WTO postpones settlement on US vs Antigua and Barbuda
The World Trade Organisation (WTO) has extended to December 14 the deadline for a negotiated settlement between the US and the small Caribbean island of Antigua and Barbuda on e-gaming by US nationals. This dispute, pending since 2003, is not the only...
The World Trade Organisation (WTO) has extended to December 14 the deadline for a negotiated settlement between the US and the small Caribbean island of Antigua and Barbuda on e-gaming by US nationals.
This dispute, pending since 2003, is not the only challenge the US is facing, as there are further compensation decisions relating to fellow WTO members, including the EU, Australia, Canada, Costa Rica, Macau, India.
This long-pending dispute centres around the US withdrawal of WTO treaty obligations concerning gambling.
In 1995, the General Agreement on Trade in Services (GATS) was created to extend the WTO's multilateral trading system to services, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. All members of the WTO are signatories to the GATS.
GATS clearly covers cross border supply, for any service delivered within the territory of the member from the territory of another member, even when the service supplier is not present within the territory of the member.
Antigua publicised its demand for the US to pay up $3.4 billion in the form of suspended copyright laws. In reply the US has suggested that around $500,000 would be more appropriate. Antigua & Barbuda seems to be the only country that is vigorously pursuing its claim and rejected the US proposal. In the eventuality that an agreement on compensation is not achieved, the issue will fall before the WTO arbitration.
Reuters' news agency quoted US Trade Representative spokesman Gretchen Hamel as saying that each negotiation is proceeding at its own pace, and some are quite advanced.
Although Ms Hamel recognises that the WTO ruling went against her country, she is adamant that the US would maintain a ban on financial transactions relating to internet gambling to "...protect public order and public morals as long as it doesn't discriminate against foreign companies".
The Unlawful Internet Gambling Enforcement Act (UIGEA) came into force in the US in October 2006, but Ms Hamel reiterated that it isn't covered by the WTO ruling and said that its 1995 commitment to open gambling to foreign companies was "an oversight" by the Clinton administration.
One has to question this statement. These treaties are not just signed for the sake of signing. A great deal of research/studies are conducted before approving such a detailed treaty. This claimed "oversight" is very debatable!
What could this mean in real terms?
This WTO ruling can be taken as a precedent against the US for online gambling discrimination and protectionism. This can be further challenged by any larger country that supports online gambling and wants access to US customers.
When the UIGEA was passed, many large UK-registered gaming companies lost their US customers and consequently took a huge loss in book value. So UK-based gaming companies will press their officials to work with the WTO to assure "free trade" to win back the business of US customers.
The extension till December 14 could give the US ample time to get its house in order. The US appeal to the WTO's ruling was seen as a huge paradox especially when it was the US itself that conceived the concept of international trade organisation! As the appeal was rejected by the WTO, it made the US think twice about this situation.
Furthermore, the WTO report noted that the UIGEA became law in October 2006 after the 2005 WTO ruling but maintained the same loopholes that first prompted Antigua to file their case. The US had more than enough time to amend this prior to enforcing this law.
There are two options for the US. The first is to negotiate a reasonable settlement with Antigua & Barbuda, shake hands and honour the GATS treaty.
The second is to discard the UIGEA and replace it with the more popular Internet Gambling Regulation and Enforcement Act of 2007 bill (IGREA) put forward earlier this year by the Democratic Representative from Massachusetts Barney Frank.
In any case, this may be the last chance for the US Congress to avoid paying trade concessions worth an estimated $100 billion.
Ms Fenech works with consultancy firm PKF (Malta).
How it all started...
2003 - Antigua and Barbuda filed a claim with WTO against the US alleging that it discriminates against online gambling (including online poker) companies that are not located within the US.
2004 - Antigua and Barbuda strengthened its claim by arguing that US trade officials had signed the 1995 GATS treaty, committing it to allow foreign entrants to its lucrative online gaming market.
2005 - WTO ruled in favour of Antiguan online gambling companies offering services to consumers in America, and against US protectionism. It ordered the US to comply either by lifting its ban on foreign operators or by withdrawing a "discriminatory" exemption for US online horse-racing betting sites, within 18 months.
2006 - Antigua and Barbuda complained when the US failed to meet the 18-month WTO deadline to comply with international trade laws. The WTO agreed in July 2006 to investigate their complaint, which resulted in a ruling late January 2007 against the US.
February 2007 - The US appealed the ruling.
March 2007 - The WTO rejected the US appeal, and again upheld Antigua's original claims over the US violations.
October 2007 - The US is given an extension till December 14 2007 for a decision on compensation to fellow World Trade Organisation members affected by its unilateral withdrawal of treaty obligations concerning gambling.
This dispute, pending since 2003, is not the only challenge the US is facing, as there are further compensation decisions relating to fellow WTO members, including the EU, Australia, Canada, Costa Rica, Macau, India.
This long-pending dispute centres around the US withdrawal of WTO treaty obligations concerning gambling.
In 1995, the General Agreement on Trade in Services (GATS) was created to extend the WTO's multilateral trading system to services, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. All members of the WTO are signatories to the GATS.
GATS clearly covers cross border supply, for any service delivered within the territory of the member from the territory of another member, even when the service supplier is not present within the territory of the member.
Antigua publicised its demand for the US to pay up $3.4 billion in the form of suspended copyright laws. In reply the US has suggested that around $500,000 would be more appropriate. Antigua & Barbuda seems to be the only country that is vigorously pursuing its claim and rejected the US proposal. In the eventuality that an agreement on compensation is not achieved, the issue will fall before the WTO arbitration.
Reuters' news agency quoted US Trade Representative spokesman Gretchen Hamel as saying that each negotiation is proceeding at its own pace, and some are quite advanced.
Although Ms Hamel recognises that the WTO ruling went against her country, she is adamant that the US would maintain a ban on financial transactions relating to internet gambling to "...protect public order and public morals as long as it doesn't discriminate against foreign companies".
The Unlawful Internet Gambling Enforcement Act (UIGEA) came into force in the US in October 2006, but Ms Hamel reiterated that it isn't covered by the WTO ruling and said that its 1995 commitment to open gambling to foreign companies was "an oversight" by the Clinton administration.
One has to question this statement. These treaties are not just signed for the sake of signing. A great deal of research/studies are conducted before approving such a detailed treaty. This claimed "oversight" is very debatable!
What could this mean in real terms?
This WTO ruling can be taken as a precedent against the US for online gambling discrimination and protectionism. This can be further challenged by any larger country that supports online gambling and wants access to US customers.
When the UIGEA was passed, many large UK-registered gaming companies lost their US customers and consequently took a huge loss in book value. So UK-based gaming companies will press their officials to work with the WTO to assure "free trade" to win back the business of US customers.
The extension till December 14 could give the US ample time to get its house in order. The US appeal to the WTO's ruling was seen as a huge paradox especially when it was the US itself that conceived the concept of international trade organisation! As the appeal was rejected by the WTO, it made the US think twice about this situation.
Furthermore, the WTO report noted that the UIGEA became law in October 2006 after the 2005 WTO ruling but maintained the same loopholes that first prompted Antigua to file their case. The US had more than enough time to amend this prior to enforcing this law.
There are two options for the US. The first is to negotiate a reasonable settlement with Antigua & Barbuda, shake hands and honour the GATS treaty.
The second is to discard the UIGEA and replace it with the more popular Internet Gambling Regulation and Enforcement Act of 2007 bill (IGREA) put forward earlier this year by the Democratic Representative from Massachusetts Barney Frank.
In any case, this may be the last chance for the US Congress to avoid paying trade concessions worth an estimated $100 billion.
Ms Fenech works with consultancy firm PKF (Malta).
How it all started...
2003 - Antigua and Barbuda filed a claim with WTO against the US alleging that it discriminates against online gambling (including online poker) companies that are not located within the US.
2004 - Antigua and Barbuda strengthened its claim by arguing that US trade officials had signed the 1995 GATS treaty, committing it to allow foreign entrants to its lucrative online gaming market.
2005 - WTO ruled in favour of Antiguan online gambling companies offering services to consumers in America, and against US protectionism. It ordered the US to comply either by lifting its ban on foreign operators or by withdrawing a "discriminatory" exemption for US online horse-racing betting sites, within 18 months.
2006 - Antigua and Barbuda complained when the US failed to meet the 18-month WTO deadline to comply with international trade laws. The WTO agreed in July 2006 to investigate their complaint, which resulted in a ruling late January 2007 against the US.
February 2007 - The US appealed the ruling.
March 2007 - The WTO rejected the US appeal, and again upheld Antigua's original claims over the US violations.
October 2007 - The US is given an extension till December 14 2007 for a decision on compensation to fellow World Trade Organisation members affected by its unilateral withdrawal of treaty obligations concerning gambling.