EU COMPANIES WANT MORE US COMPENSATORY ACTION

2 November 2007

WTO negotiations may not be going as well as the USTR believes


The World Trade Organisation compensation row between the United States and several nations, notably the European Union, looks set to widen following reports from Reuters news agency this week that EU companies may be impatient with delays in reaching a fair compensation package.

Reports earlier this week that the October 22 deadline for a resolution has been extended to December 14 will have done little to cool things down.

Reuters reports that EU companies, many of them world leaders like PartyGaming, Bwin, Sportingbet and 888.com, saw their stock market value plunge billions in 2006 after the United States passed legislation aimed at shutting down financial transactions with online gambling companies.

In May this year, after being defeated at the World Trade Organisation in a tussle with Antigua, Washington took the rare step of withdrawing its WTO commitment to allow foreign firms into its gambling market, opening itself up to compensation claims from other WTO member nations.

Since then the EU and up to six other countries have been haggling with the U.S. Administration over compensation in the form of concessions in other areas of trade.

Comments by the US trade Representative, Gretchen Hamel recently (see InfoPowa report) suggested that negotiations were progressing, although she brushed aside suggestions that as much as $100 billion might be involved in EU claims.

However, an indication of growing impatience are reports that online gambling firms want European Union trade chief Peter Mandelson to change tack and approach the US Congress on the issue when he visits Washington early next (November) month.

Naotaka Matuskata, senior policy advisor with U.S. law firm Alston & Bird, said Washington was not making meaningful compensation offers and it was time for the EU to turn to the U.S. Congress in an attempt to reverse the online gaming ban.

Matsukata's firm represents UC Group, a British company which processes online payments including for the gaming sector.

"The EU should explore the legislative options available at this moment, largely because the USTR (United States Trade Representative's) office is so dug in," Matsukata, a former USTR official, told Reuters during a visit to Brussels.

Mandelson is due to visit Washington between Nov. 7 and 9. A spokesman said he planned to speak, either by phone or in person, to Barney Frank, chair of the House of Representatives Financial Services Committee. Frank has put forward legislation to roll back the U.S. online gambling financial transactions ban although he has struggled to find substantial support.

"The European Commission continues to strive for the best possible compensation deal for European service providers," Mandelson's spokesman said, declining to comment further.

Matsukata said Mandelson could focus minds in Congress on the potential pain of compensation demanded by the EU and other countries such as Canada and Japan in other areas of U.S. business if the ban is not reversed.

Reuters reports that EU gambling firms have previously urged Brussels to push for $100 billion in compensation, a figure U.S. officials have dismissed as exaggerated.

In 2000, Mandelson's predecessor Pascal Lamy warned the U.S. Congress of retaliatory measures after failing to make headway with the U.S. administration over export tax subsidies ruled illegal by the WTO. The U.S. Administration eventually scrapped those measures known as the Foreign Sales Corporation programme.

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