Disclaimer: This material has been funded by UK aid from UK Government’s Department for International Development under the

Knowledge Partnership Programme, however the views expressed do not necessarily reflect the UK Government’s official policies.

Paper for Standards Conclave 2015

Role of Standards in International Trade: Challenges, Opportunities and Issues

New Delhi, 21-22 May, 2015

Harsha Vardhana Singh

2

Paper for Standards Conclave 2015

Role of Standards in International Trade: Challenges, Opportunities and Issues

New Delhi, 21-22 May, 2015

Harsha Vardhana Singh1

Standards Conclave 2015 builds upon the very successful Standards Conclave of 2014, which laid a

standards road map for Indian policy making, and recognized the need to enhance knowledge base,

and improve capacities and systems for Indian industry to meet standards and conformity

assessment that affect international trade and investment. These would include those that are likely

as global market conditions evolve due to mega-regional agreements. The Standards Conclave last

year recognized that standards could not be treated just an obstacle for trade but should be seen also

as an opportunity, although special and specific preparation would be required to convert potential

opportunities into effective external market access for India’s producers. Significant progress has

been achieved in terms of traversing the road map for strengthening India’s institutional and

operational framework laid down at the first Standards Conclave last year, both in terms of progress

with regard to policy initiatives and an emerging change in the mind-set of the industry. This year’s

Standards Conclave has to further enhance and consolidate that perspective and the initiatives to

empower India for its potential economic journey envisaged in the several schemes and policies

announced by the Government, including the recent Foreign Trade Policy 2015-2020 (FTP2015).

One of the stated objectives of FTP2015 is particularly relevant in this context, namely that the

“Government is committed to transforming India into a manufacturing and exporting hub. This is

possible only if India’s products are of world class standard.”2

The concept of a “hub” shows links with other nations in value chains established through trade and

investment. The emphasis on “manufacturing and exporting hub” in FTP2015 shows a focus on both

domestic and global value chains. Insights from empirical evidence suggest that domestic and

global value chain are inter-linked, though the extent of the activity within the chain that is carried

out domestically depends on the institutional, physical infrastructure and human skills within an

economy, i.e. how effectively policies have prepared the nation with the requisite capacities. Some

recent work on conditions that result in a positive domestic impact of global value chains (GVCs)

shows that, “sufficient levels of absorptive capacity are necessary for such technology transfer

effects to arise. Especially, human capital and legal institutions prove to be elementary factors for

positive spillover effects into the domestic economy.”3

1 I wish to thank in particular Ulrich Hoffman, Mahesh Sugathan and Jason Potts for providing me with some

information relevant for this paper. 2 Paragraph 30, page 5 for FTP 2015. http://dgft.gov.in/exim/2000/FTPstatement2015.pdf 3 See Victor Kümmritz, 2015, “And yet it moves – Why GVCs benefit the domestic economy”, 5 March 2015, Vox

CEPR’s Policy Portal. http://www.voxeu.org/article/global-value-chains-and-domestic-value-added-new-evidence

3

Standards play a very important role in international trade and lay the foundation for producers to

become part of a value chain. In this context, both information and capacity to implement standards

in production chains (involving goods as well as services) become a necessary requirement to

achieve the objective of making the “products of world class standard” that are emphasized by

FTP2015.

Furthermore, an important point worth emphasizing is that the significance of international trade for

India’s economic performance today is far more important than it was even a decade and a half ago.

We can see an indication of this from the large rise in India’s ratio of merchandise trade to GDP

from 19.7% in 2000, to 41.6% in 2013; the corresponding ratios for goods and services trade as a

whole to GDP were 26% in 2000 and 53% in 2013. Notably, this rapid rise in trade’s contribution

has taken place during a period of relatively higher GDP growth for India compared to most of the

previous half century. Even though the buoyancy of trade is now less than earlier4, it is evident that

conditions affecting international trade will have a major impact on India’s economic prospects.

In this background, it becomes imperative that we look at the likely changes in international trade

conditions in the next few years. Three points are of particular relevance in this regard.

One, there is an increasing overlap between international trade, investment, services as well as

goods, global value chains and technology acquisition. This implies that the scope of trade policy

now has implications for domestic initiatives, and that domestic policies in turn will have

significant impact on trade prospects.

Second, standards are now a significant part also of investment agreements. Therefore, a more

comprehensive consideration of trade and investment regulation will be needed to understand and

implement policies which help address the likely impact on global markets through standards.

Third, the global market conditions are evolving rapidly, particularly through ongoing mega-

regional trade and investment negotiations, as explained in Section 1 below. The impact of these

changing market conditions will depend also on whether or not China will decide to join the TPP.

There is some evidence to suggest that China is already preparing for the post-TPP global markets.

Thus, it would be useful to take a look at those efforts in the context of standards. Section 2

addresses these aspects.

Thus, the likely international market conditions faced by our producers after about five years will

be determined to a significant extent by the policy developments emanating from the mega-regional

negotiations. In this context, it is recognized that that non-tariff measures will be far more important

than tariff changes, and within these measures the most important and far reaching effect will take

place due to prevailing standards, especially private standards. This will happen not because these

agreements will establish any standards as such, but through the creation of large preferential

4 See Section 1.1 of Ministry of Finance (Government of India), Economic Survey 2014-15.

4

markets by mega-regionals and emphasis on certain objectives such as environment and labour

standards which will have a major implication for the way business will be done. The creation of

preferential markets through these mega-regionals will accelerate the creation of value chains

amongst the member countries. These value chains will embody the private standards emphasized

by lead firm in these markets, consolidating the effect of concerns such as labour and environment

in these standards. Sections 1 and 3 discuss these issues relating to private standards.

With regard to private standards, the Standards Conclave last year had decided that the Quality

Council of India (QCI) should be the nodal point for private standards. This would provide a focus

for some of the initiatives that are needed to better equip Indian industry to meet relevant standards

in the evolving global markets. These initiatives include training, information gathering, strategic

planning of steps required for both the domestic as well as international sectors, access to

international expertise, collaboration between different parts of the Government dealing with

standards, coalition building with international economies which together with India could try to

affect international trade conditions that are evolving through mega-regionals. These initiatives

would also contribute to building capacities relating to international standards for not just the

international markets but also the significant ongoing domestic efforts through Make in India,

Digital India, Smart Cities, and Skill India Programmes.

Taking account of these various considerations, this paper suggests a four pronged strategy. This

provides a wider than conventional framework for considering standards as a base for initiatives for

both internal and external markets, to build a strong base for India’s position domestically and in

global systems. In the context of these strategies, India could also work with some of its successful

models such as with APEDA (specifically the National Programme on Organic Production or

NPOP), to move ahead in dealing with private standards.

In this background, Section 4 of this paper discusses the importance of process standards and how

they improve the competitive positions of firms. Section 5 considers the ongoing efforts at

regulatory coherence within the mega-regionals, and the types of efforts that could be made

particularly by non-members of TPP and TTIP. Section 6 mentions the importance of risk

assessment/management strategies, and Section 7 gives some examples of products for which the

emerging standards in global markets would likely be higher than those in India at present. Section

8 explains how international standards are important not only for international trade, but also for

several major development schemes that have been implemented domestically by the Indian

Government, such as Make in India, Digital India and Smart Cities initiatives. Section 9 provides a

four pronged strategy, and Section 10 concludes the discussion.

1. The evolving global markets: environment and social standards

Today, more than ever before, global markets offer major opportunities but these markets are also

subject to intense competition. The growth of developing nations that have harvested such

opportunities has created a further increase in competition, emergence of a multipolar world, larger

presence of regional and global value chains, importance of services in economic transactions, a

change in the rankings amongst major global economies, a focus on technology acquisition for

enhancing domestic capacities and links to growth trajectories, and even the emergence of a new

international currency joining the previous ones. These changes have altered the existing economic

5

dominance and relative potential of erstwhile major economies, creating pressure to address the

emerging challenges through various means. Three amongst them are to emphasise standards based

to some extent on specific value systems emphasized in developed economies as being an important

part of international trade and investment; to build such trade and investment regulatory systems

through large FTAs or mega-regionals such as Trans Pacific Partnership (TPP) and Transatlantic

Trade and Investment Partnership (TTIP); and to emphasize importance of intellectual property

rights and fair returns to them as well as level playing field for competition for foreign direct

investment (FDI).

For example, President Obama addressing the Organizing for Action group this April, said that

ongoing trade agreements being negotiated by the United States are vital because the United States

has "got to make sure that the rest of the world is a place where we can compete on a global scale ...

We want to make sure we’re on an even playing field, not an uneven playing field. We’ve got to

deal with a place where the rules are different in other countries, and we’ve got to make sure that

those rules work for us. That’s why I believe America needs to write the rules of the global

economy. We can’t leave it to somebody else. ... Our values have to .... be reflected in these new

trade agreements in the way that they haven’t always been in past trade agreements."5

Referring to China’s growing influence in the Asia-Pacific region, the President stated that, “We’ve

got to make sure that we write rules so that our workers and our businesses can compete fairly. If

we don’t, then somebody is going to write the rule."6 Once TPP is in place, the President continued,

it means that other countries will have to treat their workers and their environment better.

Earlier, President Obama in this year's US President's Economic Council's report said that: "new

trade agreements would help American businesses reach new markets and put stronger

environmental and labor standards in place, to ensure that all countries are playing by the same, fair

set of rules. The trade deals that my Administration is negotiating in the Atlantic and the Pacific

regions would do just that."7 These negotiations he mentions are the TPP and TTIP.

For some time now, President Obama has identified China as a primary reason for this emphasis.

For instance, in a White House blog he says: "Right now, China wants to write the rules for

commerce in Asia. If it succeeds, our competitors would be free to ignore basic environmental and

labor standards, giving them an unfair advantage over American workers."8

5 Washington Trade Daily, 24 April 2015

6 Ibid.

7 Page 5 of the Economic Report of the President, Together with the Annual Report fo the Council of Economic

Advisers, Transmitted to the congress February 2015. See,

http://www.whitehouse.gov/sites/default/files/docs/cea_2015_erp.pdf 8 http://www.whitehouse.gov/blog/2015/02/18/president-obama-writing-rules-21st-century-trade

6

The United States is a prominent part of both the TPP and TTIP, and its emphasis and views on

standards will have a determining role in these negotiations. Therefore in addition to product

specific standards, we also need to keep in mind process specific environmental and social

standards. These standards sometimes require support of a policy framework which may have to

address generic effects across the economy, because these standards have an economy wide impact

and not just a firm or product specific effect. Further, these standards reflect the types of objectives

which are incorporated in private standards embodying the prevailing value systems emphasized by

lead firms in the value chain. It is noteworthy that while large firms may find it easier to meet these

standards, the small and medium enterprises may require a helping hand both through

technical/systemic support or in terms of relevant information and skills to enable their progressive

achievement of such standards. Work on these aspects should begin now to identify priorities and

relevant steps to be taken by policy makers and business.

These standards are expected to be important in the markets covered by TPP and TTIP (about half

of global trade). Another interesting development has been the initial steps towards development of

private international standards for labour issues. Such a beginning has been made at ILO where

standards relating to safety at work were sent to ISO to develop it as a prototype. This type of step

converts ILO standards into private standards, and expands their scope and applicability in the new

value chains that will likely develop in economies which are members of TPP and TTIP.

While these developments and views may evoke different reactions and perspectives in various

countries, the fact to recognize is that the significance of (private) standards in global trade and

investment will keep increasing. It is important for both policy makers and business to recognize

this evolution, bearing in mind that the role of standards is far larger than we usually consider in our

discourse on the subject.

2. The evolving global markets: China's strategies and likely policies in this context

An important view regarding the development of the structure and disciplines under TPP and TTIP

is that it is an effort to establish trade and investment policy regimes that would create conditions

perceived by the US as creating a level playing field, in terms of the standards followed and

emphasized by its firms. The objective would be to establish a large enough market space with a

requisite trade regulatory system reflecting these above aspirations so that those outside,

particularly China, would find it attractive to join the agreement.

In China, views have been divided on whether or not China should join TPP. Over time, however,

this perspective has been moving towards favouring China as a future member of TPP. Informal

discussions on this topic also suggest that China is preparing itself for the process which will make

it a member of TPP. There are also a number of tangible steps which show China's preparation

towards TPP membership.

(a) Bilateral Investment Treaty (BIT)

The early steps were taken by China through initiating Bilateral Investment Agreement (BIT)

negotiations with the EU and US. The agreements will prepare the way for China to move towards

some of the requirements in TPP, including with respect to sustainable development and labour

standards. This is indicated for instance by the provisions of the US Model BIT which include both

7

environment and labour standards. Thus, the US 2012 Model BIT “expands obligations on

standards related to the environment (Article 12) and labor (Article 13). It requires Parties to not

“waive or derogate” from, and not to fail to effectively enforce, their domestic environment and

labor laws in order to encourage investment. It also requires Parties to recognize the importance of

their respective environmental laws and multilateral agreements and to reaffirm their commitments

under the International Labor Organization. In addition, it provides for more extensive consultation

procedures on matters related to environmental and labor standards.” 9 (emphasis added)

Specifically with respect to standards, the 2012 Model BIT requires “Parties to allow investors of

the other Party to participate in the development of standards and technical regulations on

nondiscriminatory terms. Further language recommends that nongovernmental standardizing bodies

in the territory of the Parties also observe this requirement (Article 11).”10 The provisions on

transparency in the 2012 BIT Model of the United States also have disciplines related to standards

(ibid.)

Analogous moves are being made also in the EU-China BIT, which “is likely to combine

investment protection with investment liberalization, while refining both substantive and procedural

rules and embracing social concerns, in order to achieve a better balance between the rights of

foreign investors and the regulatory needs of the host country”11 (emphasis added)

Reportedly, China has a side-agreement with the EU containing a Memorandum of Understanding

on Labour Standards. This would reflect China’s initial free trade agreement in Europe, i.e. with

Switzerland. In that FTA, “both sides confirm their commitment to upholding the UN Charter,

which is the basis for the subsequently elaborated UN human rights instruments. Regarding ILO

core standards, both countries commit to respecting those that have been ratified; China has ratified

only 4 (excluding the standards protecting freedom of association and prohibiting forced labour).

This is highly problematic. However, the agreement does contain a reference to both parties’

obligations arising from membership of the ILO and from the major ILO declarations on labour

rights and social justice, observing all 8 core standards.”12

(b) Reform Introduced in Third Plenum, November 2013

9See page 11 of Shayerah Ilias Akhtar and Martin A. Weiss, 2013, “U.S. International Investment Agreements: Issues

for Congress”, April 29, 2013. Congressional Research Service, 7-5700. See

https://www.fas.org/sgp/crs/row/R43052.pdf 10

Ibid. 11

See the final paragraph in http://ccsi.columbia.edu/files/2013/10/No-128-Shan-and-Wang-FINAL.pdf 12

See, http://column.global-labour-university.org/2014/10/switzerland-china-free-trade-agreement.html

8

The steps taken by China through FTA and BIT negotiations supplement its economic policy

reform announced in 2013, which has begun a market orientation of China's production sector,

including initial reforms in the politically difficult state enterprise sector of China.13

(c) Establishment of Free Trade Zones

This move is also reflected in the Free Trade Zones, such as those established in Shanghai14

and

Tianjin15

. The Tianjin Economic Zone includes an Eco City with carbon emission standards

significantly better than the large developed economies.16

Another part of this zone has high

intellectual property standards to attract knowledge intensive industries, including digital trade17

.

Further, there are about 150 global Fortune 500 companies investing in the zone, which facilitates

infusing global standards into domestic production, and an opportunity for domestic firms that plan

to invest abroad to learn from the practices of the Fortune 500 firms. In this context, it is interesting

to note that McKinsey has estimated that the number of China's firms among the top global Fortune

500 firms will grow from its current number of about 54 in 2010 to 120 firms in 2025.18

Policy reform in China takes place through such free trade zones like the Tianjin free trade zone,

and with experience in these zones, the reform policies are extended to cover larger parts of the

economy. The Chinese Government has now decided to increase the number of economic zones,

which shows a spreading of its reform policies.19

(d) China’s application to Trade In Services Agreement (TISA)

Another step that China has taken in the direction of TPP is to apply for membership of Trade In

Services Agreement (TISA), an application which has still not been accepted because, as surmised

by many, the US wants to determine the structure and content of TISA and only then seriously

engage with China for the latter's process of acceding to TISA. This experience suggests that any

similar application from China for TPP would also be likewise treated. A further complication

arises because China is presently negotiating Regional Comprehensive Economic Partnership

(RCEP) agreement, of which India is also a member. If China begins with an application to TPP

13

See Bloomberg Brief, “China’s Transition. The Third Plenum-One Year On”, in

http://www.brookings.edu/~/media/research/files/articles/2014/11/chinaplenumopt.pdf and the section on “China to

tackle monopolies, introduce competition: CPC”, in http://ie.china-embassy.org/eng/ztlt/18jiesanzhong/. For China’s

reform programme, see also http://www.xinhuanet.com/english/special/cpcplenum2013/; and, Sheng Bin, 2005,

“China’s Trade Development Strategy and Trade Policy Reforms: Overview and Prospect”,

http://ipekpp.com/admin/upload_files/Report_3_54_Chinarsquos_2973653904.pdf 14

See, KPMG, 2013, “A milestone for China’s new wave of economic reform — Shanghai Pilot Free Trade Zone”,

Issue No. 2013005, 30 September 2013. 15

See, KPMG, 2015, “China (Tianjin) Pilot Free Trade Zone is officially launched”, 8 May 2015. See,

http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Newsletters/ChinaAlerts/Documents/China-tax-

alert-1504-08-Tianjin-Pilot-Free-Trade-Zone.pdf 16

http://www.tianjinecocity.gov.sg/bg_kpis.htm 17

http://www.chinadaily.com.cn/china/2015-04/24/content_20534624.htm and,

http://www.chinaipmagazine.com/en/news-show.asp?id=7726 18

See page 13 of McKinsey Global Institute, 2013, “Urban world: The shifting global business landscape”, October 2013.

http://www.mckinsey.com/insights/urbanization/urban_world_the_shifting_global_business_landscape 19

http://www.china-briefing.com/news/2015/01/06/china-rolls-new-ftzs-expands-current-one.html

9

before conclusion of RCEP, that would take the wind out of the sails of RCEP negotiations because

the standards and disciplines in TPP are expected to be more stringent.20

(e) Aim to complete RCEP quickly

China is aiming to complete the RCEP negotiations as soon as possible, even by end of this year.

This takes on a sense of urgency for China also because the process of Trade Promotion Authority

(TPA) in the US has picked up and some expect the TPP negotiations to be completed in the not too

distant future.

(f) Aim to complete BIT with US soon

An interesting related point is China’s keenness to complete its BIT with the US this year. There

was some consideration from the Chinese side of announcing the BIT in October this year, when

President Xi of China is scheduled to visit the US. The US however may have reasons to delay the

announcement, to avoid complications in its process of getting the TPP through the US Congress.

The strategic decisions would therefore depend on the progress of TPA, but it is evident that from

China's side there is willingness to complete the BIT quickly.

(g) China has opened channels of communication on TPP and TTIP with the US and EU

The significance of China's interest in TPP can be further gauged from a recent statement by

China's Commerce Minister, which shows that China has established an information-sharing

mechanism with the United States and the EU regarding negotiations about TPP and TTIP21

. In this

regard, the Minister also said that China will continue to study and assess the impact of TPP and

TTIP on the regional and global levels (which he says will be large), and meanwhile accelerate

China’s own free trade zone strategies. As mentioned above, the free trade zones are areas where

China introduces its new reform policies and higher standards, including standards incorporating

environment and labour concerns.

With China preparing for the standards that will prevail in western markets after TPP and TTIP,

these standards will in effect cover about two-thirds of global trade. To compete and sell its

products in these markets, India would need both an ability to implement the content of these higher

standards, as well as satisfy the conformity assessment requirements to show that the standards are

actually being met. Without such preparations, India would tend to lose market access because of

the higher standards requirements in the markets resulting from TPP. In fact this potential loss of

market would be more significant than that due to trade diversion faced by TPP non-members on

account of tariff declines under TPP creating preferential markets for TPP members.

Three thoughts in this regard related to the ongoing preparation of China.

20

For some more information on the TPP disciplines, please see Ian F. Fergusson, Coordinator, Mark A. McMinimy

and Brock R. Williams, 2015, “The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress”, March 20,

2015, Congressional Research Service, 7-5700. See, https://www.fas.org/sgp/crs/row/R42694.pdf 21

Page 4, Washington Trade Daily, 9th March 2015

10

One, India should study the policy process in the free trade zones of China.22

This will give insights

into both China's preparation for the emerging standards as well as policies that would help with

attracting FDI.

Second, China has a well developed policy of dual track for standards, one focusing on domestic

standards and another on international standards. However, with its rising emphasis on

environmental and labour standards in private business transactions, combined with China’s own

focus on addressing Chinese domestic environmental concerns, China has begun to focus on

increasingly adopting international standards for domestic transactions.

Third, it is important to connect with countries that are not members of TPP, to make a combined

effort to encourage a more inclusive framework resulting from TPP. China and India may need to

work together on strategies for doing so. This will help create a more participative trade system,

allowing the possibility for large number of economies outside the mega-regionals to maintain their

access to the main markets which are hubs for global value chains. This inclusive process will also

reduce the potential conflicts that will arise in a limited membership preferential FTA which

accounts for a large part of global trade.

3. Importance of private standards

Private standards have proliferated for quite some time, and several concerns relating to such

standards have given rise to efforts to identify key underlying components, and to develop

mechanisms which will help harmonization or simplification of the diverse existing standards. The

WTO Agreement does not impose any significant discipline on such standards, so any problems

relating to them are not subject to dispute settlement under WTO. Furthermore, private standards

are now seen as indicating policy aspects which in the future would become relevant even for

mandatory standards emphasized by governments.

Private standards have a number of specific aspects such as higher content requirement than

mandatory standards, and evolving more frequently to embody increasing requirements over time.

It is also noteworthy that private standards prevail both for goods and services. Further, they are

now getting incorporated into Government purchases as well, such as for government procurement.

The US has included a number of them as mandatory standards. The prominence of private

standards has emerged especially due to the growth of value chains, and within these chains the

emphasis by lead firms on maintaining such standards throughout the chain. As the global or

regional value chains have increased in prominence, the lead firms have felt a need to monitor and

make sure that producers in different countries follow the relevant standards. This has become an

integral part of trade relationships, and the effect is magnified through foreign direct investment.

Interestingly, now FDI has begun to change qualitatively because developing countries receive a

majority of global FDI, and these economies have themselves started investing in other nations.

22

For instance, five pillar industries have been prioritized for development in the CBD. They are innovation-oriented

financial services; headquarters; new generation ICT; cross border trading and e-commerce; and the cultural, media and

creative industries. See http://www.law360.com/articles/646362/china-cuts-curbs-on-foreign-investment-in-3-new-

trade-zones.

11

Such integrated development will over time encourage greater harmonization or equivalence of

standards across trade and investment relationships.

The emerging mega-regional agreements will further enhance the tendency towards proliferation of

private standards. The preferential markets will create incentives for value chains among the

economies which are part of the mega-regional. Furthermore, dominant or lead firms in these value

chains will tend to be from the larger economies, such as the US in TPP. This implies that the

private standards relevant for these larger firms will become the dominant part of trade transactions.

Therefore, we will see an increase in the importance of private standards in international trade and

investment.

Another aspect to consider is that whatever be the relevant disciplines within the mega-regionals for

technical barriers to trade and sanitary and phytosanitary measures, there are also other parts of the

agreement which emphasize environment and labour standards, and thus provide a basis for

sanctifying these as being valid for all transactions involving private standards. Therefore, two

related developments will be:

• An increase in the significance of private standards in commercial transactions, and

• Within those standards, the criteria for sustainable development and social standards will

become more important and widespread.

In this background, and given the fact that virtually all product areas have many private standards,

we need to establish processes to collect information about them particularly for:

• Products which are important for trade, i.e. both goods and services;

• Important markets for such products and relevant standards in those markets;

• Specific problems with standards compliance (technical, structural, capacity weakness,

inadequate policy support);

• How does the private standard compare with a national standard which is in place for the

product, and the steps required to upgrade capacities;

• Costs of reaching the higher standard level;

• Identification of measures to improve standards which will have a significant impact also on

cost-effectiveness and competitive position of the domestic producer.

The same issues, of course, are also relevant for mandatory standards and this conceptual

framework for getting information and conducting requisite analysis would be relevant to them as

well.

4. Importance of Process Standards For Enhancing Competitiveness

When discussing standards, we often focus on product standards. The developments in global

markets show that process standards such as those relating to sustainable development and social

standards are becoming quite significant for maintaining and increasing commercial presence in

large parts of global trade. In addition, process standards play a very significant role to enhance

competitive efficiency while also raising the quality of products. Examples include textiles and

clothing exporters who may have a relatively high damage rate for their products. Quality

management could lead to a significant reduction in damage rates, resulting in cost-efficiency as

well as enhanced competitiveness.

12

The Maturity Model concept used by Quality Council of India (QCI) or the customization of skill

development that has been emphasized by ITI under Skill India Programme, are good methods for

addressing specific prevailing levels of competence and improving the performance sequentially to

the highest levels required. The flexibility of Maturity Model has to be effectively utilized by

linking it more actively with industry in order to achieve the vision of Make in India, Digital India

and Skill India Programmes.

This shows that process standards affect competitiveness in two different ways, access and

improving cost-effectiveness/quality enhancement.

The first, i.e. access, is to enable a firm or industry to meet the relevant standard criteria so that the

producer can have access to the foreign markets or global value chains. The other, i.e. cost-

effectiveness/quality enhancement, is to improve performance and reduce costs of production so

that the producer improves its competitive position through lower cost (or higher quality), and also

creates more attractive conditions for further investment.

To the extent possible, projects should be identified which would have an impact on both aspects of

competitiveness, namely access and cost-efficiency/quality improvement. This would generate

interest even amongst small and medium enterprises, because the positive effect on the bottom line

and increased opportunities through business would become more readily evident.

5. Regulatory coherence

An important feature of the growing inter-dependence through international trade and investment,

as well as the increasing significance of standards in these activities, is the emphasis on regulatory

coherence amongst the economies negotiating FTAs. This has multiple implications,23

including the

evolution of the discussion on standards within the WTO, where members of TPP or TTIP or RCEP

would try and come as a coherent group.

One particular initiative to consider may be that even without being a member of TPP, whether

India could discuss the possibility of having regulatory coherence with the US and EU, and in these

discussions to have particular emphasis on activities which form the basis of regulatory co-

operation as well. The various relevant activities could be justified under the WTO Agreement

itself, but the scope of what we suggest would be larger than that normally covered by discussions

under WTO. These could include dialogues, meetings, information exchanges, including for small

and medium enterprise related issues; training programmes and other assistance; and strengthening

cooperation and relevant interaction amongst regulatory authorities.

These efforts could be conducted along three tracks. One, with government to government

discussions, another with private sector to private sector interaction, and a third which combines

both government and the private sector. However, all these three tracks would need to be co-

ordinated for maximum effect.

23

See, Joshua Meltzer, 2015, “Standards and Regulations in the Trans-Pacific Partnership Agreement: Implications for

India”, Paper prepared for IISD project on Mega-regionals and India: Addressing the implications of global market

evolution. http://ipekpp.com/admin/upload_files/Report_3_54_Standards_1463610593.pdf

13

A linked point relates to domestically improving conformity assessment capabilities and developing

an understanding with key entities in the large external markets to facilitate the process of mutual

recognition. The developments in mega-regionals, in particular the TTIP, would provide good

insights into how to take this forward. There are also existing equivalency agreements among

certain developed economies which may need to be worked upon for inclusion of India as well. For

instance, for organic products regulation, it may be possible to consider converting the US-EU

MRA scheme, the EU-Canada equivalency agreement or the US-Canada agreement, in order to

have inclusion of developing countries together with transition periods and technical assistance to

facilitate the process.24

To some extent, these ideas could also be considered based on the

discussions which took place in the WTO’s Doha Round negotiations on non-tariff measures within

Non-Agriculture Market Access (NAMA).

Similar efforts need to be made for voluntary standards as well, depending on the priority sector

that has to be given specific attention. One possible platform for such initiatives is the United

Nations Forum on Sustainability Standards (UNFSS). This is a joint initiative of FAO, ITC,

UNCTAD, UNEP and UNIDO, and provides a platform for international dialogue on Voluntary

Sustainability Standards (VSS), which are related to environmental, social, occupational safety and

animal welfare issues25

. It provides a forum for the Government to co-ordinate the dialogue of

different relevant departments with some core groups, including traders, consumers, producers,

certification bodies, diplomats, NGOs and scholars. The primary focus of the UNFSS activities is

on VSS developed by non-governmental organizations and private companies, namely, business-to-

business standards; consumer-oriented standards; meta-standards covering different issues and

groups of products; issue and commodity specific standards; and company-specific standards26

.

The main concerns relating to VSS addressed by UNFSS pertain to avoiding undue burden and

verifying that the standards are prepared to objectively address the concerns which they aim to

mitigate. The analysis would aim at considering whether the standards are proportionate to the

(real) risk they claim to address; are scientifically-based; and that the burden of compliance is

distributed fairly.

6. Importance of Risk Assessment/Management Capabilities

Another important aspect to bear in mind is that standards, especially private standards, can be seen

to be of two different types. One, to address risk management, and another to carry out product

differentiation.27

Risk management standards are employed to ensure that a product has at least the

minimum acceptable level of the attribute demanded by the market and/or required by regulations.

They guarantee compliance with predefined standards.28

24

For more information, please see Willer,H. Lernoud,J. and Home, R., 2013.The World of Organic Agriculture 2013-

Summary,FIBL and IFOAM; and FIBL and IFOAM, 2012, The World of Organic Agriculture: Statistics and Emerging

Trends-2012. 25

See information on UNFSS on http://unfss.org/about-us/objectives/ (Access on 18th December 2014). 26

See http://unfss.files.wordpress.com/2013/02/unfss-presentation-briefing-18feb2013_as.pdf . 27

See for example Spensor Hanson and John Humphrey, 2008, Understanding the complexities of Private Standards in

Global Afri-Food Chains. https://www.ids.ac.uk/files/dmfile/HensonHumphreyLeuvenOct08.pdf 28

Ibid.

14

While there is some expertise in India on issues related to risk assessment, a more comprehensive

approach with an institutional mechanism may need to be created with the help of, and also within,

the government for developing a much wider competence in this area. This could be done through a

Standards Institute with an aim to strengthen capacity in this area by identifying specific steps

required by the Government/private sector to promote robust risk assessment. This initiative could

also help locate specific experts to assist the Government and industry in undertaking risk

assessment, and develop a programme with domestic and foreign experts to provide training in risk

assessment as well as applying the techniques for its management. A close link with business and

foreign expertise in this regard would thus be essential.

7. Examples of higher standards, particularly with reference to private standards

A relevant feature of higher global standards compared to domestic ones is that large firms in all

markets find it easier to meet these standards. The problem is far more significant for small and

medium enterprises. Therefore, we need to keep in mind a number of characteristics when

considering the abilities of Indian firms to meet international standards. These include:

(1) Size of the firm

(2) Sector/product category, including whether the product is part of specially identified categories

in major programmes, such as Make in India or Digital India.

(3) Type of standard: process/product/mandatory/voluntary

(4) Whether the standard is with generic effect or specific to a product

(5) Areas where domestic initiatives should increasingly rely on international standards

A detailed analysis of these issues would be the subject of a longer paper. We therefore consider

this in terms of some summary discussion.

We have mentioned above that private standards keep evolving over time, introducing higher

content. Therefore these standards are by definition going to keep becoming higher than the

standards prevailing in India. India is not a standard-maker in international markets, but a standard-

taker.29

Therefore, Indian producers have to keep improving their capacities to catch up with global

standards. This is also true for mandatory standards in several cases.

One generally accepted point is that small and medium enterprises find it more difficult to meet

international standards, particularly international standards. However, once these firms are equipped

with the capacity to meet international standards, they are able to be efficient part of GVCs as well

as the domestic value chains established within the nation by FDI. Therefore, specific focus to small

and medium enterprises should be given so that their product and process standards may both be

improved.

Consider now the list of products which are part of Make in India.30

We take some of them for

illustration.

29

Even China, with a much larger market space and many more large companies has found it difficul to be a standard

maker. See for instance http://origin.www.uscc.gov/sites/default/files/Research/RiseofChinainTechnologyStandards.pdf 30

See the list in http://www.makeinindia.com/sectors/

15

Active Pharmaceutical Ingredients (API) are a significant part of global value chains and thus

global standards become highly relevant for them. There is no Indian government quality standard

for API, and different quality API are imported into India, one for exports and another for domestic

market. Lack of standards for producing this in India creates uncertainty for foreign importers of

API from India.

For chemicals as a whole, no comprehensive regulation like European Union’s REACH

(Registration, Evaluation, Authorisation and Restriction of Chemicals), exists in India. The

Government has introduced a draft National Chemicals Policy as a step towards legislation similar

to REACH. It is important to take this forward effectively, as the draft national chemical policy

would help consolidate “multiple legislations”. In this context special attention would be needed for

small and medium enterprises because of their compliance difficulties.

In the US, the 40-year-old Toxic Substances Control Act (TSCA) is sought be replaced with new

legislation. Its 1976 TSCA addresses the production, importation, use, and disposal of specific

chemicals including polychlorinated biphenyls (PCBs), asbestos, radon and lead-based paint.

Special attention needs to be given to this development.

Electric motors would be relevant for a number of sectors. For electric motors, India still has IEC 2

as a minimum condition for market presence whereas in EU it is IEC 3. So EU minimum energy

performance standards (MEPS) are higher than that of India.31

Indian exporters will have to meet

the higher standard for the EU market.

Organics are potentially important and growing part of food processing. On standards for organics,

consider for example Biosuisse which is a private standard unlike the Swiss regulation (which sets

minimum conditions of entry). The case of Biosuisse is an example of private standards frequently

imposing stricter conditions of access and eligibility compared to regulations. So even if an

exporter meets the Swiss regulations, the product may not be able to meet Biosuisse criteria which

may be set by supermarkets as condition for the product being on the shelf (with no recourse for

exporter through WTO).

Another area is renewable energy. Standards for this are in a process of evolution, and India will

have to keep catching up as they become specified. However, India is at the frontier of standards

related knowledge in this area and the relevant consideration may be more about how to

disseminate information and create relevant capacities along the value chains, as such chains

develop over time. Thus, policy makers will need a clear understanding of what some of the major

relevant standards are along important segments of the clean energy technology value chain and

segments. This assessment should cover standards that:

• are well-developed and can be absorbed and implemented effectively,

31

http://www.iec.ch/perspectives/government/sectors/electric_motors.htm

16

• may require efforts to be better harmonized across the chain to ensure consistency in

quality,

• imply consideration of steps required for performance and safety of traded products, and

• pertain to areas where trade and deployment of clean energy equipment would be better

facilitated through mutual recognition initiatives.

Chart 1 below provides an illustration of some considerations that become relevant for Solar PV

value chain.32

More detailed discussion on these is provided by International Renewable Energy

Agency (IRENA) in its publication on “International Standardisation in the Field of Renewable

Energy".33

Chart 1. The solar PV value-chain: value-chain segments and activities

Source: Green-Rhino Energy Consulting, http://www.greenrhinoenergy.com/solar/industry/ind_valuechain.php

The task of managing standards is a complex one involving several stakeholders. IRENA (ibid.

page 11) specifies as follows a number of relevant activities pertaining to various stakeholders:

(a) Policy Makers and Regulators

• Supporting Compliance to Regulations and Legislation

32

My thanks to Mahesh Sugathan of ICTSD for providing me with this Chart. 33

See in particular Chapter 6 of this publication, which provides the recommendations based on the analysis in this

publication. See,

http://www.irena.org/DocumentDownloads/Publications/International_Standardisation_%20in_the_Field_of_Renewabl

e_Energy.pdf

17

(b) Standards Makers

• Facilitating Trade

• Facilitating Communication and Understanding

Verification &

(c) Manufacturers and Installers

• Common Performance Specifications

• Testing, Sampling

• Materials

• Quality Assurance, Quality Control

(d) Investors and Fiscal Support

• Confidence and Trust in what is being funded

• Ability to clearly specify what is being funded

• Ability to verify and audit investment

(e) Verification and Auditing

• Clear processes, procedures and specs to audit against

• Consistency

• Harmonised approach

• Protocols established

(f) Users of the Products and Services

• Confidence

• Trust

• Consistency

• Understanding – performance, safety, etc.

In this sequence of activities, it would be important to identify the priority areas and work on those

as a starting point.

Yet another issue relates to the regulatory provisions on data transfers and privacy, areas where

even the EU and US are discussing possibility of mutually agreed solutions to provide a safe

harbor; current discussions are going on to improve the present safe harbor conditions. This issue

would have important implications for IT services, which are an important part of Make in India

Programme. In this context, it is worth noting that in a speech on this issue, previous Vice-

President of EC and EU Justice Commissioner Viviene Reding emphasized, inter alia, the need for

establishment of an independent data protection Authority.34

In developing projects to close the standards gap that exists between domestic and international

standards, it would be worthwhile to consider other countries that have performed well, and also to

develop a database of successful case studies. Examples are provided below, for instance, in terms

34

See, http://europa.eu/rapid/press-release_SPEECH-14-62_en.htm

18

of comparative performance of India in meeting sustainability compliance requirements in selected

areas:

(a) Coffee: India accounts for 4% of global conventional production but only 2% of “sustainability

standard compliant production". Countries which invest in compliant production have the potential

to become leaders since the market is still young. For example, Peru accounts for 4% of global

production (like India) but accounts for 8% of global sustainable production.35

(b) Cotton: India accounts for 23% of global production and 21% of sustainable production. This

could be considered “relatively good”, but if we compare with Brazil or Pakistan then there appears

to be a need for improvement. Brazil accounts for 7% of global production, but for 30% of global

sustainable production. Similarly, Pakistan accounts for only 9% of global production but 22% of

sustainable production.36 Also, the experience in India regarding claims of Organic production

being questioned in global markets, and the subsequent decline of the market for Organic cotton

from India37

point to the importance of robust conformity assessment and traceability systems, as

well as regulations, at the national level.

(c) Timber: India accounts for 2% of global forested area, and for 9% of global roundwood

production; but has virtually no timber products certified under Program for the Endorsement of

Forest Certification (PEFC) or Forest Stewardship Council (FSC)38

, Over 90% of certified forest

products come from North America and Europe, pointing towards a clear “developed country

advantage” in the sustainable timber market. One of the explanations for Northern dominance in

sustainable timber markets is their stronger regulations and enforcement systems historically, thus

making it easier to implement voluntary sustainability systems.

8. Importance of International Standards for National Development Schemes Like Make in

India, Digital India, Smart Cities, and Skill India

We have seen above that global transactions are getting increasingly interlinked through trade,

investment and global value chains which incorporate both goods and services. Development

aspirations globally include a desire to go up this value chain and to efficiently use the tools of new

technology to achieve multiple national objectives. Particularly for middle income economies, the

aim is to use this process to acquire increasing technological capacity over time in order to break

through the so-called "middle income trap". These aspirations are embodied also in the various

schemes announced by the Government of India, such as Make in India, Digital India, Smart Cities,

and Skill India.

35

IISD, The State of Sustainability Initiatives Review 2014, page 181. 36

ibid., page 205 37

ibid., page 202 38

ibid., page 226

19

The role of standards is paramount in making these schemes successful. They will help maintain

high quality performance and are required to enable interoperability of different modes of

communication for social and economic activities, and also for generating domestic value chains

that can link with global value chains.

The message in this section is that these standards have to be based on international standards,

including in some cases the private standards that may be relevant for initiatives in major markets.

Any domestic concerns should definitely be part of the standards used domestically, but in that

process we need to also bear in mind that standards must facilitate India's move towards modernity,

global practices and for establishing a large presence of India in major markets abroad. That implies

we cannot move too far away from international standards as such.

Take first, the Make in India programme, whose main policy emphasis at present is to ease doing

business in India and thus to invite large volume of FDI. The aim is also to link the FDI with

domestic producers, and as stated by FTP2015, to create a hub in India for domestic and global

markets. This aim does require ease of doing business in conventional terms such as factors

emphasized by the World Bank in this regard. However, to expand the FDI link with domestic

producers and to establish a hub in India requires domestic capacity to meet the international

standards which will be a focus of large foreign firms that would invest in India to create such a

hub. This would ideally imply availability not only of newly trained domestic personnel and firms

to manage the transition, but also those already with experience through their ongoing production

processes. The latter would happen only if international standards are increasingly emphasized for

production within the nation, with an objective of improving quality and reaching larger markets.

Therefore, emphasis on international standards for products and processes, particularly for small

and medium enterprises, would become essential to achieve the full potential from Make in India

and in that process to make India a hub for global business.

Digital India is another major initiative which has the ability to transform India and provide

immense opportunities for economic and social benefits.39

It is noteworthy that Digital India aims

not only to link India digitally but also to develop the substantive basis for e-governance and

provision of various services such as e-health, e-finance and e-education. This would involve

standards relating to data transfers and privacy, as well as health, finance and education services

related standards. In such instances, since the overlap of domestic economic activities with global

markets and opportunities would be a natural outflow that would benefit from such a system, it is

relevant to consider international standards as a relevant part of the framework used for developing

these initiatives. That would also help India to be in touch with the global frontier which is moving

ahead in these areas, and thus provide enhanced opportunities domestically and from global markets

through, inter alia, e-education and e-health initiatives. This would also link up in major ways with

India's aspirations to use its existing strength in services to expand export possibilities in this area.

Digital India has to be seen in these terms as well as a tool for e-governance, and the importance of

making progress keeping in mind the relevant international standards is the path to modernization

and increased economic opportunities that will leverage this initiative.

39

See, http://deity.gov.in/sites/upload_files/dit/files/Digital%20India%20Presentation%20on%20DeitY%20website.pdf

20

Smart cities is a very forward looking initiative, which aims to bring several Indian cities to reach

the most efficient, inclusive, technology savvy, and sustainable levels that have been achieved by

other such cities abroad.40

By definition, the standards relevant for this initiative have to take

international standards as their starting point and then domestic considerations could be a basis for

expanding/amending them. Particularly relevant in this context would be the private standards used

in major markets which aim at similar objectives as encompassed in Indian and other smart cities.

Since these cities would have investment by major companies as well41

, meeting the international

standards in those cases could give important signals to other markets and Governments, especially

when discussions are conducted for possible conformity assessment.

Skill India is an initiative which spans across all the other areas, and provides a substantive base for

breaking through the static constraints of comparative advantage to develop dynamic comparative

advantage and transition up the value chains both domestically and internationally. The importance

of improving skills is an important insight from the experience with industrial policy initiatives,

with innovation strategies, and more recently by senior policy economists such as Arvind

Subramanian who has discussed this as the crucial aspect which will immensely improve the

potential of what he terms as India’s "transformational sectors".42

An important aspect about skills is that they cannot be developed in a vacuum. They have to be

relevant for the specific activities which they will facilitate or serve. In several cases, they cannot be

divorced from the other large development initiatives including those mentioned above. Likewise,

an important part of Skill India is to fill the gaps in skills that are faced by Indian producers, for

both goods and services, so as to expand their income earning opportunities. In several cases these

will be required for linking up with international markets or will accompany FDI generated value

chains. As mentioned above, in all these situations, international standards would become an

important part of the preparation of skilled personnel through the Skill India programme. This does

not mean that any and every training should raise the skills to international levels. QCI for instance

has a developed a concept of Maturity Model, to provide training to help achieve modular, step-

wise progress for producers, which enables them to benefit from different types of opportunities

along the way to ultimately reach capacities that are required for meeting international standards.

This approach can be used also to move towards another important vision of the Indian Prime

Minister, namely "Zero Defect Zero Effect". This vision cannot be met without moving towards

best international achievements in the area of reducing inefficiencies and having lowest adverse

environmental impact. International standards and best practices are an essential guidepost in this

journey.

40

See Draft Concept Note on Smart Cities dated 3rd December 2014, prepared my Ministry of Urban Development,

Government fo India 41

The smart cities planned along the various freight corridors in the country have specific large companies from abroad

involved in establishing facilities both for operational facilitation of the city as well as production of goods and services

from the smart city which will provide effective, modern employment for the dwellers in the city. 42

Presentation by Arvind Subramanian at the Conference on "Changing Global Economic Scenario: Implications for

India's Trade Policy and Make In India Programme", organized on 12 May 2015 by IISD, FICCI and WTO Centre,

New Delhi. See also Amrit Amirapu, Siddharth George and Arvind Subramanian, “Transformational Sectors-The Indian

Challenge”, Business Standard, 14th May 2015.

21

9. Four Pronged Strategy

The discussion above has already suggested several initiatives to implement with respect to

standards. In this section we provide a conceptual framework for those and other relevant policy

steps. In this framework, we consider the various issues in terms of strategies which have to cover

at least four dimensions for addressing the emerging issues. The various other steps mentioned

earlier in the paper could also be allocated into these four categories, but we do not attempt to do so

yet in this paper. The four pronged strategy is as follows:

One, is to devise a flexible policy framework which can allow quick response whenever the

situation requires it. This would also require building capacities within policy making institutions as

well as for business.

Second is to focus on the link between trade, investment, value chains, technology and skill

acquisition, and an important role of services in all these aspects.

Third, the important role of lead firms in specifying private standards, to focus on private standards

as well as public mandatory standards (also called regulations) and other voluntary standards.

Fourth, a need to develop links with other countries, both for exchange of technical expertise to

enhance capacities and to build coalitions that could work towards making more inclusive the

fragmented systems that are appearing through FTAs, especially the mega-regionals.

(a) The Standards Roadmap developed by the first Standards Conclave was a very powerful vision,

which partly has been achieved through progress in creating a modern standards and conformity

assessment policy framework through evolution of policy initiatives for this purpose. However, this

has to be supplemented by actual training of the Indian producers and even the policy makers

themselves. In this context, the training should help producers to access various value chains, by

meeting both mandatory and private/voluntary standards. A matrix of these standards could be

prepared and training could be provided in a way which comprehensively covers all relevant

aspects.43

This would require a special training Institute, that is practical and substantive. Such a

training institute could be established by combining the professional and steering capacities of

Quality Council of India and an Industry Forum such as that organizing this Forum (i.e. the

CII). This Institute could use expertise from abroad as well and also become a base for providing

assistance to other developing countries, especially LDCs in Asia and Africa. Consideration of

foreign expertise could be from institutions such as the World Bank or ITC, or platforms developed

by multiple UN agencies such as the UNFSS we mentioned above, or Institutes such as the IISD

which have specialized knowledge on standards (particularly private standards), as well as experts

from countries which are part of TTIP and TPP, such as Sweden and Canada, which have well

developed programmes in this area. Any other more relevant entities would of course also be good

candidates for such common efforts and the list of experts should be expanded as they become

available.

43

Interestingly, the International Trade Center of Geneva is using such a matrix approach for addressing diverse private standards applicable to any single product.

22

Thus, the Institute could inter alia attempt to map the gap between India's standards and the new

standards in TPP / TTIP markets, and suggest a road map (including training) for Indian exporters

to comply with the new standards. It would get help in this as well as in risk

assessment/management techniques from its associates, like some established platform such as the

United Nations Forum on Sustainability Standards (UNFSS).

(b) The overlap between trade, investment, global value chains, technology and services shows that

an integrated approach would have to be taken for developing effective standards strategy. Effective

in the sense that the relevant efforts bear fruit in terms of addressing the key constraints that limit

commercial opportunities for Indian producers. Thus, it is good that the Standards Conclave is

looking at standards for services as well. However, when analyzing the lessons from the discussion,

it is important to do so within a larger inter-linked framework such as that with value chains,

because services growth requires the contribution of other, supporting products and policies in their

value chains. Such an approach would also help to simultaneously address more than one major

objective of the Indian Government, because today more than ever before, we live in a world with

overlapping initiatives, addressing each of which in a comprehensive framework is important to

achieve the maximum potential of any single objective. At the same time, this approach has

multiple externalities and over time will also require co-ordination amongst relevant stakeholders in

this process. Though we have in general been discussing relevant issues in terms of value

chains, with this perspective, we have to actually go beyond thinking in terms of even value

chains as such, and consider a series of webs of interlinked activities. This will help to identify

the main constraints to address. Further, considering these linkages will also help identify the

synergies, such as for instance between the various development programmes of India that we have

mentioned above.

(c) The most important standards for market access have for long been mandatory standards or

technical regulations. However, with the growth of value chains, private standards emphasized by

lead firms have become equally important. In fact, to get access to the global value chains, these

private standards have become "in effect" mandatory. Their scope and coverage will only increase

with mega-regionals such as TPP, and even more so with conclusion over time of TTIP, BIT

between China and the US, and the move made by China to prepare for the post-TPP world of trade

and investment.

In this background, it is important to keep in mind both the features of GVCs as well as the lead

firm in each such significant GVC, say for chemicals, electronic machinery, or clothing exports.

Sometimes the lead firm may be the one which produces a major product, or it may be the one with

the most significant market reach and presence as a sales oriented entity. Identifying the lead firm

and deciding the strategy on that basis is likely to be a far more fruitful enterprise than

looking at the market situation in isolation of such strategies.44

44

See for example, Gary Gereffi and Timothy Sturgeon, 2013, “Global Value Chain-Oriented Industrial Policy: The Role of Emerging Economies”, in D.K. Elms and P. Low (eds.), 2013, Global Value Chains in Changing World, WTO, Fung Global Institute and Temasek Foundation Centre for Trade and Negotiations.

23

(d) We have today an increasingly interdependent world, where any strategy implemented alone is

unlikely to have as much of an impact as when efforts are made together by various nations to

address common concerns. This is as true of standards as any other major initiative with a

multilateral effect. As mentioned above, the issue of standards has been a concern even earlier,

especially due to the proliferation of private standards. This is getting even more complicated as

mega-regional negotiations such as TPP result in fragmented trade regimes and also create

preferential markets wherein the private firms will be encouraged to develop agreement-oriented

value chains and with private standards that will incorporate various objectives emphasized in that

agreement.

Even if we consider all the three mega-regionals, TPP, TTIP and RCEP, these have only 49

countries as members. In contrast, the WTO has a membership of 161 members. All of Africa is

outside the mega-regionals initiative. Further, with higher standards, the non-members would find it

difficult to meet the requirements for market access, which implies that the emerging market

conditions in the markets of large economies will be less and less easy to meet. This will not only

lead to a fragmented global trading system but also carry within it the seeds of conflict and

dissension. It is important that all non-members be helped with capacity augmentation, and any

other measures which convert the fragmented system into an inclusive one, including through more

inclusive conformity assessment initiatives. In addition, the larger economies which are non-

members, for instance of TPP, should also consider similar co-operative initiatives with other non-

members.

India can play a constructive role in this context, both by providing technical assistance and by

developing coalitions of like-minded nations outside the TPP to consider options that could convert

the emerging fragmented trading system into an inclusive one. This is a necessary step in a situation

where countries find the conditions of membership of the mega-regional as being too onerous. With

both a diplomatic as well as technical initiatives, these non-member countries would raise the

issue of exclusion and fragmentation, and could help create a forum for discussion with key

members of TPP. Thus, what China has created today for itself with EU and US to know

more about TTIP and TPP, could take place at a more inclusive level with membership

spanning across various income levels, and including both China and India. That would be

essential for developing inclusive systems which help mitigate possibilities of trade and

investment conflicts over time. And for this initiative, a focus on international standards

(particularly private standards) as a beginning point, is both relevant and fruitful.

10. Conclusions

The first Standards Conclave last year, laid a very good foundation for standards policy and

capacity enhancement for Indian producers, including a roadmap for future action. One year later,

that roadmap had indeed entered the consideration of important policy and business initiatives, with

recognition of the significance of modern global standards in efforts made to revise legislation as

well as major policy statements such as the FTP2015. The links of standards with domestic

initiatives such as Make in India are well recognized. What is important is to also recognize their

role in virtually all such important programmes, including for instance Digital India and Smart

Cities. Furthermore, the relevance of standards cannot be seen in isolation of ongoing global

24

developments, most importantly through mega-regional negotiations such as the TPP. The likely

developments highlight the importance of both international standards as well as private standards

in the onward journey of India to become a much more prominent presence in global systems and a

larger presence in the markets of other large economies. This requires inter alia taking the next

steps from the success of the Standards Conclave last year, through deliberations on practical steps

in the discussions during the Standards Conclave this year.

A number of specific initiatives have been suggested by this paper, which could be considered

within a conceptual framework of a four-pronged strategy. These initiatives require both substantive

and technical steps, as well as co-ordinated system building and establishment of a training Institute

that enhance capacities of both Indian policy makers and producers. Prioritization amongst the

various steps suggested is of course important, but the broad thrust which is the basis for developing

the four pronged strategy could be considered as relevant guide posts for the overall direction of

change.

Indian policy makers have done extremely well for standards policy in terms of changing the

framework of consideration in the new environment. It is time to raise that effort to another level to

upgrade commercial and governance performance on the ground by government and industry in a

manner which develops scope for better governance, as well as creating economic opportunities

through market access and greater competitive capacities for Indian producers. These steps will

have a larger than expected impact because they will also energize and facilitate the major domestic

programmes such as Make in India, Digital India, Smart Cities, Skill India, and the vision of Zero

Defect Zero Effect. Standards, particularly international standards, will play a major role in this

context. Efforts need to be co-ordinated with clarity in this regard, with steps leading to transition

from the current clear vision on standards towards substantive achievement in terms of achieving

high quality economic and social objectives in a time-bound manner.