Define International Standards

How do we define international standard? Which qualifications must an international standard have? Strict definition of an international standard is based on whether it is published by international organizations such as the International Organization for Standardization (ISO), the International Electro-technical Commission (IEC), International Telecommunication Union (ITU) or similar (Swann, 2010). In general, international standards are broadly defined as set of rules that regulates targeted products, organizations or markets via being common to a group of countries. However, there is a strict distinction between regulations and international standards that the latter is voluntary. Whereas compliance with regulations is mandatory by law.

One solution to fight against the problem of information asymmetry in international markets is international standards. Imagine the situation that a consumer wants to buy a computer that satisfies her/his expectations regarding its quality. However, it is very difficult to disentangle whether the customer satisfaction is met with product quality till the computer is used. Moreover, the computer could be advertised as efficient and fast even though it is not in fact. This situation was firstly described by Akerlof (1970) and regarded as “lemons” problem. Hudson & Jones (2003) offers international standardization a way out of this set of such difficulties. A customer can be much more confident regarding product quality if a product is certified by independent authority which ensures that product satisfies certain qualifications. Furthermore, international standards help to reduce costs of uncertainty in conjunction with assessing product quality (Jones & Hudson, 1996). As a consequence of international standardization, search costs reflected by time and effort consumption decrease in evaluating product quality. And therefore efficiency gains add up to international trade all over the world. Furthermore, harmonization of international standards helps to reduce costs that arises due to multiplicity of standards and improve trade among the countries which uses harmonized standards (Frahan & Vancauteren, 2006). The second net benefit of standardization comes through compatibility. There is some sort of goods that has to be consumed together. They are known as complementary goods which have to be compatible to each other. And system of purchase of these products can be satisfied with a standard ensuring benefits of purchased good to the buyer increase with other users’ purchases.