Value of US WTO Settlement with EU Questioned

The ink was hardly dry on the deals the United States struck last week with fellow World Trade Organization (WTO) claimants the European Union, Canada and Japan to compensate them for US withdrawal of online gambling from their trade agreements, when the value of the EU deal and its ability to stick came into question in reaction to a statement the Office of the US Trade Representative (USTR) issued to "clarify" the EU deal, according to the Financial Times.

The European Union's WTO agreement centered around the opening of American warehousing, courier and testing service sector to compensate for the U.S. removing online gambling from their trade agreements to maintain closure of their online gaming market to foreign companies, instead of complying with repeated WTO rulings to re-open their lucrative market (click here for related article).

But within 24 hours of the deal being unveiled last week, the USTR issued a "clarification" that made European companies doubt the value of the deal, and trade experts questioning whether the deal would even stick.

The USTR said the US Postal Service had already allowed foreign competitors to handle overseas mail for the past 20 years. All it was doing was making the decision legally binding so it could not be reversed. Sensitive sectors such as domestic delivery and storage at ports and airports would remain closed.

"There will be no effect on the terms of competition and no supplier of such delivery services will receive any advantage," said USTR spokeswoman Susan Schwab, the day after the deal. It would not involve "any change in US law and practice".

A spokesman for Peter Mandelson, the EU trade commissioner said, "It gives the sector legal certainty. There is real value in binding the commitments."

However, company officials and their lobbyists on both sides of the Atlantic are not so sure of the deal's value or whether the change has any legal standing, as any legal trade change requires the approval of the U.S. Congress, which it has not received.

Nao Matsukata, a former USTR official who is now policy adviser at the law firm Alston & Bird, said his old office appeared to be attempting to be back pedaling so they stop short of any legal changes that would require congressional sanction; "If they have agreed legally binding commitments that must have the approval of Congress as they do not have fast-track authority. I would expect to see congressional leaders taking a look at this," he said.

The Public Citizen in an article last Monday, agrees, pointing out that under the U.S. Constitution, no administration can unilaterally change U.S. commitments under a trade agreement without the approval of Congress.

"Hopefully the Europeans know that the Bush administration's offer to bind more sensitive service sectors to WTO jurisdiction is meaningless unless Congress approves such a proposal. Whatever the Bush administration is considering trading away to get out of its current WTO gambling mess would have to be approved by Congress," the article warns.

"To us, this market was already liberalised and we have been operating in it for many years. It is too early to evaluate what long-term benefits this decision would have," said a spokesman for Germany's DHL, the express and logistics division of Deutsche Post World Net AG, who competes with U.S.-based companies FedEx Corp. and United Parcel Service (UPS).

TNT, the Dutch operator that has a 1 percent hold in the US market, said, "De facto nothing really changes although current affairs are legally better backed through the WTO."

Market leader UPS declined to comment, while several FedEx officials say they are looking at the details to determine any effects.

In any case, it is felt that the overall trade value of the package falls far short of the $100 billion that European online gaming sites had claimed the United States owed. EU officials could not say how much the deal was worth.

In addition to the value of the deal being questioned, the Remote Gaming Association (RGA), which represents many major U.K. online gambling companies, is filing a formal complaint against the USA for its discriminatory practices (click here for related article).

Meantime, Costa Rica, India and Macau are believed to still be negotiating their WTO settlement with the United States.

"We now enter a 45-day period in which the remaining claimants have a right to request arbitration," Hamel said in an e-mailed statement. "We will continue to discuss this matter with the other claimants to explain how our proposal is consistent with our WTO obligations."

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