. For that purpose, economic actors such as enterprises, governments and SDOs, are collaborating on standardization initiatives [2, 3, 4, 5, 6].

Beijing considers standards as the key to establish control over the international trade system and to leapfrog the digital leadership role of the United States. Standards determine global movement of goods and exchange of information across sectors and boundaries. They do so not only at low cost, but often at a profit and in an enduring fashion: Once established, they are difficult to uproot.

Launched in 2013, the Belt and Road Initiative has proven itself a signature trade, commerce and infrastructure project that connects countries from Asia through to Africa and Europe in a complex network of roads, rails, and ports. The Chinese Communist Party extended this project last year to include technology and standards. BRI can now be seen as the road to adoption for Chain Standards 2035.

Identity for Cross-border Trade in a Multi-polar world, example of BRI countries [10]

Aided by technology, China is embarking on a new geopolitical strategy. As the Chinese Academy of Sciences explained, the goal is to build an “ubiquitous and universally used information network system.”

As a first step China is addressing the issues of cooperation and friction-less trade. Xi proclaimed that, through the Belt and Road, China would “strengthen cooperation in customs, taxation, and audit oversight” and pursue cooperation on technological development.

Therefore, China is intensifying investments in accordance with its government led, enterprise driven model in new and emerging technologies, standards and domains deemed ‘core national interests’.

China is now following a two-pronged standardization strategy:

Engaging in international standardization bodies such as ISO or ITU and implementing existing standards for friction-less trade at a global scale Designing and implementing the next wave of standardization in cyber-physical trade (and military supply chains) with its ambitious China 2035 Standards strategy

China Standards 2035 is blueprint for China’s government bodies and leading technology companies to set global standards for emerging technologies like 5G internet, IoT, artificial intelligence, e-commerce traceability, smart and green manufacturing, and clean energy, among other areas. It will work in concert with Beijing’s Made in China 2025 policy — as the country’s leaders seek to become global leaders in high-tech innovation.

Identity in a multi-polar world for supply chain & trade

Beijing’s standardization plan is not just about China. It is about global proliferation by integrating and cooperating with international standard setting initiatives. Both, China and U.S. are explicit that they

use for instance its roles in ISO and the International Electrotechnical Commission (IEC) to ensure their own solutions and practices are adopted globally,

use its influence over developing countries to encourage adoption, and

leverage cooperative mechanisms with individual countries and their multilateral organizations to extend its reach.

Even if the EU is less explicit, it is pushing similar standardization initiatives for global supply chain and trade processes.

Any end-to-end supply chain or trade solution must be deployed by a variety of enterprises, customs organisations and government entities across multiple geographies. Therefore, we assume that U.S., Chinese and EU standardization initiatives will converge into a standards-driven platform ecosystem. In such a multi-polar ecosystem, with three or more geopolitical players, every player will have a fair distribution of power to influence the standards.

As such a multi-polar platform ecosystem is built upon mutually accepted standards, the resulting platform can be interpreted as a multi-polar meta-platform. A ‘multi-polar meta-platform’ enables and fosters participant-controlled data and value transfer across and among other (enterprise, government, national, regional) platform participants. It connects multiple regional trust domains providing the instrument for end-to-end verifiability and traceability. It can be adopted by all geopolitical players without any suspicion that a single player can benefit from the platform in an unfair way.

Participant-controlled Data Sharing and Value Transfer for Global Trade, Source: Spherity GmbH

A meta-platform requires adapting an open software protocol which provides ‘portabililty’ for participation. This approach lays out the foundation for the creation of a platform-of-platforms (aka meta-platform). By making participation portable to other platforms structured around the same protocol, these platforms empower the individual actor vis-a-vis the platform. With a proper meta-platform counterbalancing centralizing tendencies, a ‘winner takes it all’ approach can be avoided [7].

Therefore international trade agreements must take the meta-platform approach, standards and their enforcement via customs organisations into account to avoid the emergence of an uni-polar or bi-polar platform that is dominated by one or two geopolitical super powers. Both, a uni-polar or bi-polar platform, would significantly weaken the competitiveness of all other actors which are then NOT empowered vis-a-vis the platform.

Importance of identity for supply chain & trade

Few people outside the supply chain function used to care where products came from. Nowadays, everyone from company leaders, to customs and other trade enforcement organizations, to interest groups to consumers wants to know something, if not everything, about a product’s material, legal, geographic, and intellectual-property origins, or provenance in trade parlance. Consumers, governments, and companies are demanding details about the systems, enterprises, and sources that delivered and transformed the goods along their value chain. They worry most about quality, safety, ethics, and environmental impact, to name just a few.

For many products, origin is an essential feature of what the customer buys, even if it is an intangible or a difficult-to-verify quality. Driven by growing calls for transparency, firms such as Alibaba, Amazon and Wal-Mart are beginning to use new technologies to publish provenance data on their marketplace. Customers may soon perceive easy access to such information as the norm. Revealing origins is becoming an essential part of establishing trust and securing reputation. Back-to-birth traceability is an even more important feature for luxury goods, dangerous (chemicals, explosives) and sensitive goods (food, pharmaceuticals). This product traceability answers the questions about the components they consist of and if they were handled correctly over their product life cycle. Products will have a digital twin consisting of life-cycle credentials. In order to be authentic, all material and product supply chains must have a verifiable digital twin about their history: ‘A Story for Every Thing.’

The key technologies are not fundamentally new. Product labeling has been transformed by chemical security features, microscopic electronic devices with built-in sensors, genetic markers for agricultural products, and a new generation of tamper-proof, intelligent bar codes that can be read with standard smart phones. Combine these developments with verifiable digital twinning, enterprises can contemplate much more reliable ways to track and reveal the manufacturing trajectory of their products [8].

Supply chain transparency is even more critical for managing risk and compliance in an environment where corporate supply chain practices are attracting increasing legal, regulatory, and consumer scrutiny. To fulfill these requirements, supply chains and trade require tools to:

verify supply chain actors, i.e., enterprises and government organisations

identify products and verify their back-to-birth life cycle (product digital twin)

validate process and regulatory compliance.

An open, interoperable, portable, and cryptographically verifiable digital identity framework is a critical ingredient to provide compliance and traceability tooling for the multipolar platform strategy to work. Such an identity framework provides secure identity of enterprises & things as well as automated process auditability.

Verifiable Identity for a Multi-polar Supply Chain & Trade System, Source: Spherity GmbH

Conslusion: Identity and traceability are enabling digital supply chain and trade processes to work across multiple geographies and organisations. Verifiable life-cycle identity is a key capability for compliance and transparency.

Identity for E-Commerce in China Standards 2035

Global trade has been transformed repeatedly, driven by a combination of new technologies, standards, and policies. Next level digitization of trade is a key emerging field for cross-border economic transactions in which digitization is changing how trade happens and what is being traded.

To establish identity for efficient manufacturing, logistics, and trade processes, China Standards 2035 aims to enable the next level of trade digitization by focusing on the following objectives:

Item coding (i,.e., with a serial number and a digital twin), automatic identification and digital twinning (for civilian & military use)

Supply chain services, e-commerce and logistics

Traceability of e-commerce items

These objectives are explicitly mentioned in Beijing’s strategy [1]:

56. Speed up the development of standards for item coding and automatic identification. Develop military-civilian general material and equipment coding standards and promote the establishment of a military-civilian fusion general code system for material coding. […] 59. Upgrade the standard system of productive services and develop standards in areas such as e-commerce, green finance, social credit, modern logistics, logistics information services, and modern supply chain services. 60. Establish and improve the quality and safety traceability standard system for e-commerce transaction products, and develop national standards for information classification, coding and identification, information release, and quality traceability of e-commerce transaction products.

Digital Identity Standards for efficient data sharing in global trade

There are multiple standardization initiatives driven by organisations such as UN/CEFACT, International Chamber of Commerce (ICC), World Customs Organization (WCO), European Union Intellectual Property Office (EUIPO), or International Air Transport Association (IATA).

All these initiatives are sharing similar goals as defined in China’s 2035 Standards.

Example 1: IATA ONE Record for end-to-end digital logistics

One example is the ‘IATA ONE Record Standard Specifications’ for air freight logistics and customs.

IATA ONE Record is working towards the following objectives:

The vision for [IATA] ONE Record is an end-to-end digital logistics and transport supply chain where data is easily and transparently exchanged in a digital ecosystem of air cargo stakeholders, communities, and data platforms. ONE Record is a standard for data sharing [vocabulary] and creates a single record view of the shipment. This standard defines a common data model for the data that is shared via standardized and secured web API.

Example 2: E-Commerce Identity Standards, Open APIs and Common Vocabulary

The U.S. Customs and Boarder Protection (CBP), the world biggest customs organisation, is following a very similar strategy with its Silicon Valley Innovation Programme (SVIP) and its ‘Standards Based Digital Twin Solution for E-Commerce Shipment Traceability’. This initiative has the objectives of

promoting open APIs,

using of decentralized identity standards such as W3C DIDs and VCs and,

establishing E-Commerce traceability vocabulary to extend and combine existing schema.org and GS1 standard ontologies and vocabularies.

With the standards, APIs, and vocabularies in place, E-commerce customs processes are brought to a much higher level of automation and reliability. When adopted, customs organisations will get much more timely access to digital trade forms pre-arrival of a trade item at the port of entry. The digital entry forms will cover the E-Commerce Transaction Lifecycle for each individual shipment or trade item.

One driving assumption of this programme is that customs organisations are playing a crucial role in making sure that trade is established on a meta-platform that cannot be exploited by a dominant player, rather than a conventional closed platform.

When standards and fair meta-platform principles are being enforced, U.S. and EU customs organisations can be an effective instrument to establish a fairly balanced new internet for supply chain and trade with China.

Example 3: The European Perspective

One European example is the European Union Intellectual Property Office (EUIPO) and its focus on targeting IP infringements of trade items from China. EUIPO is relying on product & shipment identity & traceability in combination with standardized IP Registration Codes. This identity & traceability data infrastructure is supposed to help customs organisation to better target IP infringements and to help brands to protect their IP.

The impact of standards in global trade in general and in the policy debate on EU-US trade agreements is well researched [9]. In the context of the public policy debate of EU-US trade talks, benefits for the harmonization of technology standards within the Transatlantic Trade and Investment Partnership (TTIP) were explored in detail. Overall, the implementation of common standards, developed internationally or bilaterally, and their mutual recognition provides benefits for all supply chain actors.

Based on an empirical analysis of data from the German Standardization Panel benefits in the following three dimensions regarding the various harmonization solutions were identified: (1) company-specific benefits for to applying standards, (2) competitive benefits, i.e. the position vis-à-vis other market participants, and (3) technological benefits driving the dynamics of the market the company operates in.

The above mentioned examples are describing specific perspectives and value propositions for the adoption of a multi-polar meta-platform.

Establishing Trust across Geographies

The multi-polar platform approach for supply chain and trade will be powered by cloud, data & trust infrastructures. As the value and criticality of secure data for government and business processes is increasingly recognized, geopolitial ecosystems want to make sure they control and govern their respective business-critical cloud infrastructures.

To establish cloud & data infrastructure sovereignty Germany and France just launched GAIA-X. GAIA-X is an early-stage project for the development of an efficient, competitive, secure and trustworthy data infrastructure for Europe.

When geographies rely on their individual trusted cloud & data infrastructures, ‘identifier & data’ portability and verifiability must be established to enable the exchange of trusted data and their auditability. These objectives can only be achieved by standards that are adopted across a supply chain and integrated with existing business processes.

Cloud & Data Infrastructures in a Multi-polar World

An open, interoperable, portable, decentralized identity standards framework is a key enabler for traceability on a multi-polar meta-platform. The adoption across multi-cloud services provides the aggregate network effect for cross-border business process verifiability. Significant momentum has been developing behind a universal decentralized identity system based on open standards, including the W3C-supported decentralized identifier (DID) and verifiable credential (VC) standards. These standards are in the process of being adopted in North America and the EU.

By adopting these meta-platform standards by China as well, any two Sino-Western business partners that rely on their respective Chinese or Western infrastructures have the tooling to establish trust across their cross-border business processes and cloud-based infrastructures.

End-to-end verifiability across Chinese & Western cloud & data infrastructures, Source: Spherity GmbH

Standards being adopted across all participants of a meta-platform ecosystem allow the exchange of end-to-end verifiable data about enterprises, trade items and audit trails.

Today, there are already multiple components in place to establish a multi-polar meta-platform for global trade. We assume that China will most likely piggy-back similar standards — originally developed in the North American standard setting ecosystem — in order to establish end-to-end digital trade processes. As finished goods consist of multiple components and raw materials from diverse supply chain actors and countries of origin, we predict that the deployment of end-to-end traceability tools on a global scale requires a 5–10 year timeline.

Overcoming the European quandary

China and the U.S. want to dominate the future internet. The EU must recognize this threat and push towards standards congrous with a participant-controlled meta-platform strategy, rather than a centralized platform-controlled one.

A European strategy to counteract the standardization efforts of North America and China by developing a third standards ecosystem system will clearly fail. Such a strategy would only result in new obstacles and higher costs for all parties involved [10].

Rather, international bodies should be used to involve China more closely in standardization work and to engage with North America on standards way more deeply. European stakeholders might want to emphasize their higher (technical) neutrality when advocating for a meta-platform approach.

If Europe does not engage in the geopolitical trade issues and standards development in a firm and concise way, a uni-polar (US) or bi-polar (Sino-US) global platform is most likely to evolve without any European influence.

At Spherity we are embedding the above mentioned standards (W3C, IETF, Linux Foundation, GS1, GLEIF) into a cloud-edge identity product for supply chain and trade solutions. Our open APIs can be integrated with existing IT and OT systems. Spherity’s solutions are designed to enable supply chain and cross-border use cases such as Enterprise On-boarding, Authorized Trading Partner, Electronic Product Information, Trusted Release, E-Commerce Shipment Tracing, and Supply Chain Compliance.

We believe that efficient, green, compliant, and secure cross-border processes can only be established through cooperation on digital standards, primarily in the area of digital identity and traceability. These standards are shaping the multi-polar meta-platform for future supply chain & trade processes.

References

[1] Horizon Advisory, 2020, China Standards 2035 — Beijing’s Platform Geopolitics and “Standardization Work in 2020”

[2] Cambridge University, 2016, The importance of standards in a digital world

[3] GS1, 2018, The importance of digital standards for the information age

[4] Laurent Adotto, 2018, Digital standards: key role in shaping the it sector and the interest of coordination within agile dynamics

[5] ITU, 2019, Why standards are important for sustainable development

[6] MDOI, 2019, Standardization Framework for Sustainability from Circular Economy 4.0

[7] RWOT, 2020, Decentralized Identity as a Meta-platform: How Cooperation Beats Aggregation

[8] HBR, 2010, The Transparent Supply Chain

[9] TU Berlin, 2018, Prof. Knut Blind, The role of standards in the policy debate on the EU-US trade agreement

[10] BDI, 2020, Chinese Creative Drive: China Standards 2035

[11] Green Belt and Road Initiative Center