U.S. thumbs nose at WTO

May 8, 2007 7:53 AM

The United States will maintain a ban on Internet gambling services despite an adverse World Trade Organization ruling.

The move opens the door for other WTO members — ranging from tiny Antigua and Barbuda to the 27-nation European Union — to seek potential damages at the WTO.

However, Deputy U.S. Trade Representative John Veroneau told reporters the United States did not believe there was any basis for other countries to receive compensation.

Veroneau argued that a case brought by Antigua and Barbuda several years ago took advantage of a drafting error made by the United States as part of its commitments in the early 1990s to open its recreational services market.

Even though U.S. law has banned interstate gambling for decades, the United States failed to make clear its commitments "did not extend to gambling," Veroneau said.

Having exhausted other options to fight the case, the United States will exercise a rarely used right under WTO rules to modify its 14-year-old services commitments and explicitly exclude gambling, Veroneau said.

Antigua’s finance and economy minister, Dr. L. Errol Cort, called the U.S. move an unprecedented, deeply disappointing and "almost incomprehensible" action.

"We are now reviewing our options and will be proceeding to use the WTO institutions to get full compensation for our citizens," Cort said.

"JUST NOT TRUE"

Mark Mendel, Antigua’s lead counsel in the matter, dismissed the United States’ claim that it never intended to open its gambling market.

"More than a dozen countries were able to expressly exclude gambling from their commitments, and many dozens more excluded the commitment in other ways. For the United States to say this was a mistake is just not true," Mendel said.

The U.S. announcement on Friday followed a WTO decision in March that said the United States had failed to comply with an April 2005 ruling against a portion of its ban having to do with online gambling on horse racing.

In fact, the U.S. Congress moved in the opposite direction last year and passed additional legislation to ban online gambling by making it illegal for banks and credit card companies to make payments to online gambling sites.

The chairman of U.S. House Financial Services Committee, Democratic Rep. Barney Frank of Massachusetts, has introduced a bill to lift the online gambling ban. But he conceded there is not enough support currently to pass it.

The WTO case could leave the United States open to paying damages in the form of reduced U.S. market access in some services sector of the WTO member seeking damages, USTR officials said.

The United States believes it should not have to pay compensation because countries did not bargain for access to the U.S. gambling market as part of world trade talks in the early 1990s, Veroneau said.

Also, the long-standing U.S. ban on interstate gambling makes it "nonsensical" for countries to believe the United States was opening that market, even though it did not explicitly say that it was not, Veroneau said.

Gary Hufbauer, a senior fellow at the Peterson Institute of International Economics, said he doubted the United States could persuade the WTO it doesn’t owe anything.

"Maybe they can do it. It sounds fairly far-fetched to me," Hufbauer said.

(additional reporting by Peter Kaplan)