US Thumbs Its Nose at World Trade Organization on Gaming Issues

by Lou on May 8, 2007

The United States decision to maintain its ban on Internet gambling despite a World Trade Organization (WTO) ruling to the contrary affords an opportunity for other WTO signatories to seek damages at the WTO.

Deputy U.S. Trade Representative John Veroneau argues the party line, and does not believe that there is any basis for other countries to receive compensation. According to Veroneau, Antigua’s case took advantage of an error made by the United States in drafting its commitment to the WTO that opened up the American recreational services market.

According to Veroneau, “U.S. laws banning interstate gambling have been in place for decades. Most WTO Members have similar laws. Unfortunately, in the early 1990s, when the United States was drafting its international commitments to open its market to recreational services, we did not make it clear that these commitments did not extend to gambling. Moreover, back in 1993 no WTO member could have reasonably thought that the United States was agreeing to commitments in direct conflict with its own laws.”

Regardless of intentions, dispute settlement findings under WTO rules are based on written commitments and other international documents, rather than intentions. The United States has always supported rules-based trading but now they plan to modify its 14-year-old services commitments and explicitly exclude gambling.

If the US decides to modify its trade commitments after the fact, it would be only the second time in WTO history that this has been done. The first case resulted in an expensive settlement.

Antigua’s finance and economy minister, Dr. Errol Cort, said, “While we had of course been aware of the possibility of the United States taking such an action, we frankly considered it extremely unlikely. It is almost incomprehensible that the United States would take such an action in the face of an adverse dispute resolution ruling. This is going to have very severe consequences for the global free trade movement.

“We are now reviewing our options,” said Cort, “and will be proceeding to use the WTO institutions to get full compensation for our citizens in the event the United States actually pursues this most regrettable action. We would strongly urge the United States to reconsider its decision.”

This kind of brinksmanship threatens the viability of the World Trade Organization itself, and represents a big bet by the United States. Essentially the US has taken the stand that no one will side with tiny Antigua in their dispute and that they will skate, or at worst have to pay a small sum of money as compensation to the Antiguan government. At the same time, the US is pursuing a case against China on a variety of issues, and it’s hard to think that thumbing their nose at the WTO on one dispute would curry favor in their case against China, where the stakes are much bigger.

At this point it seems like we’re about to play “Let’s Make A Deal.” The tiny nation of Antigua, with a mere 70,000 citizens, cannot pressure the US with trade sanctions. But they can suspend intellectual property and copyright agreements, thus allowing their country to become a haven for software and publishing pirates. Although allowable by WTO rule under certain conditions, that’s not likely to happen. What is likely to happen is that the USA will simply pay off Antigua to go away.

If they do, they’ll try to do so quietly, in the dead of night, while no one is watching, just like they did when enacting UIGEA.

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