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Friday, February 1, 2013

Excessive Standardization Pushed by the European Commission?

The E.U.’s internal market is not typically construed in terms of federalism. Whereas the market connotes homogeneity or at least easy transfers across state lines, a union of states wherein both are semi-sovereign implies diversity within certain commonalities. The economic and political systems are not mutually exclusive, or inert, however. Put another way, too much economic standardization begins to run up against the heterogeneity that is inherent in an empire-level union of republics.
In its proposal, Single Market Act I (2011), the European Commission stresses the need for further standardization so as to enhance economic growth, given the negative impact of the debt crisis in a few E.U. states. “Standardization is a primary tool for the free movement of goods whilst ensuring product interoperability, safety and quality.” Interoperability is one thing, however, whereas product quality can be expected to differ according to whether a given company is pursuing a premium or low-cost strategy. To demand standardized quality for a given product sold by Wal-Mart and Macy’s, for example, ignores the role of market segmentation in business. Other things equal, consumers would be left without low-price alternatives as Wal-Mart’s costs in meeting the standardization requirements would translate into higher prices.
                                       Standardization is even in the exterior of the Commission's building. Even the repetition of the E.U. flag implies standardization.
The application of greater standardization becomes even murkier in the Commission’s treatment of business services. “In order to avoid the emergence of new barriers and to facilitate the cross-border provision of services, particularly business-to-business services, . . . services standardization should be developed at (the E.U.) level, taking full account of market needs.” That market needs may differ by state or even region (of the E.U.) may follow from the diversity sustained by the on-going federal system. Put another way, the service sector can be expected to resist full standardization  throughout the Union.
Additionally, the Commission refers to its “performance checks” applied to standardization in the service sector. Given the expertise required in certain business-to-business services, such as managerial consulting, it is difficult to contemplate the bureaucrats as being able to assess whether more standardization is warranted or even possible. Consulting is so client-specific that standardization other than on the requisite training of consultants could be counter-productive. The Commission would be on firmer ground going with its proposed “skill passport” and training standards rather than trying to standardize such services. This is particularly true of professionals—CPAs, physicians and lawyers.
To be sure, standardization in the transport, energy and electronic-communications networks sectors is vital given the salience of interstate usage. In its proposal, the Commission does not differentiate between these sectors and the service sector.  It has already been noted above that interoperability, safety and quality are also being treated as equally subject to standardization. It is as if the Commission was in love with the concept itself, spraying it on everything it could touch.
By implication, it can be surmised that officials in the executive branch of the Union are inclined to shirk federalism. In particular, one could predict a proclivity to understate the utility at the union level of recognizing and accommodating culturally-based differences between the states. Whereas federalism protects such differences that are completely natural in an empire-scale union, excessive zeal for business standardization can undermine that particular virtue of federalism. All is not lost, however. That virtue is consistent with targeted applications of standardization in accord with criteria relevant to business, but not with the Commission’s blanket approach.  What is needed is for the Commission to come up with such criteria that permit differentiation in applying standardization variously to different sectors (e.g., transport vs. services) and product attributes (e.g., interoperability and quality).

Proposal for Single Market Act I, The European Commission.