TWN Info Service on WTO and Trade Issues (Mar11/02)
3 March 2011
Third World Network

China blocks panel requests on credit-card payment services, steel
Published in SUNS #7097 dated 28 February 2011

Geneva, 25 Feb (Kanaga Raja) -- Two separate requests by the United States for the establishment of dispute panels against China -- one over Chinese measures affecting electronic payment services and the other, on Chinese duties on flat-rolled electrical steel -- were blocked by China at a meeting of the WTO Dispute Settlement Body (DSB) on 24 February.

These were both first-time requests and panel establishment would be automatic when the requests by the United States come up again before the DSB.

The first dispute brought by the US against China concerns certain restrictions and requirements maintained by China affecting electronic payment services for payment card transactions and the suppliers of those services.

In a communication to the DSB, the US said that in the financial services sector, as set out in China's GATS Schedule of Specific Commitments on Services, China undertook commitments under Articles XVI and XVII of the GATS (General Agreement on Trade in Services) with respect to:

-- "Banking services as listed below: ... All payment and money transmission services, including credit, charge and debit cards, travellers cheques and bankers drafts (including import and export settlement)";

-- "Other financial services as listed below: ... Provision and transfer of financial information, and financial data processing and related software by supplier of other financial services"; and

-- "Advisory, intermediation and other auxiliary financial services on all activities listed in subparagraphs (a) through (k), including credit reference and analysis, investment and portfolio research and advice, advice on acquisitions and on corporate restructuring and strategy."

Despite those commitments, said the US communication, China imposes market access restrictions and requirements on service suppliers of other Members seeking to supply electronic payment services in China. Through these and other related and reinforcing requirements and restrictions, China accords less favourable treatment to electronic payment services suppliers of other Members than to Chinese suppliers of these services.

According to the US, China UnionPay (CUP), a Chinese entity, is the only entity that China permits to supply electronic payment services for payment card transactions denominated and paid in renminbi (RMB) in China. China also requires the handling by CUP of all RMB transactions in Macao or Hong Kong using payment cards issued in Mainland China, as well as any RMB transactions in Mainland China using RMB payment cards issued in Hong Kong, China or Macao, China.

The US considered that these measures are inconsistent with China's obligations under GATS Article XVI: 1 to accord services and services suppliers of any other Member treatment no less favourable than that provided for in China's Schedule and that China is maintaining or adopting measures set out in Article XVI: 2 of the GATS. These measures also appear inconsistent with China's obligations under GATS Article XVII to accord to services and service suppliers of any other Member treatment no less favourable than that it accords to its own like services and service suppliers.

In addition, said the US, China requires all payment card processing devices at merchant locations, all automated teller machines (ATMs), and all point-of-sale (POS) terminals in China to be compatible with CUP's system and capable of accepting CUP payment cards.

It also requires that all acquiring institutions post the CUP logo and be capable of accepting all payment cards bearing the CUP logo. China further requires that all payment cards, including "dual currency" cards, issued in China capable of being used for transactions denominated and paid in RMB bear the CUP logo.

The US said that this means that issuing banks must have access to the CUP system, and must pay CUP for that access. These measures do not impose similar requirements regarding non-CUP payment cards or to transactions using non-CUP payment cards.

The US considered that these measures are inconsistent with China's obligations under GATS Article XVI: 1 to accord services and services suppliers of any other Member treatment no less favourable than that provided for in China's Schedule and that China is maintaining or adopting measures set out in Article XVI: 2. It also considered that these measures are inconsistent with China's obligations under GATS Article XVII to accord to services and service suppliers of any other Member treatment no less favourable than that it accords to its own like services and service suppliers.

The US maintained that China also requires that all cross-bank or inter-bank transactions involving payment cards be handled through CUP. China prohibits the use of non-CUP payment cards for cross-region or cross-bank or inter-bank transactions.

The US also considered that these measures are inconsistent with China's obligations under GATS Article XVI: 1 to accord services and services suppliers of any other Member treatment no less favourable than that provided for in China's Schedule and that China is maintaining or adopting measures set out in Article XVI: 2. It also considered that these measures are inconsistent with China's obligations under GATS Article XVII to accord to services and service suppliers of any other Member treatment no less favourable than that it accords to its own like services and service suppliers.

The US considered that these measures are inconsistent with China's obligations under Articles XVI, including XVI: 1 and XVI: 2(a), and XVII of the GATS. These measures also appear to nullify or impair the benefits accruing to the US directly or indirectly under the cited agreements.

In its statement at the DSB, the US said that for several years, it has been concerned about certain measures maintained by China affecting suppliers of electronic payment services.

It said that electronic payment services form the essential architecture for the many millions of payment card transactions that occur every day around the world. These vital services enable and manage the transfer of funds to permit cardholders to pay merchants supplying goods and services. Hundreds of billions of dollars worth of electronic payment transactions were processed in China in 2010.

In the financial services sector, as set out in China's services Schedule (Schedule of Specific Commitments on Services annexed to the Protocol on the Accession of the People's Republic of China), the US noted, China undertook both market access and national treatment commitments with respect to these services. Members had every reason to expect to be able to compete to provide these services to Chinese businesses and consumers.

However, said the US, despite its GATS commitments, China imposes market access restrictions and requirements on service suppliers of other Members seeking to supply electronic payment services in China. Many of these restrictions serve to protect the monopoly position of a single Chinese entity, known as China UnionPay, and over time, China's measures have increased the restrictions on foreign suppliers, the US added.

The US listed the restrictions as: China UnionPay is the only entity that China permits to supply electronic payment services for payment card transactions denominated and paid in renminbi in China; China requires that all payment cards issued in China capable of being used for transactions denominated and paid in renminbi, including dual-currency cards, must bear the China UnionPay logo; China requires that all inter-bank transactions involving payment cards be handled through China UnionPay; and China prohibits the use of non-China UnionPay payment cards for cross-region or inter-bank transactions.

The US considered that these and other measures identified are inconsistent with China's obligations under the GATS.

In its statement at the DSB, China said that contrary to what the US has stated, it has consistently observed WTO rules and has positively implemented its commitments made for WTO accession.

It also noted that the panel request by the US incorporates measures which China believed were not listed in the request for consultations.

The second dispute brought by the US against China concerns countervailing and anti-dumping duties imposed by China on grain-oriented flat-rolled electrical steel from the United States.

In its communication to the DSB, the US considered that certain measures of the Government of China are inconsistent with China's commitments and obligations under the GATT 1994, the Anti-Dumping (AD) Agreement, and the Subsidies and Countervailing Measures (SCM) Agreement. The measures impose countervailing duties and anti-dumping duties on grain oriented flat-rolled electrical steel (GOES) from the US, and are set forth in Ministry of Commerce of the People's Republic of China (MOFCOM) Notice No. 21 [2010], including its annexes.

These measures appear to be inconsistent with the provisions of the AD Agreement, SCM Agreement, and GATT 1994, said the US.

The US complaint covered a number of issues including the initiation of the investigation, subsidy rate determinations, "all others" subsidy rate determination, anti-dumping margin determinations, "all others" dumping determination, final countervailing duty determination, confidential information, and injury determination (price effects analysis and causation).

In its statement at the DSB, the US said that its concerns relate to every phase of China's investigation. It believed that there were profound procedural and substantive deficiencies in the investigation, and these make the determinations unsustainable under WTO rules.

In its statement at the DSB, China said that during the investigations, the Chinese investigating authority effectively found, firstly, that the US product (was) dumped into China and benefited from US government subsidies. Secondly, that the dumped and subsidized imports had caused material injury to the domestic industry of China.

As a result, China imposed an anti-dumping and a countervailing measure.

In other actions, the DSB adopted the panel report in a dispute brought by Korea against the US over its use of "zeroing" in anti-dumping measures involving products from Korea. (See SUNS #7070 dated 20 January 2011 for the findings of the panel.)

Also at the DSB meeting, Thailand announced that it was appealing the findings of the panel report in a dispute with the Philippines over Thai customs and fiscal measures on cigarettes from the Philippines.

The DSB meeting also saw the European Communities blocking two separate panel requests by Canada over EC measures prohibiting the importation and marketing of seal products. (See separate article.) +