Originally published in Blakes Bulletin on International
Trade/Financial Services, November 2008
On November 13, 2008, Canada's new Minister of International
Trade, Stockwell Day, announced that Canada and China have signed a
Memorandum of Understanding Regarding Measures Affecting Foreign
Suppliers of Financial Information Services (MOU). According to the
Minister, the MOU is aimed at improving access to Chinese markets
for Canadian companies delivering such services. This negotiated
settlement followed formal consultations with China under the World
Trade Organization's (WTO) dispute settlement framework
pursuant to which Canada, in combination with the EU and the U.S.,
demanded that China loosen restraints on foreign financial
information services companies.
Under China's regulatory regime, foreign financial
information services companies seeking to enter the Chinese market
were required to supply their services through an intermediary
designated by the Xinhua News Agency (Xinhua). Xinhua had only one
designated agent, China Economic Information Service, one of
Xinhua's own commercial enterprises and a competitor in the
industry. Moreover, China prohibited foreign financial information
suppliers from directly soliciting subscriptions for their
services, requiring that solicitation of subscriptions be done
through the Xinhua-designated entity. China likewise prohibited
users of financial information services in China from directly
subscribing to services supplied by foreign suppliers.
These restrictions led to the initiation of complaints to the
WTO by Canada, the U.S. and the EU. In its request for
consultations with China, which was submitted to the WTO on June
20, 2008, Canada complained that the measures restricting the
provision of financial information services in China were in
violation of the rights of market access and national treatment
pursuant to Articles XVI, XVII and XVIII of the General Agreement
on Trade in Services (GATS) as well as the commitments by China in
the Accession Protocol to which China agreed upon joining the WTO
in 2001. In Canada's view, the measures established by China
nullified and impaired many of the benefits that were supposed to
accrue to other WTO members, including Canada, upon entry of China
to the WTO.
According to the Canadian government, the recent signing of the
MOU with China represents a "culmination of Canada's
efforts to resolve concerns" arising from Chinese measures
affecting foreign suppliers. Under the Agreement, China has agreed
to establish an independent regulator of financial information
services. China has also confirmed that providers of financial
information services will no longer face obstacles in establishing
a commercial presence in the country, and that foreign suppliers
will be accorded treatment that is no less favourable than the
treatment of domestic financial information service providers.
China also recently signed similar agreements with the U.S. and
the EU. European Trade Commissioner Catherine Ashton applauded the
MOU, commenting that this "agreement ensures that investors
and market operators will be able to receive comprehensive and
objective financial information.''
While companies like Thomson Reuters Corp., Bloomberg LP, Dow
Jones & Co. and other financial information service providers
are expected to benefit from improved operating conditions
resulting from the MOU, the importance of the MOU extends well
beyond the financial information services sector. One might argue
that the settlement can be seen as a positive indicator of
China's willingness to reform existing state policies so as to
ensure these more closely conform with the obligations that stem
from its WTO commitments. This development bodes well for investors
in China who may have concerns regarding market access, national
treatment or most favoured nation treatment in connection with
existing or planned business ventures in China.
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