WTO COMPENSATION MOMENTUM PICKS UP (Update)

22 June 2007

Now Japan and India join the EU and Antigua in demanding US compensation

Mainstream media across the world is reporting on demands for compensation by World Trade Organisation member nations against the United States this week, the result of the unprecedented US decision to withdraw decades long trade commitments in order to maintain its protectionist online gambling policies (see previous InfoPowa bulletins).

Nations that take this unusual step are required by WTO agreements to consider claims for compensation from other member nations impacted by the withdrawal of commitments.

Among the many reports was one from the respected Financial Times in the UK, which revealed that the compensation claims of Antigua and Barbuda, and those of the 27 nation European Union have now been joined by demands from India and Japan. Full detail on the nature of the claims was not available as we went to press, but EU officials earlier hinted that the demands could involve trade concessions not necessarily related directly to online gambling.

Antigua, the UK and India were particularly hard hit by American laws aimed at stamping out online gambling other than that offered by those US gambling industries protected by legislative carve-outs, such as horse racing, state lotteries and fantasy sports. Billions were lost by companies and investors forced to pull out of the US market last year, and thousands of jobs were lost.

Antigua’s gaming industry was devastated by the US Unlawful Internet Gambling Enforcement Act of last October, while British companies saw more than $7 billion wiped off their share values. Antigua, which brought the original WTO action against the USA, said earlier this week that it was seeking compensation worth $3.4 billion a year, which it wants in the form of being allowed to ignore US copyright and patent laws, denying royalties to US companies.

In its report, the Financial Times quoted a US Trade Representative official who confirmed that Japan had submitted a claim prior to the June 22 deadline, and that the United States would fight the claims by trading partners.

The booming economies of India and China, which are already involved in other trade wrangles involving liquor and trademarks with the US will no doubt be watching developments in the issue closely. If the WTO supports the compensation demands, the US can ask that the matter be referred for arbitration, a long drawn out process.

The news that major trading blocs and nations such as India, the EU and Japan were on the list of complainants seemed to inject a more conciliatory if somewhat belated note into the US Trade Representative's Caribbean strategy. A spokesperson said that although the US would contest all claims for compensation it would "...continue to work with Antigua and Barbuda to try to find a mutually satisfactory resolution to this dispute."

However, USTR spokeswoman Gretchen Hamel hinted at a hardline American resistance to compensation claims when she said: "We look forward to learning the basis upon which WTO members who neither requested nor made WTO commitments on gambling and betting in the Uruguay Round, and had no basis to believe that the United States had made such a commitment, intend to support their claims of interest."

On July 24, 2007 the WTO Dispute Settlement Body will review requests and decide whether sanctions are appropriate. If approved, such sanctions could have important consquences for other, and possible not gambling related US companies and industries. For example, intellectual property protection could be lost be lost.

In an insightful article in The Register, the San Francisco-based lawyer and feature writer Burke Hansen wrote: "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."

The American position will not be enhanced by it's use in Geneva this week of a block on a request for an investigation by Canada into excessive farming subsidies. Under WTO rules, the establishment of an investigative panel can only be delayed once by a member nation.

STOP PRESS:

Late breaking news as we went to press this week was that Costa Rica has joined the list of claimants for compensation from the United States, and the 570 000 strong Poker Players' Alliance has pointed out that regulation of online gambling is an immediate and elegant solution to the growing dangers for the United States of the WTO issue.

The Point-Spreads.com sportsbetting site reports that Costa Rica will be following the lead of the European Union, Antigua & Barbuda, India and Japan in seeking compensation. Quoting an unidentified source who claims to have dined with Marco Vinicio Ruiz, the Costa Rican Minister of Commerce this week, the source says that Minister Ruiz indicated the letter would be sent to the WTO before the June 22 deadline. The Central American nation is a major centre for online casino and sportsbetting companies and has sustained significant financial and job losses as a result of the UIGEA.

Meanwhile, PPA spokesman Senator Alfonse D’Amato said that the PPA believes there is a simple solution to the growing WTO problem for the United States - the regulation of online gaming.

"Rather than allowing this trade dispute to continue to be played out on the world stage, the U.S. Congress should pass the Internet Gambling Regulation and Enforcement Act of 2007, introduced by U.S. Rep. Barney Frank (D-Mass.)," he said.

D'Amato points out that the Frank bill provides the prospect of non-discriminatory and strict regulation and licensing of Internet gambling, bringing the U.S. into compliance with its WTO commitments.

"Regulation of the industry is the only sensible public and trade policy solution," he said. "Moreover, it will generate significant revenue for the U.S. by simply allowing individuals a freedom they deserve.

"If our government continues to ignore its trade commitments, we will threaten other U.S. industries, not related to Internet gaming, that rely on consistent trade policy, and we may be in jeopardy of forfeiting a lead role among the WTO member community."

Online Casino News courtesy of InfoPowa