1. US - China (Electronic Payments) DS 413
By: Charles, Han, and Gaby

2. History and Context
In 2006 China tried to open up its Electronic Payment System(EPS) to the market but was unsuccessful
In 2010 China allowed only its UnionPay System (CUP) to supply Electronic Payment Services for all transactions paid in Renminbi
Service providers of other WTO members could only facilitate transactions undertaken in foreign currencies. All payment cards of other companies must bear CPU’s logo

3. History and Context (continued)
CPU had access to Chinese merchants that accept credit cards while foreign suppliers had to negotiate for access
On 15 September 2010, the United States requested a consultation with China with respect to “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 service at issue” claiming abuse of Articles XVI and XVII

4. DSU Time Table 15 Sep. 2010- US requested consultation with China
11 February US request creation of a panel
June 23, US request the Director General to composition of the panel
Feb.24, DSB deferred establishment of the panel
July 4, Panel composition determined
March DSB agrees to the creation of panel
May 2012, parties envisages final report shall be issued
June , the Chairman of the panel notified DSB that it would not be able to issue its report within six months
July , Panel Reports circulated to members

5. Proceedings
September 15, 2010: U.S. requested consultations with China
February 11, 2011: U.S. requested establishment of a panel
February 24, 2011: Dispute Settlement Body (DSB) deferred the establishment of a panel
March 25, 2011: DSB established a panel
June 23, 2011: U.S. requested the Director-General to determine the composition of the panel
July 4, 2011: Director-General composed panel
January 9, 2012: Chairman of the panel notified the DSB that it would not be able to issue its report within six months
July : Panel Report circulated to members

6. US Political Context
The United States officially requested consultation on September 15th of 2010 for DS413 and an additional case regarding anti-dumping in regards to steel, DS414.
On September 16th, US Treasury Secretary Timothy Geithner appeared before Congress and stated that China was purposefully devaluing their currency and not upholding similar market access in China for US firms that the Chinese firms were receiving in the US.
Geithner continued criticizing China for only appreciating the RMB(¥) by 1% since the Chinese government announced in June of 2010 that they were “relaxing” their currency valuation pegging to the US($).
Then President Obama soon thereafter echoed Geithner’s remarks regarding currency devaluation while Chinese officials hit back stating they would not succumb to foreign external pressure.

7. Business Context
Only allowing China UnionPay to supply electronic payments in Chinese currency greatly advantaged the domestic company
Guaranteeing China UnionPay access to all merchants that accept electronic transactions also advantaged the domestic company
Other restrictions such as requiring China UnionPay logos disadvantaged foreign competitors

8. Main WTO Issues National Treatment Market Access
The United States claimed that China assumed market access and national treatment commitments to permit the supply of EPS both on a cross-border basis (under mode 1) and through commercial presence (under mode 3)
The United States considered that EPS fall under sub sector 7.B(d) of China’s GATS Schedule, which reads “ [a]ll payment and money transmission services, including credit, charge, and debit cards, travellers cheques and bankers drafts (including import and export settlement)”.
The United States further claimed that, in view of these alleged commitments, the identified Chinese requirements are inconsistent with China’s market access and national treatment obligations under Articles XVI and XVII of the GATS agreement

9. GATS Article Violations
The United States argued that China allegedly violated Articles XVI and XVII under the GATS agreement.
Third Parties Involved: Australia, Ecuador, European Union, Guatemala, Japan, Republic of Korea, India
XVI Market Access
XVI: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.”
XVII:2(a) – Members shall not maintain: “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…”
XVII National Treatment
“…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.”

10. Complainant- The United States’ Position
Issues Response
Are EPS included in China’s GATS Schedule? YES
Are the Chinese requirements consistent with
the market access obligations of Article XVI? NO
the national treatment obligation of Article XVII? NO

11. Respondent- China’s Position
Issues Response
Are EPS included in China’s GATS Schedule? YES
Are the Chinese requirements consistent with
the market access obligations of Article XVI? YES
the national treatment obligation of Article XVII? YES

12. Respondent- China’s Position (continued)
Requests that the panel reject the US claim entirely
Discrepancies in regard to the definition of “EPS”
Claim that the market for so called “network services” is different from the market in which financial institutions issue payment cards and acquire payment card transactions
China’s position is that they made no market access or national treatment commitments in respect of clearing and settlement services, asks the panel to reject US claims
Accuses US of failing to comply with DSU Article 6.2 (explanation of legal implications)

13. WTO Panel Findings
This dispute concerns various alleged Chinese requirements that the United States claimed are inconsistent with obligations China allegedly assumed under the GATS Agreement.
These are:
Alleged requirements that establish China UnionPay( CUP), a Chinese company, as the sole supplier of electronic payment services (EPS) for all Renminbi (RMB) payment card transactions
WTO Findings: The panel rejected the United States’ market access and national treatment claim in their entirety but held that China maintains CUP as a monopoly supplier for the clearing of certain types RMB- denominated payment card transactions

14. WTO Panel Findings (continued)
Alleged requirements that payment cards issued by banks in China bear the “Yin Lian”/”UnionPay logo ( the logo of CUP’s network);
WTO Finding: found that it is inconsistent with China’s national treatment obligation under Art. VII---United States claim upheld
Alleged requirements that all ATMs, merchant card processing equipment and point-of-sale terminals in China be capable of accepting payment cards bearing the “Yin Lian”/” UnionPay” logo;
WTO Finding: United States claim upheld
Alleged requirements that acquiring institutions post the “Yin Lian”/UnionPay” logo and be capable of accepting all payment cards bearing the “Yin Lian/”UnionPay” logo;
WTO Finding: inconsistent with China’s national treatment obligation under Art. VII

15. WTO Panel Findings (continued)
Alleged prohibitions on the use of non-CUP cards for inter-bank and cross-region payment card transactions:
WTO Finding: United States claim upheld
Alleged requirements pertaining to RMB transactions involving payment cards issued in China and used in Hong Kong, China or Macao, China and payment cards issued in Hong Kong, China or Macao, China and used in China
WTO Finding: Article VI:2(a) requires Members not to limit the number of service suppliers where market access commitments have been undertaken. The panel found that China acted inconsistently with its mode 3 market access commitment under Article XVI:2(a) of the GATTS by granting CUP a monopoly for the clearing of these types of RMB payment and transactions. The panel found no inconsistency with China’s national treatment commitments

16. The Panel’s Decision
China was found to have not been living up to all of its commitments within GATS to provide similar market access for foreign EPS suppliers within their domestic Chinese RMB(¥) EPS transaction market that CUP conducted business under.
The Panel found inconsistencies with Articles XVII & XVI - 2(a): “(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”.
The panel rejected, due to lack of evidence, “that China maintains CUP as an across-the-board monopoly supplier for the processing of all domestic RMB payment card transactions.”

17. The Panel’s Decision (continued)
While the across the board monopoly claim from the US was rejected, it was decided by the panel that there was a CUP monopoly in the clearing of specific kinds of “RMB(¥)-denominated payment card transactions.” This meant that China was inconsistent with their commitments made under Article XVI:2(a) and its mode 3 market access commitments.
The Chinese requirements listed below were also all deemed by the panel “to be inconsistent with China's mode 1 and mode 3 national treatment obligations under Article XVII of the GAT”:
○All payments cards having the UnionPay or Yin Lian Logo and be operable with that network
○All terminal equipment must be able to accept UnionPay/Yin Liancards
○And all acquiring institutions post the UnionPay/Yin Lian logo and accept their logo cards

18. Both Sides Claims Victory
National Perspective
Both Sides Claims Victory
United States: 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.
Tim Reif, USTR general counsel, in a teleconference with reporters said that the WTO panel found in the favor of the United States “with respect to each aspect”.

19. National Perspective - China
Statement by China’s Ministry of Commerce (MOC)
The Ministry of Commerce ( MOC) on Friday welcome the ruling by the World Trade Organization (WTO) dispute panel rejecting part of the accusation made by the United States against China’s handling of electronic payment

20. Implementation
On September , China stated that it intended to implement the DSB’s recommendations and ruling in a manner that respects its WTO obligations
China stated it would need reasonable period of time to do so
On November 22, 2012, China and United States informed the DSB that they had agreed that the reasonable period of time for China to implement the DSB’s recommendations and ruling shall be 11 months from the date of adoption of the panel reports
Reasonable period of time expired on July
On July , at DSB meeting, China reported that it had fully implemented the DSB’s recommendations and rulings

21. Implementation (continued)
The United States said it did not agree with China’s assertion that it had complied
The United States stated that it would monitor and review China’s actions
On August , China and United States informed the DSB of Agreed Procedures under Article 21 and 22 of the DSU
Prior to the final report, China accelerated regulatory effort in the EPS industry
China granted 96 non-financial institution payment business licenses
China issued EPS industry regulation draft

22. Our Proposal for Resolving Trade Issues
The time frame stated for compliance i.e. 11 months does not guarantee final resolution to the issue. Despite the fact both countries did not appeal the panel’s report, it may take more time for one case and the issue to be resolved.
The USTR should propose formation of a committee that would incorporate industry representatives to monitor and report full compliance level of China
If obligations are not met, the U.S. may request a subsequent compliance panel to maintain attention on the issue
China should continue to make good on its obligation by drafting additional regulation and issuing EPS licenses in the business industry to demonstrate their willingness to comply and to avoid criticism if not able to fulfill its obligation as required by July