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United States Wins Electronic Payment Services Dispute with China

07/16/2012

07/16/2012

Washington, D.C. – United States Trade Representative Ron Kirk announced today that the United States has prevailed in a World Trade Organization (WTO) dispute regarding China’s pervasive discrimination against U.S. suppliers of electronic payment services.

“This decision will help U.S. companies and increase American jobs as a more efficient credit and debit payment system in China enables consumers to buy more goods, including quality, made-in-America products,” said Ambassador Kirk. “The WTO panel agrees that China’s pervasive and discriminatory measures deny a level playing field to American service providers, which are world leaders in this sector. The panel also found that China has entrenched the market dominance of its own company, China Union Pay (CUP), and distorted competition in China to the detriment of U.S. providers. Open financial services markets are critical, and China should honor its WTO commitments and eliminate this discrimination.”

Electronic payment services (EPS) are vital to facilitating commerce in any modern economy and are familiar to any consumer. EPS are what make possible payments using credit, debit, prepaid, and other payment cards. EPS 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 card transactions are headquartered in the United States. By industry estimates, the U.S. stands to gain 6,000 jobs related to EPS. 

Each year well over one $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.

BACKGROUND
The United States requested consultations on September 15, 2010, regarding measures maintained by China affecting electronic payment services for payment card transactions and the suppliers of those services. 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. 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).