Stephen Kho Quoted by Law360 on WTO Case Involving China’s Banking System

Law360 quoted Akin Gump international trade partner Stephen Kho in the story “WTO Case Against China’s Banking Regs Would Face Pitfalls,” which discusses a dispute between the United States and China over Beijing’s controversial rules covering information technology in its banking sector.

At issue, according to the article, are new regulations that appear to require Chinese banks to prioritize the use of domestic technology over that of international providers and require overseas suppliers to hand over source codes and other sensitive intellectual property for its products. Beijing describes the new rules as a security measure, but they may run counter to many World Trade Organization (WTO) agreements.

Kho, a former associate general counsel for the U.S. Trade Representative and acting chief counsel on China enforcement, said the case against Beijing is strong, though a national security defense could give Washington pause before pursuing one. If China uses it, he argued, “everyone else would assume that the [WTO] panel would defer to the country that is making that argument.”

Kho noted that China’s favoring of domestic industries is a clear violation of the national treatment principle underpinning the WTO. While he said the U.S. side is more comfortable challenging industrial planning, “It’s not clear that China is doing this explicitly for national security reasons or if they would be willing to play that card.” Raising this as a national security exception, Kho added, would then open the door for other countries to do the same in cases China might bring in the future.

Speaking more broadly, Kho speculated that the intermingling of economic policy and national security policy could mean the WTO will have to weigh in on the exception sooner rather than later: “You are starting to hear governments openly talking about this in the cyber world, the IT world, the sanctions world. I think when these issues intersect with trade and countries are utilizing economic sanctions and trade tools to deal with essential security issues, you're going to have this type of discussion.”