Horse Racing is Biggest U.S. Handicap in WTO Online Gambling Case
As the U.S. tries to get out of its duty to let residents gamble on foreign Web sites under a World Trade Organization ruling (WID May 7 p1), officials have little to worry about in the way of WTO-authorized retaliation, a former U.S. trade official said at a Cato Institute forum Wednesday. The WTO appellate body that reviewed a panel ruling siding with Antigua, which is heavily reliant on Internet gambling revenue, substantially limited the grounds on which Antigua and others could recoup losses, said John Jackson, a WTO expert at the Georgetown University Law Center.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Antigua’s attorney, Mark Mendel, said the U.S. had switched its explanation for its General Agreement on Tariffs and Trade language that seemingly gave thumbs-up to offshore gambling Web sites. Antigua has never sought to unilaterally force the U.S. to abandon its policy against Internet gambling in general, he said. The Antiguan government has put so many resources into fighting U.S. intransigence that “there’s no turning back,” Mendel said.
“Moral rejectionists seem to be in the majority” in the U.S., with nine in 10 favoring legalized online gambling, said Sallie James, a Cato trade policy analyst. U.S. bettors continue to place wagers on foreign sites, making the ban “apparently impossible in the long run even if it were legally justified,” she said. The U.S. is at risk of an eventual WTO punishment because of its inconsistent treatment of gambling -- allowing online gambling when a state limits activity to its own residents and interstate online gambling on horse racing, she said. Other countries may be able to join Antigua in pressing the U.S. for damages or exercising a right to retaliate by, for example, not honoring U.S.-based copyrights and trademarks -- but it is unclear that Antigua will “be able to export, legally at least, the fruits of those efforts” because of the long WTO withdrawal process, James said.
“We entered this dispute a little naively,” Mendel said. Antigua did not expect the case to still be going in 2007 when it was filed in 2002, because “fundamentally the WTO had worked quite well” when members disputed trade obligations, and the U.S. was a regular party to disputes. Antigua is still looking for a “solid middle ground,” Mendel said. “We didn’t really bring this case to win it” in the form of knocking down longstanding U.S. policy. The U.S. has never budged in its position despite regular low-level talks with Antigua, he said. “We don’t exactly know where it’s going to lead,” since the intended U.S. withdrawal from GATT commitments could be years in the making.
Conceding he’s not a gambling policy expert, Jackson said that from his analysis, the U.S. government is not “thumbing its nose” at the WTO. The Antigua case covers 10 serious legal issues, he said. GATT schedules -- lists of products and services covered -- often run to a thousand pages, and the U.S. simply overlooked that the sporting category could include gambling, Jackson said. The WTO needs a process to correct innocent mistakes like this soon after they are discovered -- before any country tries to avail itself of the commitment, to keep trade deals from bogging down in feared misinterpretations, he said.
The WTO appellate body was correct to throw out everything but online betting on horse racing from the Antigua complaint, Jackson said. The WTO can’t consider state laws on Internet gambling, so the only glaring inconsistency in the U.S. approach to online gambling is in allowing online horse wagering, he said. The provision falls under a unique federal law that the Justice Department apparently disputes but has not tried to overturn (WID April 2 p4). The U.S. has two ways to shed its liability, neither painful, Jackson said: Allowing U.S. residents to bet on foreign horse racing online or banning domestic online racing. If the U.S. shields online horse racing domestically, it will owe complaining countries little compensation, in the form of trade discrimination or further concessions, Jackson said. “The leverage from Antigua is not all that great.”
The U.S. commitment “was not a mistake,” Mendel said. The U.S. only recently raised that argument with the WTO. “This is not about horse racing.” The U.S. had the burden of showing that it was not practicing arbitrary discrimination against foreign sites, and it failed, so the U.S. argument now is “unbelievably frustrating to me,” Mendel said. The bill by House Financial Services Committee Chairman Barney Frank, D-Mass., to legalize and regulate online gambling (WID April 27 p1) takes a “more adult view” toward gambling than opponents have, he said. No stated peril of online gambling -- youth gambling, organized crime and money laundering -- has been seen consistently in visitors to Antiguan online casinos. The Antiguan government wanted to be a part of government study of online gambling proposed by Rep. Jon Porter, R-Nev. (WID Jan 9 p3), Mendel said, to show “this is something that can be done on a responsible basis.”