EU LawIndustrial Policy & Standards

Jane WinnTom Daemen

February 24, 2009

Administrative Matters• EU Law textbooks on course reserve: Craig & de Burca (2003)

and Chalmers, Hadjiemmanuil, Monti & Tomkins (2006)• Follow up from last week

– Abuse of a “dominant position” versus abuse of a monopoly– Oliver Wendell Holmes, The Path of the Law, Harvard Law Review 1897

• If you want to know the law and nothing else, you must look at it as a bad man, who cares only for the material consequences which such knowledge enables him to predict, not as a good one, who finds his reasons for conduct, whether inside the law or outside of it, in the vaguer sanctions of conscience.

– No attorney client privilege for material seized in “dawn raids”• Commission dawn raid on John Deere’s EU headquarters investigating

restrictions on cross-border sales seized in-house counsel legal opinions discussing such sales; used opinions as evidence of willful violation of EU competition law, basis for heightened sanctions

• Compare Morrison-Knudsen (1983) and In re Seagate (2007) in US Patent Law

Costs & Benefits of Using Standards• Benefits of Standardization

– Reduce costs through simplification of complex processes– Reduce learning costs for new producers– Allow producers to exploit economies of scale– Lower transaction costs between transacting parties– Promote market information and confidence by signaling product

quality, or compatibility of products or components– Reduce compliance costs– Increase competition among producers, lower prices to consumers

• Costs of Standardization– Reduced product variety– Costs of achieving compliance with standard and obtaining certification

of compliance– One-time switching costs for established products to comply with

subsequent standard– Increased switching costs away from obsolete or sub-optimal standard

Standards as “Club Goods”• What are “public goods”?

– Non-excludable, non-rivalrous– Examples: national defense, ideas, broadcast TV, ???– Market failure caused by free rider problem leads to underproduction without subsidies

• What are “club goods”?– Non-rivalrous, but excludable– Examples: telephone systems, cable TV, STANDARDS– How to insure optimal level of production?

• What are “common pool resources”?– Rivalrous, non-excludable– Examples: air, water– How to prevent excessive exploitation, pollution?

• Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (1965)– Groups work to produce private goods to share among members, not public goods– Small, highly motivated, well organized, wealthy groups work to benefit members of the

group– Large, unfocused, unstructured groups with limited resources have little collective impact

From GATT to WTO I

• Bretton Woods Post-WWII New World Order– International Monetary Fund: balance of payments– World Bank: finance development– International Trade Organization: regulate trade

• GATT instead of ITO– Work to reduce tariffs, quotas and other barriers to trade

• “National treatment” for imported goods

– “Most Favored Nation” treatment for other signatories– Safety valves: temporary barriers to trade OK to deal with

health and safety risks; environmental protection; “dumping” by trading partners; public morals; prison labor; temporary shortages; other temporary economic disruptions

From GATT to WTO II• How is WTO different to GATT?

– Expanded scope• Includes provisions of 1947 GATT plus updates• General Agreement on Trade in Services (GATS)• Agreement on Trade-Related Aspects of IP (TRIPS)• Agreement on Trade-Related Investment Measures (TRIMS)• Dispute Settlement Understanding• Agreement on Sanitary & Phytosanitary Measures• Agreement on Agriculture• Agreement on Technical Barriers to Trade

– General Council and Ministerial Conference to manage WTO– More enforcement authority

• Dispute Settlement Body• Dispute settlement process: consultation, arbitration or dispute resolution

panel, appellate review; adoption of arbitration/appellate decision, implement resolution (authorized retaliation or mutual agreement on compensation)

From GATT Standards Code to WTO TBT• Once quotas and tariffs reduced, “non-tariff

barriers” become central focus• OECD estimates 80% of trade in goods now subject

to some form of standards• TBT Code of Good Practice (a.k.a. how to cheat

with standards)– Design versus Performance Standards

• Italian cotton versus German synthetics– National versus International Standards– Voluntary private standards versus proprietary

technologies– Certification procedures

Where do standards come from?• “Top down” versus “bottom up” and transparency issues• ISO International Organization for Standards, ITU, IEC

– Codex Alimentarius for food standards• Other multilateral organizations

– MERCOSUR Standardization Association• Private International bodies

– IETF, W3C, OASIS, GS1 (RFID standards)• National standards bodies

– ANSI, BSI, DIN, AFNOR• Private sector formal standards bodies (US has hundreds)

– ASTM, IEEE, Underwriters Laboratories• Informal private sector bodies (US has thousands)

– JEDEC, VESA• Market driven, de facto standards

– Microsoft Windows

Industrial Policy & Standards• Tradition of State-Led Industrialization in Europe

– France: Jean-Baptiste Colbert 1665-1683 under Louis XIV• Chambers of commerce in France today are government agencies

– Russia: Peter the Great 1689-1725– Germany: Otto von Bismarck 1862-1890 under Wilhelm I

• Tradition of Market-Led Industrialization in UK and US– England led Industrial Revolution, turned to state planning

after 1945– US approach favored competition among speculators and

industrialists, weak central government, fragmented state governments• First “independent” regulatory agency 1887 Interstate Commerce

Commission to regulate private railroads

De Tocqueville on Voluntary AssociationsIn 1835, de Tocqueville made this observation about American society: Americans of all ages, all conditions, and all dispositions constantly form associations. They have not only commercial and manufacturing companies, in which all take part, but associations of a thousand other kinds, religious, moral, serious, futile, general or restricted, enormous or diminutive. The Americans make associations to give entertainments, to found seminaries, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; in this manner they found hospitals, prisons, and schools. If it is proposed to inculcate some truth or to foster some feeling by the encouragement of a great example, they form a society. Wherever at the head of some new undertaking you see the government in France, or a man of rank in England, in the United States you will be sure to find an association. I met with several kinds of associations in America of which I confess I had no previous notion; and I have often admired the extreme skill with which the inhabitants of the United States succeed in proposing a common object for the exertions of a great many men and in inducing them voluntarily to pursue it

US Standards System• Modern standards movement

– Great Baltimore Fire 1904 resulted in national standards for fire hydrants & fire hoses

– Expansion of standards for military procurement during World War I– Herbert Hoover & “Taylorism” in 1920s

• Private associations formed ANSI in 1916• Represents US at ISO, can submit American National Standards for

consideration as ISO standards– Under WTO TBT, show compliance by requiring use of “international

standards”• Hundreds of US Standard Developing organization but only dozens

create most widely used standards• 1995 National Technology Transfer & Advancement Act

– Government must use private voluntary standards whenever possible and limit development of government standards

– US government involvement in private voluntary standard setting limited in scope

ANSI Accredited Standards• The American National Standards “Essential Requirements”

include:– consensus by a group that is open to representatives from all

interested parties – broad-based public review and comment on draft standards – consideration of and response to comments – incorporation of submitted changes that meet the same consensus

requirements into a draft standard – availability of an appeal by any participant alleging that these principles

were not respected during the standards-development process. • ANSI accreditation is not mandatory, most American SDOs don’t

bother– Underwriters Laboratories is NOT ANSI accredited, but closed and

secretive

What is a Standards Consortium?• 1984 National Cooperative Research Act; 1993 National

Cooperative Research and Production Act– Limited antitrust exemptions for collaboration among

competitors to develop and implement standards• Consortium is a closed, market-oriented SDO

– Focus on bringing products to market quickly– Only invite team players with something to contribute– Work fast with best and brightest engineers, commit to

implement• October 2008 European Committee for Standardization

survey of ICT Standards fora and consortia more than 90% of the 240 groups listed have roots in the U.S

International Standards System

• De Jure International Standards Bodies– ISO International Organization for Standards– IEC International Electrotechnical Committee– ITU International Telecommunications Union

• De Facto International Standards Bodies– Formal: IEEE (ANSI Accredited)– Informal: IETF, W3C, OASIS

European Standards System• 19th Century: Standard developing as part of industrial

development policy under government control• 20th Century: National Standards Bodies become

independent non-profit agencies with close ties to government industrial policy agencies

• EU Level Standards organizations with memoranda of understanding with International counterparts– CEN European Standards Committee/Comité Européen de

Normalisation (like ISO)– CENELEC Comité Européen de Normalisation Electrotechnique

(like IEC)– ETSI European Telecommunications Standards Institute (like

ITU)

US Standards Strategy 2005

• Who published the US Standards Strategy? Is ANSI a government agency? If not, why is it in charge of official US standards strategy?

• ANSI’s strategic vision is on p. 7. Which parts of the strategic vision might be controversial and why?

• How does ANSI think “stable funding” should be maintained for the US Standards system? (p. 11)

Pelkmans on New Approach• On p. 250, Pelkmans describes the legal regime and the

policy regime for building a common market. Which regime focuses on “negative integration” and which on “positive integration”?

• Does the “reference-to-standards” approach create what a US lawyer would call a “safe harbor”? (p. 255)

• What was the “traditional” approach to harmonization of standards in Europe, and what was wrong with it? (pp. 251-253)

• What is the “New Approach” to standardization and how did it eliminate the problems of the traditional approach? (p. 253-261)

Weatherill & McGee on New Approach• What are “facilitative regulation” and “protective

regulation”? (p. 578)• 2. In what way is a “New Approach” directive an example

of “exhaustive regulation”? (p. 582-587)• How does the New Approach promote deregulation? (p.

584-58)• When conflicts emerge among EU member states, how

have member states asserted control? How have business groups asserted control? What impact have consumer and worker groups had? Why do M & W find aspects of the evolution of the single market disturbing? (p.595-96)

• What do you think M & W would think of the US standards system and its impact on US law?

EU New Directions in ICT Standards Policy

• Why does the EU need a new strategy for ICT standards development?

• How hard will it be for the EU to find a way to work with “consortia & fora”?

• Does this policy initiative seem like a new direction in ICT standards? What specific new policies are being proposed? How different are they to old policies?

• The “WTO criteria for global standard setting organizations” are the WTO Decisions on Principles for the Development of International Standards mentioned on p. 11 of the US National Standards Strategy. – Why does the EU support these principles? – Why does ANSI support them? – Who do you think opposes them and why?