U.S. Wins Trade Dispute with China over Electronic Payment Services

The U.S. prevailed in one of its many World Trade Organization (WTO) disputes with China this week. Specifically, the WTO found that China’s policies toward foreign suppliers of electronic payment services (EPS) were discriminatory, as the U.S. had alleged in its original complaint.

China’s trade policies have often been criticized for being borderline nationalistic, heavily favoring state or domestic suppliers while hamstringing their foreign equivalents. But as the country’s role in the global market continues to expand, the pressure to create fair and open markets has increased, most notably from the U.S., which has used WTO disputes to challenge Chinese policies on everything from sales of rare earths, to American automobiles, and now, to electronic payment options.

“This decision will help U.S. companies and increase American jobs as a more efficient credit and debit payment system in China enables consumers to buy more goods, including quality, made-in-America products,” said U.S. Trade Representative Ron Kirk. “The WTO panel agrees that China’s pervasive and discriminatory measures deny a level playing field to American service providers, which are world leaders in this sector.”

Each year well over $1 trillion worth of electronic payment card transactions are processed in China, nearly all of them through China’s state-owned company, China Union Pay (CUP). The People’s Bank of China, which regulates EPS in China, issued a series of measures dating back to 2001 that discriminate against foreign suppliers of EPS at every stage of a payment card transaction, imposing requirements on institutions in China that issue payment cards, on all point-of-sale terminal and payment card processing equipment in China, and on the institutions in China that have the relationship with the EPS supplier and handle payment card transactions for Chinese merchants. “Open financial services markets are critical, and China should honor its WTO commitments and eliminate this discrimination,” said Kirk.

For example Jack Ma’s unceremonious transfer of Alipay out of the Alibaba Group was in response to the controversial regulations imposed by the People’s Bank of China.