The U.S. filed two complaints against China at the World Trade Organization, as lawmakers stepped up pressure on the Obama administration to push China for an increase in the value of its currency.
One case concerns curbs on payment-processing companies such as MasterCard Inc. and Visa Inc. that are at a disadvantage because China favors a monopoly provider, China UnionPay Data Co., the U.S. trade office said yesterday in a statement. The second complaint is over dumping duties that China imposed on more than $200 million of U.S.-made steel products.
The Obama administration “is fighting for the American jobs threatened by China’s actions, and insisting on the level playing field promised in our WTO commitments,” U.S. Trade Representative Ron Kirk said in the statement.
President Barack Obama is under pressure from Congress to take more action against China on trade and currency. Lawmakers held a hearing yesterday to discuss legislation aimed at getting China to raise the value of its currency, the yuan. Treasury Secretary Timothy F. Geithner is scheduled to appear today before two congressional panels where lawmakers will press him on China.
The filing of the complaints yesterday wasn’t related to pressure from lawmakers or to the hearings, said Carol Guthrie. “We file cases when they are ready.”
Wang Baodon, a spokesman for the Chinese Embassy in Washington, said in an e-mail that “China will continue to faithfully implement its WTO obligations and at the same time firmly defend its legitimate rights.”
$723 Billion Market
Payment-processing in China is a $723 billion business, Terry Xie, an analyst with Mercator Advisory Group, a research firm in Maynard, Massachusetts, said earlier this year. China will overtake the U.S. as the largest market for credit cards by 2020 with about 900 million cards in circulation, MasterCard said on Sept. 10.
China doesn’t let foreign companies issue their own bank cards denominated in its currency, build networks to support such cards or process interbank point-of-sale transactions. Foreign banks must “co-brand” with Chinese operators to supply these services and execute payments through UnionPay.
Those rules run counter to the pledge China made when it joined the WTO in 2001 to open up its credit- and debit-card market to foreign processing companies by the end of 2006, according to the U.S. complaint.
China “did not make any commitment regarding the supply of payments and clearing services by foreign non-financial institutions” when it joined the trade arbiter, the Chinese government said in a statement at a WTO meeting in 2007.
'Patently Unfair’
UnionPay, created by the People’s Bank of China in 2002, is owned by more than 80 of the nation’s largest banks and other state-owned enterprises. The company has access to payment markets in more than 70 countries and aims to make its cards “acceptable all across the globe,” company President Xu Luode said in an interview last year in New York.
"Having government-sponsored exclusivity over the world’s largest consumer market is patently unfair, especially when they are accessing markets abroad,” said Phillip Philliou, a partner with industry consulting firm Philliou Selwanes Partners LLC in New York.
Hang Jia, UnionPay’s chief representative for the Americas, declined to comment in an e-mail and referred inquiries to the company’s Shanghai headquarters.
Visa, the world’s biggest payments network, clashed with China UnionPay in June when the San Francisco-based firm told banks and merchants to use its system to process international transactions by Chinese holders of cards that carry both companies’ brands.
MasterCard’s Agreement
MasterCard of Purchase, New York, the second-biggest network, has taken a different tack and said Sept. 14 that it signed a memorandum of understanding with UnionPay that may increase the number of merchants who accept both companies’ cards.
Chris Monteiro, a MasterCard spokesman, said the agreement with UnionPay is unrelated to the trade dispute.
"The WTO case is a matter between the U.S. and Chinese governments,” Monteiro said. The memorandum of understanding “covers commercial discussions between MasterCard and China UnionPay.”
Steel Case
The steel case involves dumping and countervailing duties China has placed on flat-rolled steel, which is made by companies such as AK Steel Holding Corp., the third-largest U.S. steelmaker.
Last December, China, the world’s biggest steel market, said it would impose antidumping and subsidy duties of as much as 25 percent on flat-rolled electrical steel products, used in transformers, reactors and electric machines.
China didn’t follow WTO procedures by failing to disclose the facts underlying its legal conclusions and not explaining its calculations, according to the U.S.
"China’s imposition of anti-dumping duties on the relevant American electrical steel was based on a sound investigation,” Wang, the Chinese Embassy spokesman said.
Compared with Chinese steel exports to the U.S., the volume of trade affected in this case is small, said Michelle Applebaum, a steel analyst in Chicago.
"It’s a small product in general,” Applebaum said in an interview. “But it’s material to AK Steel, and it’s the kind of thing we should be making” because it is a high-end product, she said.
Under the rules of the WTO, a filing begins a 60-day period of mandatory consultations between officials from the two nations. After that the U.S. can request a WTO panel of judges to rule on the matter.
