Let’s Make a Deal: How the United States Bought its Way Out of Treaty Obligations and Shunned Billions in Tax Revenue in the Process

by Lou on December 18, 2007

According to an agreement signed a few days ago, the US will provide the European Union (EU) with trade concessions in mail services and warehousing as compensation for removing gambling services from its World Trade Organization (WTO) commitment. Although the EU sought $100 billion in concessions, these accommodations fall far short of the mark.

The agreement offers new U.S. market opportunities for European companies involved in testing and analysis services, as well as in research and development, and postal and courier services.
We’ll Give Up Online Gaming, Shun Billions in Tax Revenue, and Pay the European Union Billions in Concessions Too
Gambling will no longer be covered by US WTO commitments, and instead of choosing to regulate and license online gaming and garner billions in tax revenues in the process, the US will provide concessions to the EU in an amount less than $100 billion. Not a good deal from my perspective, but it satisfies those who see online gaming as morally wrong—except, of course, things like horseracing and fantasy sports, which have successfully lobbied their way through our congress and were cut out of the process.

No One Gets Off Scot Free…

The US decision to renege on treaty commitments to the WTO and close its markets to offshore internet gambling operators, meant the US had to compensate other governments that would be affected by its decision. According to WTO treaty obligations, any government harmed in this manner is entitled to negotiate compensation with the United States. The European Union, Canada, Japan, India, Australia, Costa Rica and Macao joined Antigua in requesting talks. Australia dropped its claim while Japan reached a deal.

…and Our Bad Deal Now Sets a Precedent

The agreement between the EU and the US will now play a role in ongoing negotiations between the US and China, India, Canada and other countries over the WTO issue. This includes the dispute with Antigua. A ruling on the amount of compensation due Antigua has been delayed.

A Short History of Legislative Stupidity

Last year the United States’ Unlawful Internet Gaming Enforcement Act (UIGEA) stopped U.S. banks and credit card companies from processing payments to online gambling businesses located offshore, closing off a growing business worth more than $12 billion. In March 2007, the World Trade Organization ruled that the US ban was illegal. The WTO ruled that although the US had the right to prevent offshore betting to protect public order and public morals, our government broke trade agreements because rules were unequally applied to American operators offering remote betting on horse and dog racing.

We Still Have to Worry About Antigua: The Mouse That Roared
The WTO will soon rule on Antigua’s request to impose $3.4 billion in commercial sanctions against the US for its failure to comply with the ruling. Antigua, the smallest nation ever to win a WTO dispute, has requested an intellectual property rights waiver that would permit software, movie, and music piracy. Needless to say, this alarmed software and media companies no end, including Microsoft and Universal Pictures, and the Recording Industry Association of America.
This ruling is a blow to European online gaming companies, as firms such as PartyGaming hoped the EU might turn down a settlement in favor of fighting to restore their ability to operate in the United States.

Throw Them Under the Bus, Kick ’em to the Curb … It’s All in a Day’s (Political) Work

Does this agreement sell out American couriers such as UPS and FedEx? Did the EU throw their own gaming industry under the bus? Time will tell. This complex affair could have been settled easily and simply had congress chosen to pass Representative Barney Frank’s (D-MA) bill, but leave it to politicians to continue to muck things up, and kill the goose laying a golden egg full of tax revenue in the process.

Comments on this entry are closed.

Previous post:

Next post: