U.S. TRADE REP CRITICISED ON HANDLING OF INTERNET GAMBLING DISPUTE

23 November 2007

Agency did not consult with Congress over withdrawal of WTO obligations


Eight Washington lawmakers, including the influential chairmen of two important committees have criticised the US Trade Representative at the World Trade Organisation over the handling of the online gambling dispute, pointing out that the unilateral withdrawal of GAT obligations which was a consequence of losing the WTO argument over Internet gambling with Antigua could cost the United States billions of dollars in compensation.

House Financial Services Committee Chairman Barney Frank, House Judiciary Committee Chairman John Conyers and six other lawmakers criticised the Bush administration's handling of the issue in a letter to U.S. Trade Representative Susan Schwab this week which has achieved major publicity through top news agencies like Reuters and Associated Press.

In the letter, the legislators recommend that the Bush administration explore legislation to roll back a U.S. ban on Internet gambling instead of paying compensation to the European Union and several other impacted WTO nations that have submitted claims.

The letter is also critical of the lack of consultation with Congress, commenting: "Your agency has chosen not to consult with Congress, but instead to take what we view as a drastic step which could have significant consequences for the whole WTO system."

The United States has been in negotiation with the EU, India, Japan, Costa Rica, Macao, Canada and Australia on a compensation package and the trading partners recently set a new mid-December deadline for reaching a deal (see previous InfoPowa report).

Compensation would require the United States to open other service markets, such as insurance, to more foreign firms, involving business worth up to $100 billion by some estimates..

Congressman Frank has offered legislation to roll back the ban in the form of his Internet Gambling Regulation and Enforcement Act, which currently has 41 co-sponsors, while Congressman Conyers warned during a Judiciary Committee hearing last week that the ban could hurt U.S. foreign relations and the subject deserves more detailed study.

"Continuing with the same old failed policies for the sake of feel-good politics doesn't make sense," Conyers said during the hearing.

"This might be regarded and is regarded by many as a cynical manipulation of the system — you lose the game, so you try and change the rules," WTO arbitration expert Joseph Weiler, a professor at the NYU School of Law, told Conyers' committee last week.

"It also charts a way and creates a political precedent which might harm U.S. interests when other countries emulate such behavior," said Weiler, who said he had been retained by several law firms with clients indicted or threatened under U.S. law for offering betting services from outside the United States.

John Pappas, executive director of the Poker Players' Alliance, said some $80 billion to $100 billion is wagered online around the world every year, with providers taking in from $15 billion to $20 billion in revenues. He said some 10 million Americans played Internet poker for cash in the past year.

In the letter to Schwab, the lawmakers said they feared compensation would be "...expensive to the U.S. economy. However, we are perhaps more concerned about what this withdrawal says about U.S. credibility as a trading partner."

It also could backfire by encouraging other countries to withdraw commitments that turn out to be "inconvenient or politically difficult," the letter continued, pointing out that in past cases, the Bush administration has often worked with Congress to comply with adverse WTO rulings.

"We are writing to express our interest in considering possible legislative solutions that might restore U.S. compliance with the GATS agreement without renouncing any of our commitments under that agreement," the lawmakers said.

If arbitration efforts fail, Antigua and other aggrieved parties, including the European Union, could begin exacting sanctions as early as next month over the U.S. decision.

USTR press secretary Stephen Norton said in a statement in response to the Congressmen that the administration would review the letter from the lawmakers and "work with Congress and our trading partners to address this matter."

In 2002 the EU threatened to impose $4 billion in sanctions after the WTO ruled that a U.S. law granting tax breaks to exporters was illegal. The threat was withdrawn after Congress repealed the law in 2006.

Online Casino News courtesy of InfoPowa