* Ruling says China discriminates against foreign bank cards
* Panel says China UnionPay has monopoly, breaks WTO rules
* U.S. hails a victory but says it lost on some minor points
* Decision is open to appeal
By Tom Miles and Doug Palmer
GENEVA/WASHINGTON, July 16 (Reuters) - Washington won a major victory in an election-year dispute against China on Monday when a WTO ruling found China had discriminated against U.S. bank card suppliers in favour of a state-owned enterprise that enjoys an illegal monopoly.
The decision by a World Trade Organization dispute panel said Beijing was breaking WTO rules by requiring all yuan-denominated payment cards issued in China to work with the network belonging to China UnionPay (CUP), as well as requiring every merchant and ATM to accept CUP's cards.
With CUP enjoying a monopoly, firms such as Visa Inc, Mastercard Inc and American Express were restricted to foreign currency transactions.
The ruling is open to appeal and unless China manages to overturn it, the country will have to change its rules to give foreign companies equal access to Chinese firms, effectively breaking CUP's monopoly.
White House spokesman Jay Carney called the ruling a "win" that showed "our determination to go after China's efforts to distort global trade rules".
"That is precisely why 3.5 years into the president's first term we have doubled the rate of WTO cases against China, versus the prior administration," he told reporters aboard Air Force One.
The ruling did not go entirely Washington's way, however. Although the panel agreed CUP had a monopoly on yuan payment cards issued and used in China, it rejected the U.S. claim that CUP was an "across-the-board monopoly supplier" for all transactions denominated in yuan.
China's Ministry of Commerce welcomed that finding as well as the panel's rejection of a U.S. claim that China had committed to cross-border supply of electronic payment services.
Tim Reif, general counsel for the U.S. Trade Representative's office, said that some small points had been lost but that there were areas in every trade dispute where "you don't quite get what you're looking for".
"But it has absolutely no impact on the finding that every single aspect of China's discriminatory regime has been found inconsistent with WTO rules and China is going to have to fix that," he said. "We could not have asked for more."
The ruling will support about 6,000 U.S. jobs servicing a market potentially worth $1 trillion, Reif said.
"We are hopeful that this ruling will pave the way for international payment companies to participate in the domestic payments marketplace in China," Visa spokesman Will Valentine said in an emailed statement.
He added that the company's business in China was healthy and its partnerships with local banks and CUP would continue to serve users of co-badged Visa/CUP cards when they travelled abroad.
Mastercard said Monday's ruling would make opportunities for the company "all the more interesting" and that it looked forward to continuing to grow its business in China.
Although the United States and China are not in a trade war, since only a tiny portion of their imports are the subject of disputed policies, they are vocal in their mutual criticism.
Washington says China's attacks are largely tit-for-tat retaliations for valid U.S. complaints, while China suggests the White House is simply "China-bashing" in an election year.
However, WTO rulings are slow to take effect and there is no guarantee of any rapid change in the Chinese market.
Even if China waives its right to appeal, it will still have a "reasonable" period to bring its laws into line with WTO rules, and it will be up to the United States to ensure it does so, a process that could take years and lead to further litigation if the two sides disagree on the amount of reform needed.
CUP already operates in more than 110 countries and claims to be the third most used card in terms of transaction amount.
Based on share sale documents filed by a minority investor to a Chinese stock exchange in July 2011, it had more than 1.4 billion debit cards in circulation and was valued at around $11.3 billion at the time.
China's Big Four lenders, namely ICBC , China Construction Bank , Agricultural Bank of China and Bank of China are major shareholders of UnionPay, the listings showed.