1. US-CHINA DSU CASE STUDY: Electronic Payment Services
ITRN 603 – TEAM 6:
Herpin R. Jateng
Sonja Horne
James Henderson

2. Table of Contents History and Context of the Case Main WTO Issue
Summary of Dispute Settlement Case WT/DS413
History and Context of the Case
Main WTO Issue
WTO Agreement: GATS Article XVI
WTO Agreement: GATS Article XVII
U.S Complaint to DSB
Panel and Appellate Body Proceeding
Implementation
Context of U.S. Advantage from Decision
Why does this matter
Transaction growth
The current decision
Page 2

3. Summary of Dispute Settlement Case WT/DS413
Complainant: United States
Respondent: China
Third Parties: Australia; Ecuador; European Union; Guatemala; Japan; Republic of Korea; and India
Agreement Cited: Services (GATS): Art. XVI, XVI:1, XVI:2(a), XVII
Request for Consultation received: September 15, 2010
Panel report circulated: July 16, 2012
Parties agreed further procedures involving this case on August 19, 2013
combine with H3
Page 3

4. History and Context of the Case
Back in 2001, China made important commitments with respect to electronic payment services ("EPS") for payment card transactions when it joined the World Trade Organization ("WTO").
EPS enable, facilitate, and manage the transfer of funds between cardholders and merchants and are essential to processing the several hundred million card-based electronic payment transactions that occur daily around the world.
In the financial services sector, as set out in China's Schedule of Specific Commitments on Services, China undertook to provide by December 2006 both market access and national treatment for "all payment and money transmission services, including credit, charge and debit cards.“
On 15 September 2010, the United States requested consultations with China with respect to “certain restrictions and requirements maintained by China pertaining to electronic payment services for payment card transactions and the suppliers of those services”.
On 11 February 2011, the United States requested the establishment of a panel.  At its meeting on 24 February 2011, the DSB deferred the establishment of a panel
Page 4

5. Main WTO Issue
A series of requirements imposed by China and alleged by the United States to constitute impermissible market access restrictions or national treatment limitations on foreign suppliers of the services at issue.
Page 5

6. WTO Agreement: GATS Article XVI
Article XVI: Market Access
Section 1: Each Member shall accord services and service suppliers of any other Member treatment no less favorable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule.
Section 2(a): In sectors where market-access commitments are undertaken, a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, 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.
Page 6

7. WTO Agreement: GATS Article XVII
Article XVII: National Treatment
In the sectors inscribed in its Schedule, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favorable than that it accords to its own like services and service suppliers.
Page 7

8. U.S. complaint to DSB
Citing Articles I and IV of the DSU and Article XXII of GATS, which provide basis for the U.S. to request a dispute resolution panel, “China imposes market access restrictions and requirements on service suppliers of other Members seeking to supply EPS in China.”
CUP is the only entity that China permits to supply EPS 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.
Page 8

9. U.S. complaint to DSB (cont.)
China requires all payment card processing devices at merchant locations, all ATMs, and all point-of-sale (POS) terminals in China to be compatible with CUP’s system and capable of accepting CUP payment cards.
China requires 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.
This means that issuing banks must have access to the CUP system, and must pay CUP for that access.
Page 9

10. U.S. complaint to DSB (cont.)
China 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 U.S. considers that these measures are inconsistent with China’s obligations under GATS Article XVI:1, Article XVI:2, and Article XVII.
Page 10

11. Panel and Appellate Body Proceedings
At its meeting on 25 March 2011, the DSB established a panel.  Australia, the European Union, Guatemala, Japan and Korea reserved their third party rights. Subsequently, Ecuador and India reserved their third party rights.
On 23 June 2011, the United States requested the Director-General to determine the composition of the panel. 
On 4 July 2011, the Director-General composed the panel.
On 9 January 2012, the Chairman of the panel notified the DSB that it would not be able to issue its report within six months.  
The timetable adopted by the panel after consultations with the parties to the dispute envisages that the final report shall be issued to the parties by May 2012.
Page 11

12. Panel and Appellate Body Proceedings (cont.)
At its meeting on 25 March 2011, the DSB established a panel.  Australia, the European Union, Guatemala, Japan and Korea reserved their third party rights. Subsequently, Ecuador and India reserved their third party rights. 
On 23 June 2011, the United States requested the Director-General to determine the composition of the panel. 
On 4 July 2011, the Director-General composed the panel.
On 9 January 2012, the Chairman of the panel notified the DSB that it would not be able to issue its report within six months.  
The timetable adopted by the panel after consultations with the parties to the dispute envisages that the final report shall be issued to the parties by May 2012.
Page 12

13. Implementation
Sept China agrees to “implement the DSB's recommendations and ruling in a manner that respects its WTO obligations”
China requests a “reasonable period of time” to undertake the implementation
Sept 22, 2012 China and the US inform the DSB that the time to implementation of panel recommendations will be 11 months.
decision hinged on the interpretation of articles 16 and 17.
U.S. View of the Scope of Articles XVI and XV (from Market Access and National Treatment in China-- Electronic Payment Services: An Illustration of the Structural and Interpretive Problems in GATS by Rachel Block. University of Chicago Press)
Page 13

14. Implementation (cont.)
23 July 2013 China reported that it had fully implemented the DSB's recommendations and rulings.
US disagrees
August 19, 2013 China and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU
Again articles 16 and 17 drive the decision
China's View of the Scope of Articles XVI and XV (from Market Access and National Treatment in China-- Electronic Payment Services: An Illustration of the Structural and Interpretive Problems in GATS by Rachel Block. University of Chicago Press)
Page 14

15. Context of US Advantage from Decision
US based companies offering electronic payment services stand to gain market share in China (Visa, MasterCard, AmEx)
This decision enables American service providers to provide electronic payment services in China in local currency using credit, debit, prepaid, and other payment cards.
According to USTR the US electronic payment industry stood to gain 6,000 new jobs
Page 15

16. Why does this matter?
Non Cash transactions are growing worldwide info graphic from WPR
China’s market share is estimated at 12% as of 2015 and growing.
Page 16

17. Transaction Growth MARKET SHARE AND GROWTH 2013
UNION PAY MARKET SHARE IN CHINA 2015
Page 17

18. The Current Situation
China has agreed to let outside EPS providers access the market, in theory, as of 2014
As of June 2015; qualified domestic and global bank card operators can seek licenses
As of 2014, domestic third-party payment processors were forced to connect with CUP’s (China UnionPay) network system in order to process bank cards with a CUP logo
By switching transactions to CUP, card-issuing banks pay CUP a network fee even though they use their own bank cards and process through third party payment processors
Foreign bank card firms can’t do business in China without working through the UnionPay network and paying its network access fees
All Visa and MasterCard cards issued in China must be cleared in U.S. dollars rather than RMB
In February 2016, Visa signed a memorandum of understanding with UnionPay to expand access to the Chinese market
Page 18

19. END OF THE PRESENTATION ON THE U.S. – CHINA DSU CASE STUDY FROM TEAM 6
Page 19

20. THANK YOU FOR YOUR TIME!!!
Any Questions…?
Page 20