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United States Files Two WTO Cases Against China

September 15, 2010

USTR Seeks to Level Playing Field for American Companies and Workers in Steel Industries, Financial Services

Washington, D.C. – United States Trade Representative Ron Kirk announced today that the United States has filed two cases against China at the World Trade Organization (WTO). One case requests dispute settlement consultations – the first step in litigation – regarding China’s imposition of antidumping (AD) duties and countervailing duties (CVD) on imports of grain oriented flat-rolled electrical steel (GOES) from the United States. The other case requests consultations regarding China’s discrimination against U.S. suppliers of electronic payment services.

“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 and by manipulating trade remedy investigations to unfairly restrict exports of American steel. In both cases, USTR is fighting for the American jobs threatened by China’s actions, and insisting on the level playing field promised in our WTO agreements,” said Ambassador Kirk.

Consultations are the first step in a WTO dispute. Under WTO rules, parties that do not resolve a matter through consultations within 60 days may request the establishment of a WTO dispute settlement panel.

China’s Imposition of Antidumping Duties and Countervailing Duties on U.S. Steel Imports

Grain-oriented flat-rolled electrical steel (GOES) is used by the power-generating industry in transformers, reactors, and other large electric machines. The two largest U.S. manufacturers of GOES are AK Steel Corporation, based in Ohio, and Allegheny Ludlum, based in Pennsylvania.

WTO rules permit Members to impose duties on imports of merchandise found to be sold at less than fair value – “dumped” – or subsidized, if those imports cause injury to the domestic industry. But, WTO rules also require Members to follow specific procedures and apply defined legal standards when they investigate these cases.

On June 9, 2009, China’s Ministry of Commerce (MOFCOM) initiated two investigations on grain-oriented flat-rolled electrical steel from the United States. On April 10, 2010, MOFCOM imposed antidumping duties and countervailing duties, saying American steel had been dumped into their market and subsidized.

China’s antidumping and subsidy determinations in the GOES investigations appear to violate numerous WTO requirements. In the United States’ view, China initiated both investigations without sufficient evidence; failed to objectively examine the evidence; failed to disclose “essential facts” underlying its conclusions; failed to provide an adequate explanation of its calculations and legal conclusions; improperly used investigative procedures; failed to provide confidential summaries of Chinese submissions; and included U.S. federal and state programs that were not identified in the notice of initiation of the CVD investigation.

“The duties imposed by China have raised the price of hundreds of millions of dollars’ worth of American steel headed into China, with the practical effect of reducing or blocking exports of our steel to that country. China must not abuse WTO procedures to protect its market,” said Ambassador Kirk. “This case makes clear that the United States will not permit China to threaten American steelworkers’ jobs by using antidumping and countervailing duty proceedings to harass U.S. exports.”

In the GOES AD investigation, MOFCOM imposed dumping margins ranging from 7.8 percent to 64.8 percent. In the GOES CVD proceeding, MOFCOM imposed CVD duties of between 11.7 percent and 44.6 percent.

See a copy of the consultation request letter here.

China’s Treatment of U.S. Suppliers of Electronic Payment Services

Electronic payment services are provided in connection with the operation of electronic networks that process payment transactions involving credit, debit, prepaid, and other payment cards. They also enable, facilitate and manage the flow of information and the transfer of funds from cardholders’ banks to merchants’ banks. Most of the world’s top providers of electronic payment services for credit and debit cards are headquartered in the United States.

Several hundred billion dollars worth of electronic payment transactions were processed in China in 2009. China’s regulator of electronic payment services, the People’s Bank of China, has issued a series of measures – dating back to 2001 – that provide a Chinese domestic entity, China Union Pay (CUP), with a monopoly over the handling of domestic currency payment card transactions in China while excluding other potential suppliers.

China prohibits foreign suppliers from handling the typical payment card transaction in China, in which a Chinese consumer makes a payment in China’s domestic currency, the renminbi (RMB). Instead, China has created a “national champion” in allowing only CUP to provide these services. Meanwhile, with regard to payment card transactions in foreign currency, like those involving Chinese tourists visiting other countries, China imposes requirements and restrictions that favor CUP over foreign suppliers.

These market access restrictions and discriminatory limitations on foreign suppliers seeking to engage in the supply of electronic payment services appear to violate Articles XVI and XVII of the General Agreement on Trade in Services.

“The Chinese government committed to open this financial service market four years ago – but instead, the Chinese government is giving China Union Pay a monopoly over most credit and debit card transactions by Chinese consumers. China’s actions unfairly deprive U.S. credit and debit card companies of access to a huge market,” said Ambassador Kirk. “Opening this market to American firms would not only restore the level playing field we’ve been promised, but could also create additional American jobs as a more efficient credit and debit system gives Chinese consumers the ability to buy more goods – including quality, made-in-America products.”

Under the terms of its accession to the WTO, China should have fully implemented its commitments to remove market access and national treatment limitations in this service sector by December 11, 2006.

See a copy of the consultation request letter here.