Source: Wall Street Journal
BRUSSELS—The U.S. said Friday it would go ahead with a complaint against China at the World Trade Organization over restrictions on foreign payment-card firms like Visa Inc. and American Express Co.
The U.S. also said it would challenge antidumping duties imposed on imports of U.S. steel in 2009, signaling that the Obama administration is intent on pursuing a muscular trade policy with China.With the U.S. trade deficit with China growing—growing to $252.4 billion in the first 11 months of 2010 compared with $208.7 billion in the first 11 months of 2009—the administration is under pressure to show it can defend key U.S. interests. It has also filed WTO cases against China over limits on exports of raw materials and subsidies.
U.S. trade officials say the Chinese payment-card business, valued at hundreds of billions of dollars a year, is central to U.S. interests. They say they are keen to stop other emerging economies, whose booming middle classes are now providing the bulk of the sector's growth, from imposing similar curbs. The U.S. also wants to push China to open its market for other kinds of services, such as law firms and consulting.
Only China UnionPay, a company set up by the People's Bank of China, is allowed to handle credit-card payments in Chinese currency, and when Chinese travel overseas, their transactions in foreign currencies must also be handled by China UnionPay. The crux of the case concerns the business of intermediate payments between store and bank: Visitors can use foreign cards in China, but the card companies can have no piece of the lucrative business of processing transactions between the merchants and intermediary banks.
"Removal of the monopoly that China has provided to China UnionPay would create significantly expanded business opportunities in China's huge and growing market for American suppliers of this essential service," said U.S. Trade Representative Ron Kirk.
One U.S. company, MasterCard Inc., last year signed a cooperation agreement with China UnionPay. Still, MasterCard would also benefit should the WTO order a full opening of China's payment-card market. MasterCard declined to comment.
China declined a U.S. request for formal negotiations in China in September. If, as expected, it accepts the case, the WTO will take 12 to 18 months to rule. If the WTO rules in favor of the U.S., it could then force China to get rid of the monopoly.
When it joined the WTO in 2001, China committed to opening big slices of its services market by 2006. "Opening up China's market, as China committed to do over four years ago, would create American jobs for the U.S. suppliers of electronic payment services," said Mr. Kirk.A spokesman for the Chinese mission to the EU said Beijing is committed to respecting its WTO obligations, but declined to comment further.
Lingering restrictions on services, however, are a chief complaint for Western banks, law firms, consultants and other firms. The WTO's big Western service-dominated economies have tried for years without success to get emerging economies to guarantee access to service markets as part of the Doha Round of global trade talks. "There's no indication that China is opening its services sector in areas that matter to U.S. and EU economies like banking," said Jonathan Holslag, head of research of the Brussels Institute of Contemporary China Studies.
In 2009, China imposed extra duties of up to 64.8% on certain steel imports from the U.S. of a "grain-oriented flat-rolled electrical steel", which is used to make machines for factories.
In its complaint, the U.S. charged that China "improperly used investigative procedures." WTO law allows an importer to levy duties on a product if it can prove it has been "dumped," or sold below cost, or unfairly subsidized by the exporting country.
"The U.S. likes to use antidumping and antisubsidy tariffs, so it is surprising that they would take another country to court for doing so," said Simon Lester, founder of WorldTrade Law.net LLC, a Washington-based consultancy. "It shows [Washington] is going on the offensive."
