Forbes Article About WTO

[Rollo]

http://www.forbes.com/feeds/ap/2007/...ap3687953.html

Associated Press
U.S. Reaffirms Ban on Online Gambling
By DIBYA SARKAR 05.04.07, 2:23 PM ET

The United States will use a World Trade Organization procedure to clarify its ban on online gambling, a U.S. trade representative said Friday.

A measure signed into law by President Bush in October prohibits U.S. banks and credit card companies from processing payments to online gambling businesses outside the United States, taking many of these companies by surprise.

In March, a WTO panel opened the door to possible commercial sanctions against the United States when it ruled that the law as written unfairly targets offshore casinos. The twin Caribbean island nation of Antigua and Barbuda has argued that online gambling provides income for hundreds of its citizens.

The Geneva-based global trade referee said Washington can maintain restrictions on online gambling, so long as its laws are equally applied to U.S. operators offering remote betting on horse racing.

On Friday, Deputy U.S. Trade Representative John K. Veroneau said that because federal and state laws have prevented domestic companies from profiting off of interstate gambling for decades "it would be nonsensical for the U.S. to make a commitment to open up interstate gambling for foreign providers."

Veroneau said the WTO process would allow the United States to clarify its stance on the issue so that there would be no basis for any WTO member to seek or expect compensation.

The ban on Internet gambling enacted last fall, which prompted companies such as Sportingbet PLC and Leisure & Gaming PLC to sell their U.S. operations, would be overturned under legislation proposed last month by Rep. Barney Frank, D-Mass. The bill faces long odds in Congress and likely opposition from the Bush administration.

The $12 billion Internet gambling industry is based outside the United States, mostly in Britain, although half of its customers live in America.

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What the hell does "the WTO process would allow the United States to clarify its stance on the issue so that there would be no basis for any WTO member to seek or expect compensation" mean?

I guess this means that the US will recast it's position and the whole dispute will start over again.

I'm working on a large scale portal right now that would hugely benefit from gambling ads so this does suck. Even the nature of the beast is changing... 888.com for example seems to have done away with revenue share altogether and brought payment per new depositor roughly in line with say what one gets for promoting web hosting, etc. I guess the fat lady is really singing on the cushy existance of independent online gambling promoters. I expect a lot of places to follow suit in an attempt to recoup revenues at the expense of webmasters. What say the other webmasters here? Surviving or packing it in?

[Rollo]

Looks like the US will get off...

http://www.gambling911.com/US-WTO-Decision-050407.html

US Responds to WTO Internet Gambling Ruling
"Most of it is lying till the end. But basically they are saying, "We admit defeat and we are taking our ball and going home. Antigua kicked their ass so bad they are waiving their last appeal. This has HUGE international trade implications."

So says an industry expert who has been involved in online gambling since the early days in reference to the US response to a recent WTO decision finding in favor of Antigua, which states that the US policy on Internet gambling is illegal.

"They knew very well what they were doing when they made their commitments. At the time they were the world's largest exporter of gaming services. At the time 100 of the 150 countries opted out of it, but not them.

"Finally, know that despite what they imply, this will not be easy for them to just opt out. It could cost them billions, not just to Antigua, but any other country who wants to put in a claim."

Here is what the US had to say about the decision:


The Office of the United States Trade Representative
today informed the World Trade Organization (WTO) it intends to clarify
its WTO commitments with respect to Internet gambling services.

The United States is invoking procedures under Article XXI of the General
Agreement on Trade in Services (GATS) in order to clarify its commitment
involving "recreational services," which was interpreted in the course of
WTO dispute settlement as including a U.S. commitment to allow Internet
gambling services.

"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," said Deputy United States Trade Representative John K. Veroneau.

"Neither the United States nor other WTO Members noticed this oversight in the drafting of U.S. commitments until Antigua and Barbuda initiated a WTO case ten years later. In its consideration of this matter, the WTO panel acknowledged that the United States did not intend to adopt commitments that were inconsistent with its own laws. However, under WTO rules, dispute settlement findings must be based on the text of commitments and other international documents, rather than the intent of the party. The United States strongly supports the rules-based trading system and accepts the dispute settlement findings. In light of those findings, we will use WTO procedures for clarifying our commitments."

Background:

In the course of a dispute originally filed by Antigua and Barbuda in 2003, the United States' GATS schedule was found to have included a market
access commitment covering Internet gambling based outside of the United
States. This finding was a result of imprecision in the drafting of the
1994 U.S. GATS schedule, combined with the application of formal treaty
interpretation rules under which a country's intent is not determinative.
In fact, as even the WTO panel recognized, gambling or betting services
are generally prohibited or highly restricted in the United States for
reasons of public morality, law enforcement and protection of minors and
other vulnerable groups, and the United States never intended to make a
GATS commitment covering gambling.

The dispute has now completed the compliance phase, and the report of the > compliance panel is scheduled to be adopted by the WTO Dispute Settlement Body (DSB) on May 22, 2007.

In light of these developments in the WTO dispute, the United States has
decided to make use of the established WTO procedures to correct its
schedule in order to reflect the original U.S. intent - that is, to
exclude gambling from the scope of the U.S. commitments under the GATS.

The GATS provides that when a Member modifies its services schedule, other Members who allege they will be affected by this action may make a claim for a compensatory adjustment to other areas of the GATS schedule.

However, since no WTO Member either bargained for or reasonably could have expected the United States to undertake a commitment on gambling, there would be very little, if any, basis for such claims.

[sdaddy]

Huh? How can the US do this? It's something like, "Well we lost, but now we're going to change our commitments with the WTO after the fact, and nullify the violation."

[soflat]

It makes sense to me. There is no way the US intended to commit to allowing interstate & international sports wagering. The Antiguans kind of ended up looking like schmucks (not that I would mind if they actually won and we got to gamble freely).

[jetset]

Huh? How can the US do this? It's something like, "Well we lost, but now we're going to change our commitments with the WTO after the fact, and nullify the violation."

I think it's called "moving the goal posts", or as 911 puts it "picking up your ball and refusing to play any more" LOL

Here's another perspective on it:

http://www.citizen.org:80/pressroom/release.cfm?ID=2429

Unprecedented Bush Administration Decision to Withdraw U.S.Gambling Sector From WTO Jurisdiction Highlights Hazards of Fast-Track-Enabled Trade Agreements

Under WTO Rules, U.S. Is Required to Negotiate Terms of Compensation With Other WTO Signatory Countries Before It Is Allowed to Withdraw Sector

WASHINGTON, D.C. – The Bush administration’s unprecedented decision that it will withdraw the U.S. gambling service sector from World Trade Organization (WTO) jurisdiction is good news for U.S. sovereignty, Public Citizen said today. But the fact that this action will trigger major demands by other countries for compensation under WTO rules also highlights how the fast track negotiating system has enabled a series of trade pacts that undermine the public interest.

"It’s good news that the Bush administration finally is listening to the state attorneys general and others who have asked for the U.S. Trade Representative (USTR) to remove gambling from WTO jurisdiction and thus eliminate further attacks on U.S. gambling regulation,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division. “The WTO’s ruling against the U.S. Internet gambling ban was not some fluke, but rather a preview of coming attractions given how extensively the WTO’s service sector rules interfere with non-trade domestic policies regulating the conduct of services operating within our own country.”

Today’s announcement that the USTR has submitted a WTO GATS Article XXI (Modification of Schedules) request follows an early March WTO enforcement panel ruling that authorized sanctions against the United States. The panel ruled that the U.S. had failed to comply with a 2005 final WTO order to change certain laws related to a successful challenge by Antigua of the U.S. ban on Internet gambling. The WTO GATS agreement allows nations to “take back” service sectors from WTO jurisdiction, but only after compensating trading partners for lost business opportunities.

“What American industries will USTR be willing to trade to compensate for the withdrawal of the gambling industry from the WTO?” said Saerom Park, state and local program coordinator of Public Citizen’s Global Trade Watch division. “The USTR’s announcement unfortunately explained none of this.”

In this case, the USTR can not merely “clarify” or “correct” U.S. service sector commitments at the WTO – it can only withdraw them. Additionally, the USTR can not withdraw U.S. commitments without first compensating countries that feel they have lost out on their access to a $15.5 billion online gambling market, making this potentially a very costly situation.

“Thanks to the WTO’s overreaching rules, the United States found itself in the position of either facing trade sanctions for failing to implement a WTO ruling ordering it to change its ban on Internet gambling or facing costly demands for compensation from other WTO countries after requesting to remove the gambling sector from WTO jurisdiction,” said Wallach. “Either way, the United States will be required to pay for the right to regulate gambling activities within our country. But today’s choice is designed to shut down future threatened additional WTO challenges by simply removing the sector from WTO coverage.”

Beyond the narrow issues related to Internet gambling, the WTO Internet gambling ruling implicated large swaths of state and federal gambling law unrelated to online gaming as potential trade barriers. The European Union has already threatened to bring an additional case. An array of common state gambling regulations such as gambling bans, state lotteries or exclusive Indian gaming rights, which have the unintended effect of keeping out private European lotteries and casinos, were implicated as trade violations and jeopardized by the possibility of future challenges by the Internet gambling ruling.

The Antigua gambling case shows how “trade” agreements over-extend their scope into domestic regulatory issues that have nothing to do with trade. It demonstrates the dangers of trade negotiations that exclude the participation and oversight of a broader set of interested parties. It also shows the perils of fast track authority, which allows the president to negotiate the details of trade agreements without congressional input.

Despite having one of the largest and most sophisticated negotiating teams, the United States could not avoid having WTO’s expansive rules limit U.S. domestic regulatory authority. Thus, three long-standing, federal anti-racketeering statutes that in effect banned Internet gambling were subject to challenge as cross-border “barriers to trade” in the WTO by Antigua, whose Internet gambling firms wanted access to the U.S. market for online gambling – worth an estimated $15.5 billion.

In 2005, the WTO ruled that the United States had to bring federal anti-organized crime statutes into conformity with WTO dictates. In addition, a European Union official has already threatened a similar trade suit against the more recent Unlawful Internet Gambling Enforcement Act passed in 2006, which limited publicly traded European gambling firms’ potential U.S. sales opportunities. For more information about this case, click here.

In 2005, 29 state attorneys general wrote the USTR seeking withdrawal of the gambling sector from WTO jurisdiction. Because of the WTO ruling against the United States, the USTR had three options: change domestic federal laws and pre-empt corresponding state laws; do nothing and face both trade sanctions and future challenges; or withdraw its commitments, negotiate compensation and avoid future cases that would expose state law to WTO challenge.

Even after this WTO gambling debacle, rather than pausing to reexamine the WTO GATS agreement, the federal government is currently engaged in negotiations to dramatically expand the scope of the GATS into additional sensitive service sectors. These negotiations are part of the “Doha Round” of trade talks that are once again under way in Geneva. Trading partners are demanding that the United States cover many more sectors under the terms of the agreement – including energy services, higher education services, medical services and more. Yet many of these matters are regulated by states, and state officials are not being meaningfully consulted about hidden dangers or these complex negotiations.

"The USTR’s decision, conveniently announced on a Friday afternoon to avoid press and public scrutiny, claims that it ‘intends to clarify its WTO commitments’ and ‘correct its WTO schedule’ with respect to Internet gambling services, rather than fessing up to how dramatic this move is and how costly it is to get out of WTO’s clutches,” said Park. “Worse, at the same time that the USTR is forced to withdraw the gambling sector, it is pushing to include new and additional aspects of the U.S. service sector under WTO jurisdiction. The Bush administration should use this gambling situation as a lesson and withdraw its Doha Round WTO offers to submit more of our sovereignty to WTO.”

[jetset]

Or perhaps it's just a case of "might is right"

The WTO reaction to this will be fascinating.

[EasyRhino]

The last article was the most informative, interesting since it came from an anti-trade perspective.

Anyway, I'm really curious how the "compensation" would work out. the US blocks off the gambling industry, but has to give up the sugarbeet subsidy? That would be pretty strange. I don't even like sugarbeets.

[sdaddy]

I would think that the compensation would somehow go specifically to the countries most affected by the U.S.' withdrawal from the gambling sector. Maybe it would be a monetary damages award determined by the WTO?

[lots0]

The idea that the USA did not intend to open up online gambling is just not true...

I personally heard President Bill Clinton in a speech he gave about the WTO in 1998 or 1999 mention Online Gambling and he spoke about Online Gambling in such a way as to make it look like he was agreeing that the US should and would open up online gambling.

I wish I could remember the exact words Clinton used or find a text of that speech, but I have looked all over and just can't find it.

Even though I can't find the speech, I know one thing for sire.... The Bush Administration is just doing what they do best... Lying to get their way.

[Rollo]

Good article... looks pretty bad. With the left joining the right to support this, the best hope for an overturn of the new law is out of the picture. I thought if the EU brought a case, there was an actual chance of getting it changed, but it looks like now this new law is here to stay as the US found an escape. The Barney Frank bill is sure to go nowhere. What to do now?