I had seen brief references to a WTO complaint against China related to the credit card industry, but didn't know the details. Here's the argument, as set out by Eric Grover in the Washington Times:
Chinese banks have 1.88 billion debit cards and 190 million credit cards outstanding, on which cardholders made 19.7 billion purchases last year. But they can't buy domestic card payment network services from American Express, Discover, JCB, MasterCard or Visa. China UnionPay (CUP) enjoys a protected card-payment-network monopoly. And merchant processors such as First Data and Global Payments, which have joint ventures in China with British banks Standard Chartered and HSBC respectively, can't compete with CUP and Chinese banks providing domestic card acceptance to merchants.
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By Dec. 11, 2006, China's entire domestic credit and debit card market should have been open to foreign payment networks and processors. But there has not yet been a single domestic MasterCard or Visa payment transaction in China, almost nine years after it joined the WTO and three years after it pledged to have completely opened its domestic retail cards market.
While Chinese banks co-brand payment cards with MasterCard and Visa, it's only for use overseas where CUP's acceptance network is weak. Similarly, foreign merchant processors only provide card acceptance for MasterCard and Visa payments by tourists and business travelers visiting China.
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China's ban on American, European and Japanese firms from its domestic credit and debit card market violates the letter and spirit of its WTO commitments, harms Chinese consumers and merchants, and hurts businesses such as Amex, Discover, First Data, Global Payments, JCB, MasterCard and Visa. Dialogue with no credible possibility of punitive consequences won't change China's conduct. Successful WTO complaints have borne fruit in other sectors. The United States should bring a card-payments WTO action against China unilaterally, or, possibly, with Japan and the EU.
