JohnA on "The price of free trade or the price of protectionism?"

This one is by reader JohnA…

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In 2003 the tiny Caribbean nation of Antigua filed a case against the
US with the WTO. The case was about US initiatives to restrict online
gambling. These initiatives effectively barred all foreign run online
gambling companies from operating within the US.

In 2004, the WTO ruled for Antigua, and in 2005 an appeal by the US also ruled for the tiny nation. The US was given 11 months and 2 weeks to comply. To comply, the US had to repeal it’s laws allowing interstate gambling, specifically the Interstate Horseracing Act (and a similar one allowing gambling between 2 states as long as it is legal in both), or allow all Internet gambling. The US chose not to do either.

In 2006, The US passed a law, making it illegal for credit card companies to process payments for online gambling sites. It also started arresting directors of foreign online gambling companies who happened to set foot on US soil. This has served to strengthen Antigua’s hand in it’s WTO proceedings. It was also against the US GATS commitments in the WTO. These commitments were the same ones that the US pushed so hard for and spent years negotiating. They basically bring services into the purview of the WTO.

Because of the intransigence of the US, the WTO expanded it’s look into state gambling laws, which it had initially refused to consider, and found them to be also in violation of the GATS agreements. Things like state run lotteries, Indian casinos, and limits on numbers of casinos were now under threat. On top of that, Antigua is asking for $3.4 billion per year in sanctions until the US complies with the WTO order.

The US is trying to withdraw gambling from it’s GATS commitments. Initially, it tried to argue that it didn’t mean to include gambling, which didn’t do down very well with the other WTO members. From some sources, the US is still maintaining that it doesn’t have to do anything to withdraw, but from others it is using the GATS provided for mechanism for withdrawing obligations. The mechanism allows a member to withdraw it’s obligations in one area by opening up other services to other countries. Services like education have been mentioned.

Any government that says its interests are harmed by a change to pledges opening borders at the WTO is entitled to request negotiations with the US. Action by the EU, India and Japan have been started, with talks of Canada and Brazil also joining in.

Do we, as a country, really have any moral objections to gambling? No. It’s everywhere. Then why have we painted ourselves into this corner? What are we going to give up to protect gambling in the US? To the rest of the world, this is just another example of the US reneging on it’s commitments when it doesn’t suit US interests, and many are starting to wonder why they should live up to their commitments when they are counter to their own country’s interests.

Further reading…

Q&A with the attorney for Antigua in the WTO case:

Q&A with the attorney for Antigua in the WTO case, Mark Mendel, who, puts the blame squarely on the shoulders of the DOJ.

A 2004 article on the case before the initial verdict by Out-Law.com

A summary of the case from an anti free trade site (Warning pdf!!)

Articles on this issue from a pro-American (or anti-free trade) perspective depending on your point of view

A NY Times article on the case.

A Sydney Morning Herald article on the case.

An explanation of GATS.

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Again, this post, including all the links, was written by reader JohnA.

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