EU-US Deal Made in WTO Online Poker and Internet Gambling Dispute

Reuters announced Monday that the European Union has accepted a package from the U.S., to compensate for loss of trade resulting from U.S. withdrawal from World Trade Organization (WTO) agreements on poker, gambling and betting services on the Internet.

"A bilateral agreement was signed in Geneva, which provides EU service suppliers with new trade opportunities in the U.S. postal and courier, research and development, storage and warehouse sectors," the Commission said. "The U.S. also made concessions in the testing and analysis services sector."

The valuation of the package was believed to fall far short of the $100 billion that European online gambling sites had claimed the United States owed. EU officials could not immediately say how much the deal was worth.

"This compensation cannot be quantified up to the euro," the EU mission to the World Trade Organization said. "Nonetheless, it is clear that new trade opportunities are created for EU service suppliers in important sectors in the United States," it said.

The European Union said it will also "continue to press for non discriminatory treatment in U.S. internet gambling legislation."

WHY THE COMPENSATION?

The deal was the result of a case brought by Antigua and Barbuda to the WTO in 2003. The WTO ruled in 2005 that U.S. online gambling legislation that criminalized Internet betting violated global laws.

During a 2007 ruling, the WTO pointed out that the Unlawful Internet Gambling Enforcement Act (UIGEA), which exempts certain domestic betting services such as online horse-racing, lotteries and fantasy sports, effectively discriminates against foreign companies seeking to offer similar services to U.S. residents.

After losing an appeal of the ruling early in 2007, instead of opening its markets, the U.S. moved in May to "clarify" its commitments to the Geneva-based trade arbiter, saying that it "never intended" to open its market to offshore Internet gambling when it made pledges on joining the WTO in 1994.

The U.S. then decided to withdraw its online gambling commitments to the WTO, keeping its markets closed to offshore Internet gambling operators, which meant it had to compensate other governments that would be affected so the overall level of its market access remains unchanged.

EFFECT ON OTHER CASES AGAINST USA

Meanwhile, a WTO decision on what sanctions the island nation of Antigua and Barbuda may impose on the U.S., over its refusal to allow U.S. citizens to gamble at foreign online casinos, has been delayed, Reuters reports

Antigua has asked the WTO for permission to impose $3.44 billion in annual trade sanctions, while the U.S. says the country should be entitled to $500,000 in damages.

The European Union, Canada, Japan, India, Australia, Costa Rica and Macao joined Antigua and Barbuda in requesting talks to discuss compensation. Australia dropped its claim while Japan reached a deal.

ADVERSE EFFECT ON INTERNATIONAL TRADE SYSTEM

Some view the refusal of the United States to comply with the WTO decision as a threat to the rules binding the international trade system.

They say that instead of rewriting its gambling laws, the United States has chosen to rewrite its trade rules to remove the issue from the WTO's jurisdiction. The international trade community fears that other nations, including China, may take a similar tack if cases do not go their way.

"This is by far the most significant WTO case ever," said Naotaka Matsukata, a policy adviser with Alston + Bird and a former U.S. trade official.

Antigua's request for an intellectual property rights waiver has raised alarms among trade associations that represent the largest software and media companies, including Microsoft and Universal Pictures, and the Recording Industry Association of America.

"Antigua literally is the mouse that roared," said Robert Lighthizer, head of the international trade practice at Skadden, Arps, Slate, Meagher & Flom.

A spokeswoman for the U.S. Trade Representative said the agreement signed Monday involved "commitments to maintain our liberalized markets" in the areas covered by the deal.

EU officials said the postal and courier concessions would affect how DHL, the express and logistics division of Deutsche Post World Net of Germany, competed with U.S.-based companies FedEx and United Parcel Service.

"The EU is a very active exporter of postal services and has significant export interests," said Clare Kelly, a trade analyst at the Geneva law firm White & Case. "It's an area where there is potential for expansion, and if the EU has achieved greater binding commitments, they must construe it as useful to them."

Uwe Bensien, a Deutsche Post spokesman, said it was "too early to say" what benefits the settlement would bring.

Read Related Articles: