WTO Case DS413

1. WTO Case DS413 U.S. Complainant Against China Regarding Electronic Payment Services (Panel Report: July 13, 2012) Joseph Rossell Shannon McDaniel Javier Marquez

2. What is this case about?

4. Case Timeline:

6. UnionPay Dominance in Hong Kong & Macau 40 Miles

7. UnionPay Monopoly

10. Panel Findings • EPS is covered under subsector 7.B(d) of China’s GATS Schedule: • “[a]ll payment and money transmission services, including credit, charge, and debit cards, travellers cheques and bankers drafts (including import and export settlement)” • But China’s GATS Schedule does not include a market access commitment allowing cross-border EPS from foreign suppliers

11. Panel Findings (con’t) • The Panel rejected the US’s claim that China maintains CUP as an across-the-board monopoly for all domestic EPS due to insufficient evidence. • Accordingly, the US’s market access and national treatment claims with regards to across-the-board EPS were rejected. • Exception: the Panel upheld the US’s claims of a CUP monopoly on EPS in Hong Kong and Macau since sufficient evidence was provided in this situation.

12. Panel Findings (con’t) • Panel found that CUP is a monopoly supplier of certain kinds of EPS, which is not allowed under Article XVI:2(a) (market access commitment)

13. Article XVI:2(a) 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: (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.

14. Panel Findings (con’t) • Panel found that China’s requirement that all cards bear the Yin Liang/UnionPay logo and that all institutions operating in China be capable of accepting said cards is not allowed under Article XVII (national treatment)

15. Resolution • The DSB officially adopted this report on August 31, 2012. • China requested a reasonable period to comply with the decision, and was given until July 31, 2013 to implement the DSB’s recommendations. They reported that they had done so on July 23, 2013. The United States objected, and said they would review and monitor China’s actions. On August 19, 2013, the United States and China informed the DSB that the issue had been resolved. This case was not appealed.

16. Further Processes? • After the final WTO determination, the U.S. and Chinese governments did not challenge • The Chinese government waived their right to appeal • Accepted the decision that the Chinese/CUP gradually open their market over time. • The time period in which they open was not clearly defined by the WTO.

17. Significance of Case for U.S. Trade Policy? • The ruling is expected to further open China’s financial services market, benefiting American electronic payment services companies such as Visa and MasterCard. • Creation of 6,000 domestic U.S. jobs • As the market for EPS opens, it will grant access to a $1 trillion plus market

18. Additional Comments • It is anticipated (since the 2012 ruling) that the Chinese credit market will grow. • Credit spending in 2012 was $1 trillion, expected to grow to 2.5 trillion by 2025. • Even though the WTO ruled that China will have ease access into the domestic market, no real time table was set to change their internal policies. • But it was expect to do so in a reasonable time period • No clear winner or loser

19. Headline News • Wall Street Journal – WTO: China Discriminates Against U.S. Credit Cards • The US – China Business Council – WTO Rules in Favor of US in Electronic Payment Case; US Calls Win a “Decisive Victory” • Reuters – U.S. wins WTO case over China bank card monopoly • Xinhau News – China welcomes WTO ruling on China-US e-payment dispute • China Briefing – UnionPay Ruling Paves Way for Visa and MasterCard

20. QUESTIONS???