2
Standards Development

Standards serve many different purposes, as noted in the previous chapter. There are also many ways of developing standards. Figure 2-1 defines the three principal types of standards by development process. The first comprises consensus-building activities among private firms, technical experts, customers, and other interested parties. These groups write standards through a formal process of discussion, drafting, and review. Group members attempt to form consensus on the best technical specifications to meet customer, industry, and public needs. The resulting standards are published for voluntary use throughout industry. Standards arising from these processes are termed voluntary consensus standards. Examples range from dimensions of valve fittings in household plumbing to performance characteristics of automotive structural materials. A variety of private organizations produce voluntary consensus standards, including industry and trade associations; professional societies; nonprofit, standards-setting membership organizations, and industry consortia.

No single organization, public or private, controls the U.S. standards development system. The efforts of many U.S. voluntary consensus standards organizations, however, are coordinated by the private, nonprofit American National Standards Institute (ANSI). This organization sets guidelines for groups to follow in managing the consensus-seeking process in a fair and open manner. ANSI reviews and accredits many U.S. standards-setting organizations for compliance with these guidelines. It also approves many of the standards these organizations produce, designating them as American National Standards. These and other central roles that ANSI plays in the U.S. standards system, including representing



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--> 2 Standards Development Standards serve many different purposes, as noted in the previous chapter. There are also many ways of developing standards. Figure 2-1 defines the three principal types of standards by development process. The first comprises consensus-building activities among private firms, technical experts, customers, and other interested parties. These groups write standards through a formal process of discussion, drafting, and review. Group members attempt to form consensus on the best technical specifications to meet customer, industry, and public needs. The resulting standards are published for voluntary use throughout industry. Standards arising from these processes are termed voluntary consensus standards. Examples range from dimensions of valve fittings in household plumbing to performance characteristics of automotive structural materials. A variety of private organizations produce voluntary consensus standards, including industry and trade associations; professional societies; nonprofit, standards-setting membership organizations, and industry consortia. No single organization, public or private, controls the U.S. standards development system. The efforts of many U.S. voluntary consensus standards organizations, however, are coordinated by the private, nonprofit American National Standards Institute (ANSI). This organization sets guidelines for groups to follow in managing the consensus-seeking process in a fair and open manner. ANSI reviews and accredits many U.S. standards-setting organizations for compliance with these guidelines. It also approves many of the standards these organizations produce, designating them as American National Standards. These and other central roles that ANSI plays in the U.S. standards system, including representing

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--> DE FACTO STANDARD A standard arising from uncoordinated processes in the competitive marketplace. When a particular set of product or process specifications gains market share such that it acquires authority or influence, the set of specifications is then considered a de facto standard. Example: IBM-compatible personal computer architecture VOLUNTARY CONSENSUS STANDARD A standard arising from a formal, coordinated process in which key participants in a market seek consensus. Use of the resulting standard is voluntary. Key participants may include not only designers and producers, but also consumers, corporate and government purchasing officials, and regulatory authorities. Example: photographic film speed--ISO 100, 200, 400, etc., set by International Organization for Standardization (ISO) MANDATORY STANDARD A standard set by government. A procurement standard specifies requirements that must be met by suppliers to government. A regulatory standard may set safety, health, environmental, or related criteria. Voluntary standards developed for private use often become mandatory when referenced within government regulation or procurement. Example: automobile crash protection—air bag and/or passive seat restraint mandated by National Highway and Traffic Safety Administration FIGURE 2-1 Types of standards. U.S. positions in international standards organizations, are discussed in this chapter. Not all private-sector standards are set through consensus. Many arise through competition in the commercial marketplace. When one firm's product becomes sufficiently widespread that its unique specifications guide the decisions and actions of other market participants, those specifications become a de facto market standard. De facto standards are sometimes called industry standards. A de facto standard is usually promoted by a firm or organization in pursuit of commercial benefits. These benefits include gaining economies of scale, protecting or increasing market share, and obtaining revenues from licensing of intellectual property, among others. The IBM personal computer architecture, established and promoted by IBM beginning in 1981, is an example of a de facto industry standard.1 De facto standards may arise without formal sponsorship, simply through widespread, common usage. Cultural norms and customs, including informal business practices, are unsponsored standards. The arrangement of keys on a typewriter or computer keyboard—the QWERTY keyboard, so named because of the placement of those letters in one row—is an example of an unsponsored, de facto technology standard. Although no firm or group of firms actively promotes the QWERTY standard, it remains the standard arrangement of most keyboards.2 Most standards of interest in the context of this report, however, are actively sponsored by one or more organizations or individuals.

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--> Mandatory standards are standards set by government with which compliance is required, either by regulation or in order to sell products or services to government agencies. Public-sector standardization encompasses many levels of government. Federal, state, regional, and local government agencies set regulatory standards on products and processes in order to protect health, safety, and the environment. They also produce specifications for public procurement of goods and services. Some of these standards are written by government agencies, whereas others are developed in the private sector and adopted by agencies. Even in the case of standards written by government, the process of development is not without private input or participation. For example, laws governing administrative processes—such as the Administrative Procedures Act—require public review and comment on proposed regulations. The Federal Register regularly publishes requests for comments on standards drafted by federal agencies. Technical requirements for safety devices on machinery, developed by the U.S. Department of Labor's Occupational Safety and Health Administration, are an example of mandatory standardization. The boundary between voluntary and mandatory standards is not always distinct. Government standards writers frequently refer to privately developed, voluntary standards within the text of regulations and procurement specifications. Mandatory standards may cite voluntary standards in whole or in part, with or without additional criteria beyond those set in the referenced standard. For example, many of the regulations applied in state and local building codes require that electrical materials, such as wiring, meet portions of the National Electrical Code, a consensus standard developed by the private, nonprofit National Fire Prevention Association.3 In addition, procurement specifications set by major manufacturers are, from the perspective of their suppliers, mandatory for doing business in the same way that government procurement standards are mandatory. The mechanisms by which standards are developed are extremely diverse. There is no single process in the United States or worldwide for creating and adopting standards. There is great variability among different standards in such attributes as purpose, scope, specificity of requirements, relative technological sophistication, and speed of development. Many different types of organizations, companies, government agencies, and consumers are users of standards. The variables that affect the pattern of standards development in an industry or market sector include, among others, (1) industry size and concentration; (2) dominance of specific suppliers or buyers; (3) level and speed of technological advance; and (4) public interests such as safety, health, and environmental protection.4 Despite the diversity of U.S. standards development processes, however, some generalizations can be made that are useful in assessing the performance of the U.S. standards development system and providing guidance to policymakers. This chapter examines the major components of the U.S. system, turning first to the private-sector and then the public-sector components. Implications of the decentralized, market-oriented structure of U.S. voluntary standards development

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--> processes are highlighted, as well as interactions between voluntary and mandatory standards-setting mechanisms in the United States. Scope Of The U.S. System Standards exist for virtually all industries and product sectors. The 20 leading nongovernment standards developers in number of standards produced, for example, encompass a spectrum of industry sectors: aerospace; electronics; automotive and mechanical engineering; petroleum products; chemicals; pulp and paper; and cosmetics. This group also includes developers of safety-related standards such as those for fire protection, industrial hygiene, consumer product safety, and product testing.5 Government standards at the federal, state, and local levels, including privately developed standards adopted by government, are similarly diverse. These encompass manufacturing, transportation, and communications equipment; environmental protection and public health; food, drugs, and consumer products; construction materials, such as electrical wiring, plumbing, wood, stone, and concrete; and the broad range of products procured for government use such as office equipment, vehicles, communications systems, and military hardware.6 The number of U.S. standards at a given point in time is difficult to identify. Table 2-1 details the approximate number of formal standards maintained in a current, active status by the main categories of public and private standards developers. The public sector list begins with the Department of Defense (DoD), which develops and maintains more formal standards than any other organization in the United States. The number of DoD standards was estimated by the National Institute of Standards and Technology (NIST, a branch of the Department of Commerce) at 38,000 in 1991. The number has begun to shrink, however, because DoD now decommissions more standards than it develops each year. Remaining federal procurement and regulatory standards bring the total of U.S. government standards to 52,000.7 The number of private-sector, voluntary consensus standards in the United States is 41,500.8 Table 2-2 lists the 10 leading standards-developing organizations (SDOs) in the United States, by number of standards produced. There are three types of private standards-developing organizations. First are technical and professional societies that engage in technical standards development. These consist of organizations of individuals who practice a profession or discipline, frequently a branch of engineering. Second are industry associations, whose membership consists of firms in a specific industry or trade. The third group has the more generic designation of standards-developing membership organizations, whose membership is open to individuals interested in standardization. Unlike professional societies for which standards development is one among many functions, these organizations' primary focus is standards development and standards-related activities.

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--> TABLE 2-1 —U.S. Standards, by Developer (active standards as of 1991) FEDERAL GOVERNMENT NUMBER OF STANDARDS Department of Defense 38,000 General Services Administration (nondefense procurement) 6,000 Other federal (primarily regulatory) 8,500 Examples: Environmental Protection Agency, Occupational Safety and Health Administration, Federal Communications Commission   Total 52,000 PRIVATE SECTORa NUMBER OF STANDARDS Scientific and Professional Societies 13,000 Examples: American Society of Mechanical Engineers (ASME), Institute of Electrical and Electronics Engineers (IEEE)   Trade Associations 14,500 Examples: National Electrical Manufacturers Association (NEMA), Computer and Business Equipment Manufacturers Association (CBEMA)   Standards-Developing Membership Organizations 14,000 Examples: American Society for Testing and Materials (ASTM), National Fire Protection Association (NFPA)   Total 41,500 Overall Total (Federal Government and Private Sector) 93,500 a Not including de facto industry standards. SOURCE: Toth, Robert B., ed. Standards Activities of Organizations in the United States. NIST Special Publication 806. P. 4. National Institute of Standards and Technology. U.S. Department of Commerce. Washington, DC: U.S. Government Printing Office, 1991. Data on numbers of standards must be treated with caution, for several reasons. First, the definition of what constitutes a standard is not exact. There may be uncertainty in whether to consider a product description, specification, definition of a term, or description of a procedure to be a standard. Different agencies and organizations may vary in their interpretation of such cases. The context of the discussion is also significant. Given this report's primary focus on the links among standards, conformity assessment, and domestic and international

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--> TABLE 2-2 —Top 10 Private Standards-Developing Organizations (active standards as of 1991) TOP 10 DEVELOPING ORGANIZATIONS IN THE U.S. NUMBER OF STANDARDS American Society for Testing and Materials 8,500 Society of Automotive Engineers 5,100 U.S. Pharmacopeia 4,450 Aerospace Industries Association 3,000 Association of Official Analytical Chemists 1,900 Association of American Railroads 1,350 American Association of State Highway & Transportation Officials 1,100 American Petroleum Institute 880 Cosmetic, Toiletry & Fragrance Association 800 American Society of Mechanical Engineers 745 performance of U.S. manufacturers, the discussion here is limited to product and process standards. Professional certification, for example, such as that required of accountants, lawyers, and health care providers, is a type of standard that is not considered in this report. Second, the distinction between a single standard with many sections and a series of separate, but related, standards may be arbitrary. The American Society of Mechanical Engineers (ASME) produced and regularly updates the Boiler and Pressure Vessel Code, a single standard running into thousands of pages. The code currently has 11 major sections covering design, fabrication, inspection, and safe operation of boilers, pressure vessels, and nuclear power plant components.9 The choice of writing a set of specifications as a single standard or a series of standards is made by each developing organization or agency, according to its own guidelines. Third, not all published standards have equal influence in the economy. Some voluntary standards fail to achieve widespread acceptance or use in the marketplace. The most widely used 15 to 20 percent of standards developed by private organizations accounts for 80 percent of those organizations' orders for printed copies of standards.10 These standards may be presumed to have greater economic and technological significance than those that are rarely used. A standard applied at a critical point in a system, market, or industry, however, could have an impact far greater than the number of copies ordered from its publisher would indicate. Both voluntary and mandatory standards may become technologically obsolete, yet remain in a technically active status. For example, an organization may

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--> choose to maintain an outdated standard for the benefit of persons who own or acquire a piece of old equipment and need access to technical information in order to operate or maintain it. Alternatively, a standard may remain in existence simply for lack of incentive to unlist it. As many as 25 to 30 percent of U.S. government and private standards have been estimated to be obsolete.11 Finally, two groups of product and process standards are omitted from the data in Figure 2-1. First, information on numbers of state and local government standards is extremely limited and fragmentary. These standards are concentrated in such areas as building and construction materials, workplace safety, environmental protection, agriculture, and foods.12 Second, de facto standards are also excluded from the table. The same difficulties in enumerating public and private formal standards apply in the case of de facto standards set by firms through market competition. In addition, the distinction between a product that sets a standard, influencing the design of others, and a product that is simply one among many is highly subjective. The absence of a formal, institutional process for designating de facto standards compounds the difficulty of identifying, much less quantifying, the output of de facto standards development efforts. These factors, among others, make it clear that neither a determination of the economic impact of standards activities in the United States nor an overall assessment of the U.S. system should focus closely on the quantities of standards produced. Valid assessments depend, instead, on examination of the efficiency and effectiveness of standards development in relation to the needs of industry, government, and society; the economic and technological implications of the U.S. system's characteristics; and the efficacy of existing mechanisms for strengthening and improving the system. Private-Sector Standards Efforts to coordinate standards development in the United States began to develop momentum early in this century. One factor spurring these efforts was the realization that technical standards were needed to ensure the safety of many new products of the industrial age. The first version of the American Society of Mechanical Engineers Boiler Code was written in 1914, in response to serious hazards posed by poor-quality boilers, which were prone to explode. The code—today, the Boiler and Pressure Vessel Code—performs several of the functions of standards outlined in the previous chapter. Most significant is its role in protecting safety by providing a standard against which unsafe boilers, components, and manufacturing methods can be identified and rejected. Large portions of the code have become mandatory through reference in government regulation in the United States and many other countries.13 The code also acts as a guide for manufacturers in the techniques of producing and maintaining safe boilers, pressure vessels, and nuclear reactors. In this way, the code fosters the diffusion of best practices throughout the industry.14

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--> A large fire in downtown Baltimore in 1904 was another impetus to standardization. Fire engines from other cities that came to assist the Baltimore fire department were unable to connect their hoses to the local hydrants. The disaster, which included the loss of 1,526 buildings, could have been prevented if hose connections had been standardized, as they are today.15 Safety concerns were not the only factor that fostered industrial standardization in the United States. The economies of scale afforded by mass production are driven by standardization of parts and processes, as discussed in Chapter 1. The automotive industry was an early proponent of standardization, not only within each manufacturer's own plants, but industry wide. There were several incentives for standardization across the industry: It enabled parts suppliers to produce large quantities for multiple customers, such that suppliers could gain economies of scale and lower their costs. Suppliers passed these savings on as lower prices to automobile manufacturers. In addition, standardization meant that if one supplier went out of business (a frequent occurrence in the early years of the industry), shortfalls of parts could be made up by other suppliers without a delay for reconfiguring their machinery to new specifications. Standards also allowed manufacturers to impose minimum quality criteria on their suppliers, particularly for steel. In general, standardization benefited both suppliers and manufacturers throughout the industry.16 Coordinating standards development among different automotive firms became the responsibility of the Society of Automotive Engineers (SAE). SAE was (and remains) a professional society whose membership spanned the industry, including both manufacturers and suppliers; was independent of any one firm or set of interests; and had the technical competence for the required work. Its success in reducing the variety of parts and in promoting interchangeability and quality was such that the National Automobile Chamber of Commerce, an industry trade association, estimated in 1916 that SAE standards yielded cost reductions of 30 percent in ball bearings and electrical equipment and 20 percent in steel.17 Economic Rationale for Consensus Standardization These examples from the history of standardization illustrate one of the most important economic aspects of standards. Uncoordinated market mechanisms alone do not ensure that necessary standards are set. Firms acting in isolation are not as effective at setting an industry standard as producers, customers, and other interested parties acting in coordination. Even in situations in which all participants in an industry sector would benefit from standardization, cooperation and communication among them are usually necessary for a standard to emerge.18 A primary reason cooperation is necessary is that standardization requires gathering information and developing compromises among the needs, interests, and capabilities of many different interested parties. It is not impossible for a

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--> single firm to accomplish this task by marketing a product that meets the needs of diverse parties. In some cases, there are economic incentives to make the attempt. If a firm is successful in promoting its own, proprietary solution to a technological need and sets an industry-wide de facto standard, it may reap large benefits from dominating the resulting market. Microsoft Corporation's MS-DOS operating system is an example of success in this area. However, the costs of coordinating and accommodating multiple interests can be high. In addition, if a rival firm simultaneously attempts to set a competing standard, the companies can become caught in a winner-take-all game of investment and price cutting. In this case the benefits of success are outweighed by the costs of competing to set the standard.19 Another important reason the uncoordinated market can sometimes produce too few standards derives from the public nature of standards. When a standard has been set, everyone may use and benefit from it. This is true whether or not they participated in its development. The potential thus exists for free riders to benefit from standards-setting work done by others. In economics terminology, standardization is a public good.20 A standard can be used any number of times without depleting its utility. The more widely a standard is used, in fact, the more valuable it becomes—not only to those who originally developed it, but to all users. Communication, compatibility, economies of scale, and other benefits of standards all increase as those standards become more widespread. Conversely, if a standard is little used, its value is limited. Although coordination among participants in an industry takes time and effort, it increases the likelihood that the standard will become widely used and thus acquire value. These theoretical examples are not meant to show that the free market is unable to produce standards. They demonstrate that individual firms acting alone may be unable to justify the cost of developing and promoting their own proprietary standards against the risk that their efforts will fail to establish a de facto standard. A firm that bears the costs of developing a standard by itself cannot generally capture rewards equal to the overall social and economic benefit that accrues from standardization. (An exception is noted in the next paragraph.) As a result, market incentives alone are not sufficient to encourage firms, acting in isolation, to produce as great a degree of standardization as would be most economically beneficial to the industry or to society at large.21 An exception, applicable particularly in the communications and information technology industries, is the establishment of network compatibility standards. A detailed body of recent economics literature examines the incentives facing firms to establish compatibility standards, such as telecommunication system interfaces and computer operating systems.22 These standards have unique economic properties, because they exhibit unusually strong returns to scale. Specifically, the more widespread a given network standard becomes, the greater does the incentive become for additional users to adopt that standard rather than be left as ''orphans," incompatible with other systems. A firm that builds momentum

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--> behind its standard can benefit from a bandwagon effect in which users rush to adopt that standard. IBM Corporation in the 1960s, with System 360, and Microsoft Corporation's MS-DOS operating system in the 1980s are familiar examples of proprietary, de facto standards that conferred enormous economic benefits on their sponsors as computer users adopted them.23 Responses of consensus standards-developing organizations to the challenges posed by compatibility standards are discussed later in this chapter. In most cases, as noted above, uncoordinated market competition among firms promoting their own, proprietary solutions to particular market needs will not lead to as much standardization as is theoretically desirable for the economy as a whole. Voluntary consensus standards are an effective, rational response to this economic dilemma of standardization in the free market. As the example of the early automobile industry and the Society of Automotive Engineers illustrates, industry participants working together can share the effort of developing standards and gain mutual benefits from the results. Most of the formal standards used in the U.S. private sector are developed by private standards-developing organizations, such as SAE. These organizations have developed procedures to foster communication, coordination, and consensus in order to overcome the limitations of the uncoordinated marketplace and achieve industry-wide standardization. Many foreign countries, including key U.S. trading partners in Europe and Asia, have a central, primary national standards-developing body. This is usually a government-chartered private organization or a quasi-public agency, rather than a direct agency of the government. Examples include Germany's Deutches Institute fur Normung (DIN), the British Standards Institute (BSI), and France's Association Francaise de Normalisation (AFNOR).24 It is important to note, however, that even in countries in which a government agency sets national industrial standards, private-sector input plays a vital, pervasive role. It is impossible, given the breadth of technical and commercial expertise required to write standards, for all industry sectors to reside in any one organization. The resources of a national standards organization must always be supplemented with private-sector manpower, technical knowledge, and understanding of marketplace needs in order to develop useful standards. At the level of the technical committees—the volunteers who write the standards—the differences between foreign, relatively centralized standards systems and the U.S. system are negligible.25 It is important to note that issues related to ownership of private standards can influence the role they play in particular markets. Many standards developers, for example, offset expenses and generate income through sales of standards documents, to which they hold the copyright. For many SDOs, publishing is a significant source of operating revenue.26 In addition, license fees and royalties are often paid to owners of patented innovations incorporated into standards. These fees can be a significant incentive for firms to innovate and develop new

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--> technologies and to permit their incorporation into standards. As previously noted, some firms gain substantial benefits from owning the rights to a proprietary technology that becomes a de facto industry standard. Prohibitively high payments to the owner of technology in a given standard, however, will deter its spread and motivate other parties to develop an alternative standard.27 In most consensus standards organizations, owners of intellectual property incorporated into a formal standard agree to license proprietary technology at reasonable terms.28 Voluntary Consensus Standardization Processes In comparison to most foreign systems, the institutional structure of the U.S. voluntary consensus standards system is highly decentralized. The United States has more than 400 private standards developers. Most are organized around a given industry, profession, or academic discipline. About 275 engage in ongoing standards-setting activities. The remainder have developed standards in the past—usually few in number—and occasionally update them.29 There are three main types of U.S. standards-developing organizations: professional and technical societies, industry associations, and standards-developing membership organizations, discussed later in this chapter.30 All standards-developing organizations, to varying degrees, seek to overcome economic obstacles to standardization. The typical method for achieving this goal is to coordinate participation of volunteer technical experts in standards-writing committees. Each technical committee is responsible for standards in a particular area of product, process, or technology, although overlap does sometimes exist among different committees' scope of work. Committee membership is generally selected to represent a diversity of interests and viewpoints. Committees—or, in some cases, working groups that are subsets of a committee—meet on a semiregular basis over a period ranging from weeks to years. The first step in developing a standard is to identify an area of marketplace need requiring a standardized technical solution. Once a scope of work is set, draft technical standards are proposed, discussed, revised, and voted on. Consensus is, in most organizations, a key goal. Although negative votes do not prevent a standard's adoption, they must generally be considered and responded to in writing.31 Participants in a technical committee may propose, as foundations for a standard, technologies developed by their respective firms. Success in this effort may yield a marketing advantage or a technological head start over other companies whose technologies are not chosen. Alternatively, the committee may develop a compromise standard incorporating aspects of multiple proposals.32 After review, comment, and approval by the SDO's oversight board and membership at large, the organization publishes the standard. If the organization uses ANSI-accredited procedures, it may choose to have the standard approved and distributed by ANSI as an American National Standard. ANSI does not

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--> for standards within the international trading system, the General Agreement on Tariffs and Trade (GATT). Through a network of national inquiry points, GATT members are required to notify each other when considering new regulations and conformity assessment requirements that affect imports from other nations. (GATT obligations concerning standards and conformity assessment are discussed in detail in Chapter 4.) The office is also the U.S. contact point for ISONET, an information exchange network for members of the International Organization for Standardization, despite the fact that ANSI is the U.S. member body of ISO. Other Office of Standards Services activities discussed in the next two chapters include laboratory accreditation and conformity assessment system recognition; coordination of the National Conference on Weights and Measures, which promotes uniformity and effectiveness in state and local measurement programs; technical assistance programs in several developing overseas markets; and assistance to the U.S. Trade Representative and other trade agencies with technical standards and conformity issues that affect international trade policy.86 In conjunction with its role as the U.S. GATT and ISONET inquiry points, the Office of Standards Services maintains an extensive library of information about both U.S. and international standards, including mandatory and voluntary standards. This library, the National Center for Standards and Certification Information (NCSCI), is open to the public, responds to telephone and written inquiries, and disseminates standards information through announcements in the ANSI Reporter. Through its Standards Code and Information (SCI) Program, Standards Services compiles directories of public and private organizations with standards and conformity assessment activities and publishes basic informational reports on various topics. With a staff of 10 and a combined annual budget of approximately $1 million, however, SCI and NCSCI have been unable to pursue as proactive an outreach effort as would be possible with greater resources. For example, NCSCI receives approximately 10,000 requests for information per year. These divide about evenly between questions about domestic and foreign standards and conformity assessment matters. Increased efforts at publicizing the service—for example, through advertisements in industry and trade publications—would likely swamp the center's capacity to respond to inquiries.87 A 1993 special publication from SCI, a report on ISO 9000 quality system standards, became its most requested document; however, lack of resources for printing and mailing has limited dissemination of the report.88 Federal Use of Voluntary Consensus Standards Many federal agencies besides NIST are active in developing and using standards. Procurement standards set by the DoD and the GSA together represent the majority of federal standards. Regulatory agencies such as EPA, OSHA, CPSC, and FDA account for approximately 8,500 active federal standards. Federal regulations and procurement standards are distinct from voluntary consensus

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--> standards in two respects. First, they are mandatory—by law, by regulation, or by contractual obligation in government purchasing. Second, federal standards are not generally written by committees of volunteer experts through a consensus-seeking procedure. Administrative procedures law requires public notice of proposed rules in the Federal Register and response to received comments, but agencies' statutory obligations require government employees to make any final decisions in setting government standards. Increasingly, however, government agencies are meeting their statutory obligations not by developing government-unique standards but, rather, by participating in and adopting the end products of voluntary consensus standards development. In 1982, the Office of Management and Budget (OMB) issued Circular A-119, "Federal Participation in the Development and Use of Voluntary Standards."89 Revised in October, 1993, Circular A-119 notes, Government functions often involve products or services that must meet reliable standards. Many such standards, appropriate or adaptable for the Government's purposes, are available from private voluntary standards bodies. Government participation in the standards-related activities of these voluntary bodies provides incentives and opportunities to establish standards that serve national needs, and the adoption of voluntary standards, whenever practicable and appropriate, eliminates the costs to the Government of developing its standards. Adoption of voluntary standards also furthers the policy of reliance upon the private sector to supply Government needs for goods and services, as enunciated in OMB Circular No. A-76, entitled Performance of Commercial Activities.90 The policy expressed in Circular A-119 has strong potential to produce savings to government in developing standards. Participation of government experts such as NIST research staff in consensus standards committees raises the level of technical competence applied to the standardization effort. Committees serve as a working forum for public-private cooperation in the development of standards to meet public needs, while imposing the lowest possible costs and restrictions on technological innovation in industry. The circular encourages government use of performance standards over design standards for this reason.91 In public procurement, use of consensus standards in place of government-unique specifications has proven effective at both reducing government costs and improving the competitive strength of U.S. industry. Pilot efforts at DoD in replacing military with commercial item specifications have saved procurement funds and reduced burdens on suppliers of maintaining separate commercial and military production capabilities.92 One example is the procurement of thermal insulation for buildings. The Naval Facilities Engineering Command (NAVFAC) reviewed government and consensus standards in this area and found many redundant standards.93 In 1982, at NAVFAC's request, ASTM formed a technical committee to help convert military and civilian federal standards for thermal insulation to ASTM standards. Of an identified 59 candidate government specifications,

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--> 33 had been canceled by June 1991. Among these, 20 were replaced by ASTM standards, 12 were canceled without replacement, and one military specification was canceled as duplicative of a civilian federal specification. Total administrative savings to the Navy of these canceled government-unique specifications were estimated at more than $1.8 million. NAVFAC also expects to save about 2 percent on material cost of insulation. Now that appropriate consensus standards have been identified, these savings should be replicable across all federal military and civilian purchases of insulation. This will yield estimated total savings to the U.S. government of $89.5 million over the lifecycle of a typical facility. In addition, the defense supplier base for insulation has been strengthened by the conversion to commercial items, because administrative duplication and special knowledge related to military purchasing procedures are no longer required of suppliers.94 Controlling costs is clearly not the only issue faced by federal agencies in setting standards. Regulators, in particular, face an obligation to protect the public interest that sometimes outweights the need to promote either government or industry efficiency. Circular A-119, moreover, requires use of voluntary standards only "whenever practicable and appropriate." These circumstances are not, however, rare. For several reasons, adoption of voluntary consensus standards by federal agencies—particularly, but not exclusively, when government personnel have participated in their development—is an effective means of securing public interests. First, although voluntary standards-setting is sometimes criticized for slowness, regulatory standards-setting is even slower.95 Agencies face stringent due process requirements and opportunities for private interests to delay regulatory action through the legal system, as well as limitations on time and resources for drafting regulations. With the exception of especially hazardous product sectors such as drugs, moreover, agencies have generally been far more effective at influencing corporate design and production of safe products through public information campaigns, including product advisories, and product recalls than through the writing of mandatory standards.96 Second, voluntary consensus standards are often equally as stringent in the level of protection they require as mandatory standards would be.97 It might seem reasonable to expect that private standards developers—industry associations, especially—would seek to set standards at the lowest common denominator of safety. Such standards might allow manufacturers to cut costs, for example. In fact, however, private standards writers have several incentives to set high standards. Forestalling government regulation by developing a private solution to a perceived problem requires a standard stringent enough to satisfy public needs. (Government participation in standards committees enhances this process from both public and private perspectives.) Voluntary design of safe products also reduces risks of large liability claims and high liability insurance premiums. Avoidance of liability has been found, in fact, to be a stronger motivator for safe product design than regulation or any other factor.98 The private standards system

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--> plays an important part in guiding corporate decisionmaking and disseminating safe and in effective design throughout industry. The potential benefits of effective public–private cooperation in the development and use of consensus standards are significant. Implementation of OMB Circular A-119 has not, unfortunately, been successful at securing these benefits. The NIST-chaired Interagency Committee on Standards Policy (ICSP) has a mandate to coordinate policy throughout the federal government on using voluntary consensus standards. In 1987, because of a lack of commitment on the part of regulatory agencies, ICSP was virtually disbanded.99 The OMB's 1993 revision of the circular required each agency to appoint an senior Standard Executive to serve on the ICSP, and it raised the frequency of required reports on agency activities in voluntary standardization from triennial to annual.100 The ICSP was rechartered in June 1991 and has begun meeting approximately annually. Table 2-5 lists the 1994 membership of the ICSP, including title and department. Working groups under ICSP have been active in the following areas: compiling directories of agency staff participation in standards committees; federal use of ISO 9000 quality standards; conformity assessment (from February to December 1992); and international standards (from March to September 1992).101 The 1992 triennial report of the ICSP, however—prepared after revision of Circular A-119 had been initiated—noted the following: Despite the low level of committee activity, significant standards-related activities are underway in a number of agencies, albeit in an uncoordinated fashion. … Having only one ICSP representative from a department with multiple agencies and the diversity of programs in certain agencies make oversight and accountability difficult.102 The report illustrates a high degree of variability among agencies in implementing OMB policy. While DoD reported an increase in the number of voluntary standards used from 3,486 in 1985 to 5,200 in 1991, CPSC use of such standards rose from 6 to 9. In the same period, FCC reported a decline from 6 to 5 voluntary standards used.103 For a number of agencies, such as the Department of Transportation and the Department of Agriculture (1991), no data were reported. Public-Private Cooperation Effective public–private cooperation in developing and using consensus standards will require increased commitment within agencies and improved sharing of information among agencies and between the public and private sectors. The revised reporting and membership requirements in Circular A-119 are unlikely to achieve the needed improvements. The circular makes NIST the chair of the interagency coordination process, but it does not give NIST or any agency a clear mandate to oversee and evaluate federal implementation of the policy across all agencies. The OMB retains final authority for overseeing its policies, but lacks

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--> TABLE 2-5 —Interagency Committee on Standards Policy as of June 29, 1994 AGENCY MEMBER REPRESENTATIVE Chair - Commerce, Department of - National Institute of Standards and Technology Director, Office of Standards Services, NIST Agency for International Development, U.S. Director, Office of Administrative Services Agriculture, Department of Director, Office of Food Safety and Technical Services Consumer Affairs, Office of Director for Policy and Education Development Consumer Product Safety Commission Assistant Executive Director for Hazard Identification and Reduction Defense, Department of Deputy Assistant Secretary (Production Resources) Education, Department of Chief Financial Officer Energy, Department of Director, Office of Nuclear Safety Policy and Standards Environmental Protection Agency Deputy Director, Office of Modeling, Monitoring Systems and Quality Assurance Federal Communications Commission Chief Engineer Federal Emergency Management Agency Deputy Associate Director, Operations Support Directorate Federal Trade Commission Associate Director for the Bureau of Consumer Protection General Services Administration Deputy Assistant Commissioner, Office of Commodity Management, Federal Supply Service Government Printing Office, U.S. Manager, Quality Control and Technical Department Health and Human Services, Department of - Food and Drug Administration Director, Office of Standards and Regulations, Center for Devices and Radiological Health Housing and Urban Development, Department of Senior Advisor for Science, Technology and Urban Policy Interior, Department of the Director, Office of Acquisition and Property Management International Trade Commission Director, Office of Administration Justice, Department of Director, Office of Policy Development Labor, Department of Assistant Secretary for Administration and Management National Aeronautics and Space Administration Associate Administrator for Safety and Mission Assurance National Archives and Records Administration Preservation Officer

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--> AGENCY MEMBER REPRESENTATIVE National Communications System Assistant Manager for Technology and Standards National Science Foundation Senior Engineering Advisor Nuclear Regulatory Commission Deputy Director, Division of Engineering, Office of Nuclear Regulatory Research Postal Service, U.S. Manager, Configuration Management Small Business Administration Deputy to the Associate Deputy Administrator for Economic Development State, Department of Deputy Assistant Secretary for Trade and Commercial Affairs Trade Representative, U.S. Deputy Assistant U.S. Trade Representative for GATT Affairs Transportation, Department of Director, Office of International Transportation and Trade Treasury, Department of Deputy Assistant Secretary for Information Systems Veterans Affairs, Department of Deputy Assistant Secretary for Acquisition and Material Management Liaison - Office of Management and Budget Chief, Information Policy Branch, Office of Information and Regulatory Affairs Executive Secretary - National Institute of Standards and Technology Standards Code and Information Program, Office of Standards Services the depth of expertise in standardization issues available to NIST. An oversight mandate for NIST would lead to improved federal use of voluntary standards and enhancement of the government's regulatory and procurement activities at reduced cost. A NIST mandate would also create a central locus for coordinating communications on standards issues between the federal government and the private standards community. Despite many discussions over past decades, there has never been a formal Memorandum of Understanding (MOU) between ANSI and the U.S. government.104 An MOU would lay out the respective roles and responsibilities of government and the private sector in the U.S. standards system. It would not make ANSI the officially designated developer of standards for the U.S. government; final authority for protecting public interests must, by law, remain with federal agencies. An MOU would, however, facilitate understanding throughout the government of the potential uses of voluntary standardization in meeting public objectives. It would recognize the system of voluntary consensus standardization, conducted by SDOs with coordination and accreditation by ANSI, as a valuable source of standards for public use.

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--> An MOU would affirm ANSI's responsibility and improve its ability to represent U.S. interests in international, nontreaty standards-setting bodies. Although the Trade Agreements Act of 1979 recognizes that U.S. representation in international standardization should be by the private U.S. member of the relevant organization, it does not specify mechanisms for government cooperation with ANSI and U.S. industry in preparing U.S. positions for international standards activities.105 An MOU would also be an appropriate vehicle for addressing a frequent source of tension in public–private standards cooperation. This source is the low level of government financial support for voluntary standards organizations, including ANSI. Government agencies make significant contributions to voluntary standardization, as shown by the previously discussed data on NIST staff participation in outside standards committees. ANSI incurs significant expenses, however, in providing the administrative overhead for coordinating the U.S. voluntary standards system. ANSI dues to ISO and IEC are a particularly large expense. Government participation and use of the system implies a responsibility to pay a share of the overhead expenses associated with the system. Among federal agencies, however, only the Departments of Agriculture, Defense, Energy, and Veterans Affairs, along with NIST, the U.S. Geological Survey, FCC, FDA, GSA, the NASA, and the National Archives are dues-paying members of ANSI. EPA, CPSC, the Nuclear Regulatory Commission, and the Departments of Housing and Urban Development, Labor, and Transportation are among prominent government standards developers that are not ANSI members.106 Although membership dues represent 23 percent of ANSI gross revenues (including publications sales), U.S. government dues are less than half of 1 percent of ANSI revenues.107 Cooperation and understanding between the private standards system and the federal government appear to be improving. A formal MOU clearly would not create understanding where none exists. It would, however, create a formal framework for continuation of cooperation in the future. This framework would prove valuable as circumstances change, new issues emerge, and informal working relationships among individuals in each sector are replaced through changeover of key personnel. Summary And Conclusions The U.S. system for developing formal product and process standards is complex and diverse. It incorporates, for example, cooperative efforts by technical experts to write voluntary standards on a consensus basis. These activities generally take place in the context of consensus-based standards-developing organizations, according to guidelines for due process and open participation of interested parties. Many standards developers are accredited by the American National Standards Institute, a private, nonprofit federation of business, government,

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--> and other individuals. Other U.S. standards arise through competition in the marketplace. When a particular set of product specifications is widely used, it may become a de facto market standard. Government agencies set mandatory standards, both to meet regulatory needs in areas such as health and safety and to support public-sector procurement of products and services. Voluntary standards developed in the private sector may become mandatory through adoption as government standards. This chapter has presented analysis and evidence to demonstrate that the U.S. standards development system is largely successful in meeting public and private needs for standards. The U.S. standards system has a highly decentralized structure. It offers multiple avenues for developing standards and disseminating them to potential users in industry and government, including informal (de facto), consensus-oriented, and mandatory processes. These characteristics provide for responsiveness to a wide range of demands for particular standards. These demands vary according to such factors as industry structure; level of development and speed of technological change; and specific, relevant public interests, such as protection of health and safety. As this chapter has noted, however, there is the need for significant improvement in the use of standards developed in the private sector for government regulation and procurement. Government use of private standards has the strong potential to reduce costs for government agencies and private industry. Existing federal policies, however, are ineffective at ensuring that these benefits are realized. New mechanisms are needed to provide for (1) improved standards policy coordination with the federal government and (2) improved communication and cooperation between government and private sector standards organizations, particularly ANSI. Chapter 5 presents specific recommendations for achieving these needed improvements. Processes for developing standards represent only a portion of the complete impact of standards in the U.S. economy. The next chapter examines public and private mechanisms in the United States for assessing the conformity of products and industrial processes to standards. Notes 1.   Michael Hergert, Technical Standards and Competition in the Microcomputer Industry. 2.   Paul A. David, Clio and the Economics of QWERTY, 332-337. 3.   Breitenberg, The ABC's of Certification Activities in the United States; and National Fire Prevention Association (NFPA), National Electrical Code 1993. For a detailed analysis of regulatory use of private standards, with several case studies, see Cheit, Setting Safety Standards. 4.   See William Lehr, Standardization: Understanding the Process, 550-555. 5.   Toth, Standards Activities of Organizations in the United States, 5. 6.   Toth, Standards Activities of Organizations in the United States, 547-548. 7.   Toth, Standards Activities of Organizations in the United States, 3. 8.   Toth, Standards Activities of Organizations in the United States, 3.

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--> 9.   American Society of Mechanical Engineers (ASME), 1992 ASME Boiler & Pressure Vessel Code. 10.   Toth, Standards Activities of Organizations in the United States, 3. 11.   Toth, Standards Activities of Organizations in the United States, 3. 12.   Breitenberg, ed., Index of Products Regulated by Each State. 13.   Breitenberg, The ABC's of Standards-Related Activities, 5. 14.   ASME, 1992 Boiler and Pressure Vessel Code; and OTA, Global Standards, 43. 15.   Breitenberg, The ABC's of Standards-Related Activities, 3. 16.   For a review of the role of the Society of Automotive Engineers in producing standards for the early automotive industry, see Hemenway, Industrywide Voluntary Product Standards, 13-18. 17.   Hemenway, Industrywide Voluntary Product Standards, 14-15. 18.   Greenstein, Invisible Hands and Visible Advisors, 539. 19.   Greenstein, Invisible Hands and Visible Advisors, 539. 20.   Kindleberger, Standards as Public, Collective and Private Goods, 384-385. 21.   Kindleberger, Standards as Public, Collective and Private Goods, 377. 22.   For a review of the relevant literature, see David and Greenstein, The Economics of Compatibility Standards: An Introduction to Recent Research, 3-41. 23.   See, for example, Farrell, The Economics of Standardization: A Guide for Non-Economists, 189-198. 24.   OTA, Global Standards, 61-69. 25.   Lehr, Standardization: Understanding the Process, 550. 26.   OTA, Global Standards, 50-51. 27.   Joseph Farrell, Standardization and Intellectual Property, 42-43. 28.   See, for example, the American National Standards Institute's (ANSI) guidelines for treatment of patent rights in consensus standardization: ANSI, Guidelines for Implementation of The ANSI Patent Policy. 29.   Breitenberg, Standards Activities of Organizations in the United States, 2. 30.   Cheit, Setting Safety Standards, 23-25. 31.   Lehr, Standardization: Understanding the Process, 551. 32.   For further discussion of the dynamics of standards committees, see Cargill, Information Technology Standardization, 103-112. 33.   Common characteristics of standards processes among SDOs are considered in detail in Lehr, Standardization: Understanding the Process. 34.   Lehr, Standardization: Understanding the Process. 35.   Cheit, Setting Safety Standards, 15. 36.   Cheit, Setting Safety Standards, 187-189. 37.   Cheit, Setting Safety Standards, 188. An additional example in which the consensus standard developer is deemed competitive is Eliason Corporation v. NSF. See Pamela Klien, NSF Wins Court Fight. 38.   ANSI, The U.S. Voluntary Standardization System: Meeting the Global Challenge, 17-22. 39.   Cheit, Setting Safety Standards, 23-25; and OTA, Global Standards, 49-51. 40.   Defense Systems Management College, Standards and Trade in the 1990s: A Source Book for Department of Defense Acquisition and Standardization Management and their Industrial Counterparts, 2.2-2.3; Cheit, Setting Safety Standards, 23-25; and OTA, Global Standards, 49-51. 41.   Institute of Electrical and Electronics Engineers. IEEE Standards: Annual Activities Report 1993. 42.   American Society of Mechanical Engineers. 1992 ASME Bioler and Pressure Vessel Code. 43.   Cargill, Information Technology Standardization: Theory, Process, and Organizations, 170-178.

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--> 44.   Miller, Michael, J. Hearing on International Standardization: The Federal Role. 45.   Quality. International Standards: It's a Small World After All. 46.   American Society for Testing and Materials (ASTM), ASTM 1992 Annual Report; and ASTM, ASTM 1993 Annual Report. 47.   NFPA. The NFPA Standards-Making System, n.d. 48.   NFPA. National Fire Protection Association: Fact Sheet. 49.   For a discussion of the rise of standard-setting consorita, see Carl Cargill and Martin Weiss, ''Consortia in the Standards Development Process," Journal of the American Society for Information Science, 559-565. 50.   ANSI, The U.S. Voluntary Standardization System: Meeting the Global Challenge, 10-11. 51.   ANSI Annual Report, 1993, 13. 52.   ANSI Annual Report, 1993, 1. 53.   ANSI, The U.S. Voluntary Standardization System, 4-5. 54.   ANSI, The U.S. Voluntary Standardization System: Meeting the Global Challenge, 18-22. 55.   EEE, Standards Catalog. 56.   NFPA, National Electrical Code 1993. 57.   ANSI Annual Report, 1993, 13. 58.   James Thomas, President, ASTM, personal communication, March 24, 1994; and Sergio Mazza, President, ANSI, personal communication, March 1, 1994. 59.   ANSI, The U.S. Voluntary Standardization System, 18. 60.   ANSI, The U.S. Voluntary Standardization System, 18. 61.   Lehr, "Standardization: Understanding the Process," 551-552. 62.   Stanley M. Besen and Joseph Farrell, Choosing How to Compete: Strategies and Tactics in Standardization, 117-131. 63.   For further discussion of the interactions between standardization and technology development, see Farrell and Saloner, Competition, Compatibility and Standards; and Richard Jensen and Marie Thursby, Patent Races, Product Standards, and International Competition. 64.   Cargill and Weiss, "Consortia in the Standards Development Process", 563-564. 65.   Mary Anne Lawler, memorandum, U.S. Technical Advisory Group to JTC-1. 66.   ANSI Annual Report, 1993, 8-9. 67.   OTA, Global Standards, 48-49; 54-55. 68.   Cargill, Information Technology Standardization, 142-147. 69.   For descriptions of international standard-setting organizations and processes, see especially ANSI, The U.S. Voluntary Standardization System; Cargill, Information Technology Standardization, 125-148; and Stanley M. Besen and Joseph Farrell, The Role of the ITU in Standardization, 311-321. See also Maureen Breitenberg, ed., Directory of International and Regional Organizations Conducting Standards-Related Activities, NIST Special Publication 767. 70.   ANSI, The U.S. Voluntary Standardization System, 27. 71.   Data provided by ANSI, November 1883; and OTA, Global Standards, 87. 72.   ANSI, The U.S. Voluntary Standardization System, 27-29; data on ISO/IEC committee participation provided by ANSI, July, 1994; and OTA, Global Standards, 87. 73.   ANSI, The U.S. Voluntary Standardization System, 105-106. 74.   ANSI, The U.S. Voluntary Standardization System, 30; and Michael Miller, President, Association for the Advancement of Medical Instrumentation, presentation to the Conference on New Developments in International Standards and Global Trade. 75.   ASTM, internal memorandum, May 11, 1994. 76.   ASME, "Annual Report for 1992/1993", AR-11. 77.   For a directory of federal agencies with standards activities, see Toth, Standards Activities of Organizations in the United States, 547-656. 78.   ANSI, The U.S. Voluntary Standardization System: Meeting Global Challenges, 14. 79.   The regulation in question was a beer labeling requirement proposed by the State of

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-->     California. JoAnne Overman, Director, National Center for Standards and Certification Information, National Institute for Standards and Technology, personal communication, June 7, 1994. 80.   Breitenberg, The ABC's of Standards-Related Activities in the United States. 81.   NIST, NIST Budget Summary, August 30, 1994. 82.   Based on estimates provided by John Donaldson, Director, Standards Code and Information Program, Office of Standards Services, NIST. 83.   U.S. Department of Commerce, Memorandum, Third Triennial Report to the Office of Management and Budget on the Implementation of OMB Circular A-119, p. 15. 84.   James E. Rountree, Directory of DoC Staff Memberships on Outside Standards Committees, 3-6. 85.   Unpublished data provided by JoAnne Overman, Director, National Center for Standards and Certification Information, NIST, 1994. 86.   The Office of Standards Services, brochure published by NIST, n.d. 87.   JoAnne Overman, GATT Standards Code Activities of the National Institute of Standards and Technology 1992, 3-4; and JoAnne Overman, personal communication, June 7, 1994. 88.   Information provided by NIST, Office of Standards Services staff, May and June, 1994. 89.   Office of Management and Budget, Circular No. A-119, 1982. 90.   OMB, Circular No. A-119, Revised, in Federal Register, October 26, 1993, p. 57644. 91.   OMB, Circular A-119, Revised, paragraph 7.a.(4). 92.   Increased government use of commercial product specifications in place of government-unique standards and specifications is one goal of federal acquisition reform legislation signed into law in 1994. See Title VIII, Federal Acquisition Streamlining Act of 1993, 103rd Cong., 2nd session, S. 1587. 93.   Cassell and Crosslin, Benefits of the Defense Standardization Program, A3-A5. 94.   Cassell and Crosslin, Benefits of the Defense Standardization Program, A6-A10. 95.   George Eads and Peter Reuter, Designing Safer Products: Corporate Responses to Product Liability Law and Regulation, 34-39. 96.   Eads and Reuter, Designing Safer Products, 112-115. 97.   For a discussion, see Cheit, Setting Safety Standards, 8-14 and 211-221. 98.   Eads and Reuter, Designing Safer Products, 106-115. 99.   Cheit, Setting Safety Standards, 224. 100.   OMB, Circular No. A-119, Revised. 101.   Interagency Committee on Standards Policy. 102.   U.S. Department of Commerce, Third Triennial Report to OMB, p. 3. 103.   U.S. Department of Commerce, Third Triennial Report to OMB, p. 4. 104.   OTA, Global Standards, 46-58. 105.   Trade Agreements Act of 1979, 96th Cong., 1st sess., H.R. 4537. 106.   ANSI, 1993 Annual Report, 24. 107.   Membership dues provide for meeting 43 percent of ANSI's core (non-publishing) expenses, primarily administration of U.S. consensus standards development. Net income from publications sales provides for 34 percent of these expenses; program support, 14 percent; conformity assessment services, 4 percent; and other, 5 percent. ANSI, 1993 Annual Report, 13; and Manuel Peralta, President, ANSI, personal communication, October 25, 1993.