WTO Panel Rules Against Some Aspects of China's Electronic Payment Services Reqs
A World Trade Organization dispute settlement panel found some aspects of China’s requirements for electronic payment services to be inconsistent with its WTO obligations in the panel’s report in China — Certain Measures Affecting Electronic Payment Services (DS413). While the panel said there was not enough evidence to establish that UnionPay maintains an across-the-board monopoly over provision of electronic payment services, it said UnionPay does maintain a monopoly in certain situations that violates China’s market access commitments. The panel also said, among other things, that requirements that all payment cards bear the UnionPay label violates national treatment obligations.
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(On Sept. 15, 2011, the U.S. requested WTO consultations with China, alleging that China permits only a Chinese entity (China UnionPay) to supply electronic payment services for payment card transactions denominated and paid in renminbi in China, creating a monopoly for China UnionPay while excluding other potential suppliers. The U.S. said China also requires all payment card processing devices to be compatible with that entity's system, and that payment cards must bear that company's logo. The U.S. also argued that China UnionPay has guaranteed access to all merchants in China that accept payment cards, while services suppliers of other Members must negotiate for access to merchants. The U.S. requested the formation of a panel in February, and the WTO established the panel on March 25. See ITT’s Online Archives 11030719 for summary of the U.S. Trade Representative’s request for comments on its panel request, which includes details of the U.S. challenge.)
China has Market Access, National Treatment Obligations for Electronic Payment Services
The U.S. argued that China assumed market access and national treatment commitments to permit the supply of electronic payment services both on a cross-border basis and through commercial presence. The panel disagreed, and said China’s accession schedule does not include a market access commitment to allow the cross-border supply of electronic payment services into China by foreign suppliers.
However, the panel found that China's schedule does include a market access commitment that allows foreign suppliers to supply their services through commercial presence in China, so long as a supplier meets certain qualifications requirements related to local (RMB) currency business. Also, the panel said that China's schedule contains a full national treatment commitment for the cross-border supply of electronic payment services, as well as a national treatment commitment for supply through commercial presence in China that is also subject to certain qualifications requirements related to local (RMB) currency business.
Insufficient Evidence that UnionPay has an Across-the-Board Monopoly
The panel rejected the U.S. claim that China maintains China UnionPay as an across-the-board monopoly supplier for the processing of all domestic RMB payment card transactions on the basis of insufficient evidence. Accordingly, the panel rejected the United States' market access and national treatment claims in their entirety in respect of this alleged across-the-board requirement.
But Panel Says UnionPay has a Monopoly on Some Types of Transactions
But the panel concluded that China maintains China UnionPay as a monopoly supplier for the clearing of certain types of RMB-denominated payment card transactions, such as RMB payment cards issued in China and used in Hong Kong or Macao, or RMB payment cards issued in Hong Kong or Macao and used in China. The panel said these requirements were inconsistent with China’s market access commitments because of members may not limit the number of service suppliers where market access commitments have been undertaken, but said these requirements are not inconsistent with WTO national treatment obligations.
Panel Finds Label Requirements Violate National Treatment Obligations
Finally, the panel found that China maintains (1) a requirement that all payment cards issued in China must bear the Yin Lian/UnionPay logo and be interoperable with that network; (2) a requirement that all terminal equipment in China must be capable of accepting Yin Lian/UnionPay logo cards; and (3) a requirement that acquiring institutions post the Yin Lian/UnionPay logo and be capable of accepting all payment cards bearing the Yin Lian/UnionPay logo.
The panel found each of these requirements to be inconsistent with China's cross-border and commercial presence services provision national treatment obligations under Article XVII of the General Agreement on Trade in Services. It found, through these requirements, that China modifies the conditions of competition in favor of China UnionPay and therefore fails to provide national treatment to electronic payment services suppliers of other members, contrary to China's commitments.
(See ITT’s Online Archives 10091616 for summary of U.S. request for consultations with China, and 10092917 for summary of the USTR’s solicitation of comments on the consultations. See also 11021427 for summary of the U.S. request for a panel.)