Reposted from King & Spalding’s Trade & Manufacturing Alert
Josh Snead | September 2012 | Trade & Manufacturing Alert
A WTO Panel, in a final report issued in July, ruled in favor of several U.S. claims that China maintains measures that unfairly discriminate against foreign suppliers of electronic payment services by modifying conditions of competition in favor of China’s national bank card association, China UnionPay (“CUP”). The electronic payment services addressed in this dispute related to services for processing payment card transactions, including credit and debit card transactions. The United States had challenged various Chinese measures relating to electronic payment services as contrary to China’s commitments under the WTO’s General Agreement on Trade in Services (“GATS”). The Panel also rejected U.S. claims that Chinese regulations effectively provide CUP with a monopoly over domestic currency card transactions in China.
U.S. Government officials, including United States Trade Representative (“USTR”) Ron Kirk, hailed the decision as a clear victory for the United States. Ambassador Kirk, in a statement, asserted that the Panel’s key findings confirm that China’s “pervasive and discriminatory measures deny a level playing field to American service providers, which are world leaders in this sector.” Ambassador Kirk stated that the decision would be positive for American companies and American jobs. Another USTR representative cited industry estimates that implementation of the Panel decision could lead to the creation of 6,000 additional U.S. jobs. USTR officials also emphasized the importance of the Panel’s finding that provision of electronic payment services is an integrated service rather than a disaggregated set of individual services. Various U.S. officials emphasized that measures relating to electronic payments are one example of China’s efforts to create national champions in different sectors of the Chinese economy by imposing discriminatory measures that limit competition from outside China.
Chinese officials also welcomed certain aspects of the panel decision, including the Panel’s rejection of the U.S. claim that China made a commitment of cross-border supply of electronic payment services and confirmation that foreign suppliers of electronic payment services should conform to conditions set forth in China’s WTO schedule. A Chinese official stated that, if upheld, these findings would require foreign providers of electronic payment services to conduct business in China through subsidiaries that do “substantial business” in China rather than from abroad in order to benefit from any modified Chinese measures that result from the WTO ruling. Chinese officials expressed concern primarily with the Panel’s finding that the electronic payment service at issue should be classified as “all payment and money transmission services” under China’s WTO commitments.
The United States and China have until mid-September to decide whether to appeal, and it is anticipated that both countries likely will appeal various aspects of the decision. If they do, the WTO’s Appellate Body normally has 90 days to issue a ruling.