The European Union and the United States launched a case against China at the World Trade Organisation (WTO) on Monday over the way Beijing regulates foreign providers of financial information.
"Competitive and open financial services information markets are the lifeblood of a strong financial sector, but China's rules have tipped the balance against foreign companies," EU Trade Commissioner Peter Mandelson said in a statement. "I trust the EU and China will be able to resolve this issue amicably and to mutual benefit."
The WTO umpires the world trade system. Brussels and Washington object to rules that require data suppliers such as Reuters Group, Bloomberg and Dow Jones, part of Rupert Murdoch's News Corp, to operate in China through the state news agency Xinhua - which is also their competitor - instead of dealing directly with customers.
"We take note that the European Union has brought up the issue in the dispute settlement system and we will respect any other members' rights under the mechanism," said an official at China's WTO mission. "We shall study the request for consultations and deal with it according to WTO procedures," the official, who declined to be named, told Reuters.
US Trade Representative Susan Schwab said the current rules placed US and other foreign suppliers of information at a serious disadvantage. Although Washington had raised the issue repeatedly it had not been resolved.
"It is not in China's interest to restrict access to the high-quality, comprehensive financial information provided by foreign service suppliers," Schwab said in a statement.
Schwab noted that the rules introduced in 2006 were more restrictive than those prevailing when China joined the WTO. The two trade powers clearly hope this could lead to a swift resolution at the consultation stage of the case as WTO members are not supposed to restrict market access unilaterally. Chinese officials have argued that national security interests require China to regulate the flow of news internally.
But the EU and the USA say the dispute is about financial data, such as stock prices and currency rates, rather than news. Financial experts say the Chinese market for financial information was worth over $100 million in 2006 and is still expanding.
"We are confident that consultations between the US, EU and Chinese governments within the WTO framework will result in an outcome that will support the development of China's financial markets by ensuring the effective flow of financial information," a Reuters spokesman said.
The case is likely to add to strains between Beijing and Washington and Brussels stemming from China's record and still expanding trade surpluses with both the European Union and the United States.
China suffered its first loss in a WTO dispute earlier this month in a case involving imported auto parts, brought jointly by the United States, the European Union and Canada.
It is facing several other cases, brought mainly by the United States. But China, whose international trade has benefited greatly since it joined the WTO in 2001, settled a case with the United States and Mexico over tax breaks in November without going to a dispute panel, and has used the WTO to bring its own cases.
Under WTO rules, the European Union and the United States would hold consultations with China for 60 days. If those fail to resolve the conflict, Washington and Brussels would seek the formation of a panel.
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