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United States Wins Dispute Over China’s Discrimination Against U.S. Financial Services Companies

08/31/2012

08/31/2012

Washington, D.C. – United States Trade Representative Ron Kirk announced that today the World Trade Organization (WTO) adopted the Panel Report finding in favor of the United States in the dispute regarding China’s pervasive discrimination against U.S. suppliers of electronic payment services. The Panel issued its report on July 16, 2012. Ambassador Kirk welcomed China's decision to accept adoption of the Panel report today.

“This decision makes it clear that China should honor its WTO commitments to play by the rules and stop discriminating against American financial services providers. Fair and open financial services markets are critical to facilitating global trade,” said Ambassador Kirk. “Most of the world’s leading providers of the services that enable credit and debit card transactions are headquartered in the United States. These companies employ tens of thousands of American workers. A more efficient credit and debit payment system in China will also enable consumers to buy more goods, including made-in-America products,” he continued. “The WTO panel agreed that China’s pervasive and discriminatory practices are unfair to American suppliers of electronic payment services and discriminate at each stage of a payment card transaction. The message to the Government of China is that those practices must end.”

BACKGROUND

After this decision, the industry estimates that the United States stands to gain 6,000 jobs related to EPS. EPS are vital to facilitating commerce in the global marketplace. Such services allow consumers to make purchases using credit, debit, prepaid, and other payment cards. EPS enable and manage the flow of information and the transfer of funds from cardholders’ banks to merchants’ banks.

Each year well over $1 trillion worth of electronic payment card transactions are processed in China. China’s regulator of EPS, the People’s Bank of China, issued a series of measures – dating back to 2001 – that discriminate against foreign suppliers of EPS at every stage of a payment card transaction. China’s measures impose requirements on institutions in China that issue payment cards, on all point-of-sale terminal and payment card processing equipment in China, and on the institutions in China that have the relationship with the EPS supplier and handle payment card transactions for Chinese merchants. The WTO panel report adopted today confirms that China’s measures significantly distort competition in China to the detriment of U.S. providers.

The United States requested dispute settlement consultations on September 15, 2010. On February 11, 2011, the United States requested that a WTO dispute settlement panel be established. On July 16, 2012, the WTO circulated the Panel’s final report. China did not appeal. That report was adopted by the WTO today, becoming its official recommendations and rulings. The Panel found in favor of the United States regarding most of the challenged measures, whether based on the General Agreement on Trade in Services (GATS) national treatment claims or the GATS market access claims. The United States obtained findings of GATS violations against each aspect of China’s regulatory architecture for payment card transactions, covering China’s requirements pertaining to:

• issuing institutions (those banks that issue payment cards);

• acquiring institutions (those banks that have relationships with merchants and that “acquire” payment card transactions); and

• payment card processing equipment, point of sale (POS) terminals, and automated teller machines (ATMs).

Under WTO rules, China must state formally within 30 days whether it intends to comply with the findings in the Panel Report.