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American gamble or bluff: WTO members bet on Antigua

EU, Japan, and India join sanctions call against US

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Analysis Antigua yesterday filed for formal trade sanctions against the United States, demanding $3.4 billion in compensation from the truculent, recalcitrant super power for failing to open its domestic market to remote gambling services. Antigua, as expected, was not alone; the hottest online gaming market in the world, the EU, also filed for sanctions.

Antigua has been embroiled in a four year battle with the US over the provision of remote gambling services, and the WTO has repeatedly ruled against the US, in increasingly stern terms. After the US tried to insist to the WTO that it had brought itself into compliance without doing anything at all – a novel argument that riled the WTO compliance panel – the WTO issued a definitive and far reaching ruling in favor of Antigua, opening the door for sanctions for the tiny Caribbean country that has seen one of its principal industries pummeled repeatedly by the American Department of Justice (DOJ).

The rules of the WTO typically provide for traditional tit-for-tat trade sanctions, but for tiny countries like Antigua that depend heavily on imports, such an approach can be economically devastating, while doing virtually nothing to penalize the offending nation. The WTO thereby provides an alternative; countries may suspend their own obligations to the offending country. Antigua thus could sell unlicensed copies of American movies or software, for example, to compensate itself for losses resulting from the American actions.

Although gambling is the kind of allegedly trivial activity that inspires strong reactions in many people, important principles of international law and trade are at stake: just what kind of internet do we want, and to what extent can one country pick up its proverbial marbles and go home when trade disputes go bad? Do we want the freewheeling internet that characterized its early years, or a tightly regulated and controlled internet, subject to the prosecutorial whims of the administration of the day? Regardless of what one thinks of gambling and gamblers, just how far should American police jurisdiction really go?

The United States Trade Representative’s (USTR) has taken a similar hard line position to that of the DOJ, and it’s clear from the American arguments in front of the WTO that the two have been working in concert on this case. Not surprising, since this dispute has revolved around American criminal law and how it impacts internet gambling.

What is surprising is the extent to which the USTR seems willing to abandon the decades of hard-fought negotiations covering the international trade in services that ultimately resulted in the General Agreement on Trade in Services (GATS) for a policy ultimately damaging to American trade interests. The USTR, after pretending the US didn’t really know what it was doing when it failed to exempt gambling services from its schedule of commitments (countries are allowed to exempt “immoral” services or products, but cannot discriminate in doing so), and repeatedly getting hammered by the Antiguans, has decided to redefine its GATS commitments to eliminate gambling services, thereby opening the door for other WTO members to do the same. It’s not hard to understand how such an approach may quickly render international agreements worth less than the paper they are printed on.

And so, today, what is expected to become a parade of countries demanding sanctions against the United States as a result of its refusal to comply with WTO rulings on gambling services began to form, as Japan and India piled it on with more demands for compensation. Every other signatory affected will have a right to demand sanctions, and those sanctions may, depending on the circumstances, be applied against any American industry, from automobiles to semiconductors.

Perhaps this is just a game of chicken by the USTR, a kind of unilateralist posturing, although that seems hard to believe considering the floundering state of the current DOHA round of negotiations; just where the WTO goes from here, no one really knows.®

Burke Hansen, attorney at large, heads a San Francisco law office

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