US Suffers Setback Regarding Online Gaming Restrictions at World Trade Organization

by Lou on January 30, 2007

The United States suffered another setback in long legal battle with Antigua over Internet gambling restrictions.

What’s this dispute all about?
The trade dispute between the tiny Caribbean nation of Antigua and Barbuda and the United States has been discussed on numerous occasions in this blog, though there’s been little to report over the course of the last three to four months. The dispute centers on whether the United States should drop prohibitions on Americans placing bets in online casinos. A World Trade Organization ruling said that some U.S. laws were in line with international commerce rules, but others were not.

The US Ccontinues to drag its feet
Antigua’s position is that that the United States has not complied with WTO recommendations and rulings. The U.S. asserts that its laws are in line with trade rules.Antigua claims that online gaming is a lucrative source of revenue and provides an income for hundreds of islanders. They claim that US prohibitions harm Antiguan efforts to diversify what is now almost exclusively a tourist-based economy.

Antigua filed its case before the WTO in 2003, and the beat goes on in 2007, with the tiny nation — Antigua and Barbuda has a population of approximately 70,000 — still grappling with the economic muscle of the United States. An April 2005 WTO ruling, which both sides claimed as vindication, focused on the narrow issue of horse racing, saying that foreign betting operators appeared to suffer discrimination.

A review panel meets and comes to a conclusion
A three member panel met a few months ago to review the facts and render a decision. This resulted in a preliminary confidential report issued last week to both parties. A final, public report will be issued in March.

Gretchen Hamel, a spokeswoman for the U.S. Trade Representative’s office, confirmed that the WTO panel “did not agree with the United States that we had taken the necessary steps to comply” with that ruling.

Hamel, however, downplayed the decision, saying “The panel’s findings issued today involve a narrow issue of federal law” and the United States will have opportunity to submit comments to the WTO before it issues its final, public report in March.

It’s a two-edged sword for the Bush administration: They support free trade but support bans on Internet gambling
This creates some thorny issues for the Bush administration, which supports free trade but also supports legislation that bans online gambling.

What’s the next step?
So what happens next? I’m predicting that the March report will look substantially similar to the preliminary report issued last week. The US won’t like it and they’ll appeal. By the time the appeal is heard the Bush administration is not likely to be around any longer and the problem will fall to a new administration to resolve.

Why the WTO is important to the United States
In all of this discussion, it’s important to realize that the World Trade Organization agreements represent a treaty, and that the United States has historically gotten much more out of the WTO than they’ve had to give up in order to comply with various rulings.

So it’s doubtful that the US wants to pull out of the WTO. It has too much at stake in terms of international agreements that prevent software piracy and that sort of thing. If the US appeals and loses, I’m not sure how our government will handle things. Hopefully, they’ll look for some face-saving way to comply. But that’s not been our history thus far, and because of that, you never know.

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