Japan & India Join WTO Claims Against USA- is US Poker Bluffing?

Japan and India have joined the EU and Antigua in filing a compensation request with the World Trade Organization (WTO) resulting from Washington's attempt to change the details of its obligations under the 1994 General Agreement on Trade in Services to remove online gambling and online poker.

The European Union first notified the WTO on Tuesday regarding their claim, followed by the tiny Caribbean nation of Antigua and Barbuda on Wednesday, with Antigua seeking compensation of $3.44 billion against the United States.

When the U.S. lost its final appeal March 2007 the United States Trade Representative's (USTR) office announced that it would take the unprecedented legal step of changing the international commitments it made as part of the 1994 General Agreement on Trade in Services (GATS) agreement amongst the 150 members of the WTO.

As a result, the U.S. declined to challenge the WTO ruling, because it says that its legal maneuver effectively ends the case, which enraged WTO members (click here for related article).

HOW COMPENSATION WORKS

Under the GATS, if a country withdraws its commitments other nations can seek compensation for any services trade opportunities that they could prove they lost through the change, which is what the EU, Antigua, and now Japan and India have done.

In compensation claims, WTO rules typically provide for equivalent trade sanctions to compensate for WTO member losses. The EU said that the unprecedented legal move by the U.S. of deleting part of an agreed treaty has to be accompanied by a commitment to open up other trade sectors.

But for small country like Antigua that is highly dependent on imports, there are no equivalent trade sectors to be compensated for, so to do so would be economically unfeasible, nor would it do much to penalize the offending larger WTO member nation.

So the WTO provides an alternative, where countries may suspend their own trade agreement obligations towards the offending country. This means that Antigua might choose, for example, to sell unlicensed copies of American designer shoes, DVD, CDs or computer software to compensate for the losses caused by the USA banning online gambling business from Antigua.

IS THE USTR OFFICE BLUFFING?

Burke Hansen, who heads a San Francisco law office, astutely lays the groundwork in an article in The Register that works up to the question: to what lengths is the US willing to go to keep its protective online gambling ban - are they willing to sacrifice years of trade sanction agreements, or are they playing out some form of poker bluff?

Hansen begins, "What is surprising is the extent to which the USTR seems willing to abandon the decades of hard-fought negotiations covering the international trade in services that ultimately resulted in the General Agreement on Trade in Services (GATS) for a policy ultimately damaging to American trade interests."

He continues, "The USTR, after pretending the US didn't really know what it was doing when it failed to exempt gambling services from its schedule of commitments (countries are allowed to exempt "immoral" services or products, but cannot discriminate in doing so), and repeatedly getting hammered by the Antiguans, has decided to redefine its GATS commitments to eliminate gambling services, thereby opening the door for other WTO members to do the same. It's not hard to understand how such an approach may quickly render international agreements worth less than the paper they are printed on."

"And so, today, what is expected to become a parade of countries demanding sanctions against the United States as a result of its refusal to comply with WTO rulings on gambling services began to form, as Japan and India piled it on with more demands for compensation," Hansen added.

"Every other signatory affected will have a right to demand sanctions, and those sanctions may, depending on the circumstances, be applied against any American industry, from automobiles to semiconductors."

Hansen postulates, "Perhaps this is just a game of chicken by the USTR, a kind of unilateralist posturing, although that seems hard to believe considering the floundering state of the current DOHA round of negotiations; just where the WTO goes from here, no one really knows."

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