United States Files WTO Case Against China Over Treatment of U.S. Suppliers of Financial Information Services
WASHINGTON, D.C. – United States Trade Representative Susan C. Schwab announced today that the United States has requested dispute settlement consultations with China at the World Trade Organization (WTO) regarding China’s treatment of U.S. suppliers of financial information services.
China’s regulatory regime requires foreign financial information suppliers to operate through a government-designated distributor in China and prohibits them from establishing local operations to provide their services. In addition, the agency designated by China to regulate this financial service appears to have a conflict of interest, since the agency seems to be closely aligned with a Chinese competitor in the supply of these services. The United States believes that China’s treatment of foreign financial information suppliers is inconsistent with China’s WTO obligations.
“China’s restrictive treatment of outside suppliers of financial information services places U.S. and other foreign suppliers at a serious competitive disadvantage,” Schwab said. “We have raised this matter with China repeatedly, yet the problem has not been resolved. We hope the filing of our request for formal WTO consultations will lead to a swift resolution of this matter.”
“It is not in China’s interest to restrict access to the high-quality, comprehensive financial information provided by foreign service suppliers,” Schwab added. “Financial market professionals in domestic and foreign banks, investment firms and other businesses in China need real-time access to this information from diverse sources – foreign and domestic – in order to make effective business decisions.”
New Chinese regulations, from 2006, require foreign financial information suppliers to supply their services through an entity designated by China’s regulatory authority. The regulations prohibit foreign financial information suppliers from directly soliciting customers for their services, requiring efforts to develop new customers to be conducted exclusively through the government-designated entity. China likewise prohibits users of financial information services in China from directly purchasing services supplied by foreign suppliers. Furthermore, China prevents foreign financial information suppliers from establishing local operations in China to provide their services.
These new restrictions and requirements imposed by China on foreign financial information suppliers are now even more restrictive than those in place at the time of China’s accession to the WTO.
The European Union has also requested formal WTO consultations with China on this matter today.
Banks, investment firms, and other businesses involved with financial markets need to keep constantly abreast of national and global developments affecting those markets. Suppliers of financial information services provide these clients the specialized news, data, analysis, and commentary that they require to make fast and effective business and investment decisions.
In 1996, China attempted to impose restrictions and requirements on foreign financial information suppliers similar to those currently being imposed. That matter was resolved in 1997 when China agreed to allow foreign financial information suppliers to contract directly with customers in China and to distribute their services directly to these customers. Ten years later, China’s regulator has again attempted to impose similar restrictions on foreign suppliers. This is despite China’s strong market opening commitments in the financial information sector in its 2001 WTO accession.
The United States maintains that China’s restrictions and requirements limit the ability of foreign suppliers of financial information services to conduct business in China and place them at a competitive disadvantage in the marketplace. The apparent conflict of interest of China’s regulatory authority compounds these issues. As such, China appears to be acting inconsistently with several WTO provisions, including Articles XVI and XVII of the General Agreement on Trade in Services as well as commitments made by China in its WTO accession agreement.
Consultations are the first step in a WTO dispute. Under WTO rules, if the parties do not resolve an issue through consultations, the complaining party may refer the matter to a WTO dispute settlement panel.
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