An Internet Gaming Trade Dispute that Won’t Go Away

by Lou on March 11, 2008

The European Union will investigate possible international trade violations by the United States for discriminatory trade practices against European online gambling companies.
The European Union ‘s investigation follows a contentious trade dispute over Internet gambling, in which Antigua successfully challenged the regulation of Internet gambling in the United States. During the WTO dispute last year, Mandelson stated that the U.S. Congress should consider opening its market to overseas operators. “I think (US cogresman Barney Frank’s proosed legisation) takes a fair-minded, common sense approach to this and we look forward to that being effective legislation,” said Mandelson in an interview with Reuters.

“The U.S. has the right to address legitimate public policy concerns relating to Internet gambling, but discrimination against E.U. companies cannot be part of the policy mix,” said E.U. Trade Commissioner Peter Mandelson. “We are interested in a constructive and mutually satisfactory solution to this issue.”

The investigation by the E.U. is the result of a Trade Barrier Regulation complaint filed by the Remote Gambling Association (RGA), which represents the largest remote gambling companies in Europe. The RGA claims the United States is in violation of international trade law by threatening and pursuing criminal prosecutions, forfeitures and other enforcement actions against foreign Internet gambling operators, while allowing domestic U.S. online gambling operators, primarily horse betting, to flourish.

“The EU investigation only highlights the reckless manner in which the U.S. has handled its withdrawal of gaming commitments under the GATS (General Agreement on Trade in Services),” said Nao Matsukata, formerly Director of Policy Planning for USTR Robert Zoellick and now a Senior Advisor for Alston & Bird, LLP. “This situation would not be possible if the United States had chosen to resolve the GATS dispute from the beginning by appropriately changing U.S. law and adopting the Frank bill.”

“To move into a formal investigation reflects the E.U.’s belief that this matter is serious enough for them to put at risk the larger transatlantic relationship and other positive developments in the bilateral trade relationship,” Matsukata added.

A solution to this international trade dispute is contained in the Internet Gambling Regulation and Enforcement Act (H.R. 2046), introduced by Congressman Barney Frank (D-MA). This legislation would bring the United States into compliance with World Trade Organization (WTO) requirements by regulating Internet gambling and creating a level playing field among domestic and foreign Internet gambling operators.

“It is time for the U.S. to end its hypocritical practices that discriminate against foreign online gambling operators, while allowing U.S. gambling operators to accept bets for certain forms of gambling,” said Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling Initiative. “Regulating Internet gambling should be supported as a means of resolving this trade dispute, protecting consumers and ensuring that billions of dollars in taxes are collected for critical government programs.”

After the investigation, the E.U. could pursue discussions with the U.S. to find an appropriate solution to end the discrimination. If the parties cannot settle the matter themselves, the E.U. could bring a case against the U.S. to the WTO.

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