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WTO internet gambling ruling could require U.S. to pay $100 billion in trade compensation penalties

26 Sep 2007

ASHINGTON -- (PRESS RELEASE) -- International trade policy and Internet gambling experts spoke today about the need for the U.S. to quickly resolve the trade dispute around Internet gambling as it could result in penalties in excess of $100 billion in U.S. trade compensation, discredit the World Trade Organization (WTO) and undermine U.S. credibility. The experts, including Naotaka Matsukata, a senior policy advisor with Alston & Bird and former director of policy planning for U.S. Trade Representative Robert B. Zoellick, Lode Van Den Hende, a Brussels-based trade lawyer with Herbert Smith, Raul Herrera, a Washington-based lawyer with Arnold & Porter and Clive Hawkswood, chief executive of the Remote Gambling Association, presented their comments on the WTO Internet gambling trade conflict and likelihood for a major trade clash between the European Union and the Bush Administration at a press conference in Brussels, Belgium.

"The $3.4 billion claim by Antigua and the much larger claim of potentially over $100 billion by the seven economies seeking compensation are some of the largest penalties in the history of the WTO," stated Matsukata. "This is by far the most significant WTO case ever and its implications for both the U.S. and the EU are enormous. Given the size of the U.S. gaming market, both the potential benefit for European industry and the corresponding potential damage to U.S. companies is unprecedented."

The WTO previously ruled, in response to a dispute filed by the Caribbean island nation of Antigua and Barbuda, that the U.S. unfairly prohibits foreign Internet gambling operators from accessing the U.S. market, while allowing domestic companies to legally accept online bets. In response, the Office of the U.S. Trade Representative announced the U.S. intention to withdraw its commitments to the WTO, thus allowing the United States to keep its markets to offshore-based internet gambling operators closed. Currently, the European Union (representing 27 member states), India, Japan, Australia, Canada, Costa Rica, Macao, and CARICOM (representing 15 Caribbean nations) have joined Antigua and Barbuda in seeking compensation from the U.S. for economic injury resulting from this trade agreement violation. If the U.S. does not settle with each country, the trade concessions will be determined by WTO arbitration.

Withdrawing from a binding treaty commitment could undermine U.S. negotiating credibility and risks discrediting the WTO as an effective rules- based body. Essentially, the U.S. is disregarding the rules it helped put in place with the creation of the WTO. "When the U.S. decides to 'clarify' its commitment, its creates a deep anxiety about the credibility of the WTO as a rules based institution -- how many other countries may decide to follow suit by similarly 'clarifying' previously made commitments that may now be politically difficult or economically unpopular to fulfill?" commented Matusaka.

Lode Van Den Hende added, "By withdrawing its commitments the U.S. is opening a Pandora's box because if it becomes easy to withdraw commitments they become meaningless. And you have to ask yourself whether this is in the long term interest of the U.S.?"

A solution to the U.S. noncompliance with the WTO obligations may be found in the Internet Gambling Regulation and Enforcement Act that was introduced in the spring by U.S. Representative Barney Frank. Matsukata argues that the bill would "effectively extend national treatment to WTO members in the area of gambling services; satisfying U.S. obligations under the WTO General Agreement on Trade in Services, and eliminating the rationale for potentially harmful compensation concessions to a number of countries."

"Rather than face paying billions in trade compensation, which would have a significant adverse impact on the American economy, the U.S. should embrace the legislative solution presented by the Frank bill, which brings the U.S. into compliance by regulating Internet gambling and creating a level playing field among domestic and foreign Internet gambling operators," said Jeffrey Sandman, spokesperson of the Safe and Secure Internet Gambling Initiative.

About Safe and Secure Internet Gambling Initiative

The Safe and Secure Internet Gambling Initiative promotes the freedom of individuals to gamble online with the proper safeguards to protect consumers and ensure the integrity of financial transactions. For more information on the Initiative, please visit http://www.safeandsecureig.org. The Web site provides a means by which individuals can register support for regulated Internet gambling with their elected representatives.

 
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