China won't challenge WTO ruling in U.S. bank card row

By Tom Miles and Doug Palmer

GENEVA/WASHINGTON | Fri Aug 31, 2012 6:26pm EDT

GENEVA/WASHINGTON (Reuters) - The United States welcomed China's decision on Friday not to appeal a trade panel ruling that Beijing discriminated against U.S. bank card suppliers such as Mastercard Inc and Visa Inc in favor of a state-owned enterprise, China UnionPay.

"Fair and open financial services markets are critical to facilitating global trade," U.S. Trade Representative Ron Kirk said in a statement, noting that China now had 30 days to say how it would comply with the World Trade Organization's July 16 ruling.

The U.S. case accused China of imposing a series of measures dating back to 2001 that discriminated against foreign suppliers of electronic payment systems that allow consumers to make purchases using credit, debit, prepaid and other payment cards.

More than $1 trillion worth of electronic payment card transactions are processed in China each year, making it a hugely attractive market for U.S. electronic payment services firms such as Visa and MasterCard.

"The WTO panel agreed that China's pervasive and discriminatory practices are unfair to American suppliers of electronic payment services and discriminate at each stage of a payment card transaction," Kirk said.

"The message to the Government of China is that those practices must end," Kirk said.

As many as 6,000 jobs could be gained from increased access to China's electronic payments market, Kirk's office said.

China had until Friday to notify the WTO whether it intended to appeal the July decision.

In a statement, Beijing played down the significance of the panel's ruling, even though the United States heralded it as a major victory in its effort to open China's financial services sector to more foreign competition.

"In fact, China's electronic payments market is already very open," China's Commerce Ministry said. "The panel's decision rejected the U.S. charges that UnionPay was the only service provider, and affirmed that (China's policy) does not prevent foreign service providers from entering China's market."

Although the July ruling found that China UnionPay (CUP) had a monopoly on yuan payment cards issued and used in China, it rejected the U.S. claim that CUP was an "across-the-board monopoly supplier" for all transactions denominated in yuan.

A U.S. diplomat, according to a transcript that did not identify individuals by name, told the WTO's Dispute Settlement Body the United States was disappointed the ruling had stopped short of branding CUP as a "monopoly or exclusive supplier".

China's representative at the meeting said that claim had been the centerpiece of the U.S. case, and China commended the dispute panel for rejecting it.

However, despite China's decision not to appeal, the Chinese official also said that the ruling was not entirely free from error, and China was "troubled" by parts of it.

The Chinese Commerce Ministry, in its statement, said China believed "cooperation and competition" between domestic and foreign companies would help develop its payments market.

"China will continue to push forward with reform and opening up and international cooperation in the electronic payments market," the ministry said.

(Additonal reporting by Ben Blanchard in Beijing and Doug Palmer in Washington; Editing by Stephen Nisbet and David Brunnstrom)

Source: http://www.reuters.com/article/2012/08/31/us-china-usa-trade-bankcards-idUSBRE87U1BV20120831?feedType=RSS&feedName=businessNews

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