Reader JohnA forwarded this article as an update to the toe in the water scenario for implementing WTO GATS policy. The New York Times article suggests possibilities.
Antigua is best known to Americans for its pristine beaches and tourist attractions like historic English Harbor. But the dozens of online casinos based there are vital to the island’s economy, serving as its second-largest employer.
More than a few people in Washington initially dismissed as absurd the idea that the trade organization could claim jurisdiction over something as basic as a country’s own policies toward gambling. Various states and the federal government, after all, have been deeply engaged for decades in where and when to allow the operation of casinos, Indian gambling halls, racetracks, lotteries and the like.
But a W.T.O. panel ruled against the United States in 2004, and its appellate body upheld that decision one year later. In March, the organization upheld that ruling for a second time and declared Washington out of compliance with its rules.
That has placed the United States in a quandary, said John H. Jackson, a professor at Georgetown University Law Center who specializes in international trade law.
Complying with the W.T.O. ruling, Professor Jackson said, would require Congress and the Bush administration either to reverse course and permit Americans to place bets online legally with offshore casinos or, equally unlikely, impose an across-the-board ban on all forms of Internet gambling — including the online purchase of lottery tickets, participation in Web-based pro sports fantasy leagues and off-track wagering on horse racing.
But not complying with the decision presents big problems of its own for Washington. That’s because Mr. Mendel, who is claiming $3.4 billion in damages on behalf of Antigua, has asked the trade organization to grant a rare form of compensation if the American government refuses to accept the ruling: permission for Antiguans to violate intellectual property laws by allowing them to distribute copies of American music, movie and software products, among others.
For the W.T.O. itself, the decision is equally fraught with peril. It cannot back down because that would undermine its credibility with the rest of the world. But if it actually carries out the penalties, it risks a political backlash in the United States, the most powerful force for free-flowing global trade and the W.T.O.’s biggest backer.
There are several thought that come to mind:
1) The Doha Rounds of talks have pretty much stalled completely on the agricultural subsidy problem between two big players, the US and the EU. China has resisted US pressure to respect intellectual property rights, so the ‘moral high ground’ is in danger for the US on the symbolic level at least.
2) The testing of rules and jurisdictions would be easier if the short term stakes look small, as in this David/Goliath case.
Antigua is a small country (70,000 people) so the penalty imposed on intellectual property would be tiny for the US in relation to the economy. But the issue of jurisdictions is huge. The US federal government has restricted use of credit cards and such for internet gambling offshore, and there is a long history of regulation at the state and local levels of government.
3) I do not think that the gambling industry has as powerful a lobby and financial backers as agricultural, and is less centralized. Americans are also ambivalent about the industry, but it has become a money maker for states as sole providers of tickets.
4) Alternative routes to globalization are being explored in various multi-lateral agreements based on regional interests with similar political goals or more familiar cultural values as more local businesses become involved in regional trade.