DISPUTE SETTLEMENT: DISPUTE
DS413
China — Certain Measures Affecting Electronic Payment
Services
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Outline
History & Context
The Main WTO Issues and applicable GATS Articles
The Position of the Complainant and Respondent
WTO Panel Findings
National Perspectives
Implementation
Proposal
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History & Context
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Chinese market for electronic payments
expected to open by Dec. 11, 2006
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Still, in 2010, China only allowed China
UnionPay (CUP) to supply electronic payment
services for all transactions paid in Renminbi.
In 2009, electronic payments in China
amounted to US$722billion. This was expected
to double by 2012.
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History & Context
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Also, service suppliers of other WTO members could
only handle transactions made in foreign
currencies. And all payment cards of other
companies must bear CUP’s logo.
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Finally, CUP had access to all Chinese
merchants that accept credit cards while
foreign suppliers had to negotiate for access.
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History & Context
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September 2010 – US formally requests
consultations with China, claiming
abuse of Articles XVI and XVII.
We are concerned that China is breaking its
trade commitments to the United States and
other WTO partners, both by favoring its one
state-owned financial services firm to the
exclusion of American credit and debit card
companies…USTR is fighting for the American
jobs threatened by China’s actions, and insisting
on the level playing field promised in our WTO
agreements”
-Ron Kirk, US Trade Rep
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History & Context
Feb. 11, 2011 – US
requests the
creation of a panel.
March 26, 2011 – DSB
agreed to create panel.
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June 23, 2011 – US
requested the DirectorGeneral to determine the
composition of the panel.
July 4, 2011 – Panel
composition determined.
The Main WTO Issues
National Treatment
Market Access
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The United States claimed that, in view of
commitments made in section 7.B(d) of China’s GATS
schedule, the Chinese electronic payment services
requirements are inconsistent with China's market
access and national treatment obligations under
Articles XVI and XVII of the GATS.
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China’s GATS Schedule 7.B(d)
“[a]ll payment and money transmission services,
including credit, charge, and debit cards,
travellers cheques and bankers drafts (including
import and export settlement)”.
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General Agreement on Trade in Services
(GATS)
Article XVI: Market Access
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1.
With respect to market access through the modes
of supply identified in Article I, each Member shall
accord services and service suppliers of any other
Member treatment no less favourable than that provided
for under the terms, limitations and conditions agreed
and specified in its Schedule.
2.
In sectors where market-access commitments are
undertaken, the measures which a Member shall not
maintain or adopt either on the basis of a regional
subdivision or on the basis of its entire territory, unless
otherwise specified in its Schedule, are defined as:
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(a)
limitations on the number of service suppliers
whether in the form of numerical quotas, monopolies,
exclusive service suppliers or the requirements of an
economic needs test;
General Agreement on Trade in Services
(GATS)
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Article XVII: National Treatment
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1.
In the sectors inscribed in its Schedule, and
subject to any conditions and qualifications set out
therein, each Member shall accord to services and
service suppliers of any other Member, in respect of all
measures affecting the supply of services, treatment no
less favourable than that it accords to its own like
services and service suppliers.
2.
A Member may meet the requirement of paragraph
1 by according to services and service suppliers of any
other Member, either formally identical treatment or
formally different treatment to that it accords to its own
like services and service suppliers.
3.
Formally identical or formally different treatment
shall be considered to be less favourable if it modifies the
conditions of competition in favour of services or service
suppliers of the Member compared to like services or
service suppliers of any other Member.
The Main WTO Issues (cont.)
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Are EPS included in China’s GATS schedule?
If so, are the Chinese requirements consistent
with the market access obligations of Article
XVI?
If so, are the Chinese requirements consistent
with the national treatment obligations of
Article XVII?
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The Position of the USA (Complainant)
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Are EPS included in China’s
GATS schedule? YES
If so, are the Chinese
requirements consistent with
the market access
obligations of Article XVI?
NO
If so, are the Chinese
requirements consistent with
the national treatment
obligations of Article XVII?
NO
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Third Parties:
Australia,
Ecuador,
European
Union,
Guatemala,
Japan, Korea,
India
The Position of China (Respondent)
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Are EPS included in China’s GATS
schedule? YES
If so, are the Chinese requirements
consistent with the market access
obligations of Article XVI? YES
If so, are the Chinese requirements
consistent with the national
treatment obligations of Article
XVII? YES
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WTO Panel Findings
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Alleged requirements that establish China
UnionPay (CUP), a Chinese company, as the sole
supplier of electronic payment services (EPS) for all
domestic Renminbi (RMB) payment card
transactions;
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WTO Finding: Mixed findings, rejected national
treatment claims of US but determined that China
maintains CUP as a monopoly supplier for the
clearing of certain types of RMB-denominated
payment card transactions
Alleged requirements that payment cards issued by
banks in China bear the “Yin Lian”/“UnionPay” logo
(the logo of CUP's network);
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WTO Finding: Substantiated US Claim
WTO Panel Findings
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Alleged requirements that all ATMs, merchant card
processing equipment and point-of-sale terminals
in China be capable of accepting payment cards
bearing the “Yin Lian”/“UnionPay” logo;
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Alleged requirements that acquiring institutions
post the “Yin Lian”/“UnionPay” logo and be capable
of accepting all payment cards bearing the “Yin
Lian”/“UnionPay” logo;
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WTO Finding: Substantiated US Claim
WTO Finding: Substantiated US Claim
Alleged prohibitions on the use of non-CUP cards
for inter-bank and cross-region payment card
transactions; and
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WTO Finding: Substantiated US Claim
Both Countries Claim Success
The Ministry of Commerce (MOC) on Friday welcomed a
ruling by a World Trade Organization (WTO) dispute
panel rejecting part of the accusations made by the
United States against China's handling of electronic
payments.
http://news.xinhuanet.com/english/business/201208/31/c_123657947.htm
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Tim Reif, USTR general counsel, said in a teleconference
with reporters that the WTO panel found in favor of the
United States "with respect to each aspect.”
http://www.google.com/hostednews/afp/article/ALeqM5g
_MaK0zK1lCFW77RX71YWr016LA?docId=CNG.b875bca87dc5066fb2c7b7510ef57454.1a
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Implementation
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Neither country appealed the panel report
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China and the USA reached mutual agreement that a
July 31st, 2013 deadline represented a reasonable
amount of time for Chine to implement the panel’s
recommendations and meet its WTO obligations
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It will likely take several years, rather than 11 months
agreed to, for full implementation
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Prior to the final report, China accelerated regulatory
efforts in the EPS industry
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China granted 96 non-financial institution payment
business licenses
China issued EPS industry regulation drafts
Our Proposal
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Though neither country appealed the panel’s report it will
likely take more than 11 months and one case for the issue to
be completely resolved
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The USTR should form a committee (including industry
representatives) to investigate whether or not China has met
its obligations
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If obligations are not met, the US may request a subsequent
compliance panel to maintain attention on the issue
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China should continue to draft regulations and issue
additional business licenses in the EPS industry to
demonstrate their willingness to comply and to avoid criticism
if obligations are not met entirely by July 31, 2013
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