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U.S. Disavows Own Trade Agreements, Plans to Ignore WTO Judgment

U.S. Disavows Own Trade Agreements, Plans to Ignore WTO Judgment 0001

The United States has announced that its way of complying with a recent online-gambling trade decision rendered by the World Trade Organization will be to ignore its own trade compacts. The U.S. announcement, the latest move in the long complaint brought by the island nation of Antigua and Barbuda, is a rare ploy that not only amounts to a rewrite of history, but has the potential to threaten the very framework of the WTO itself.

In the announcement, Deputy U.S. Trade Secretary John K. Veroneau conceded defeat in the narrow online dispute centering on accessibility to Internet-based horseracing wagering. However, all parties recognized that the narrow decision had much greater impact, establishing the initial precedent for online gambling as a general class of trade. Last October's UIGEA [Unlawful Internet Gambling Enforcement Act] was not part of the original dispute, though WTO appellate officials saw fit to include the UIGEA specifically in documents connected to the denial of the U.S.'s appeal. According to the WTO at that time, the passage of the UIGEA was a strong indicator that the U.S. was intentionally choosing to not comply with the existing agreements, and was instead moving in the opposite direction.

Friday's announcement by Veroneau confirmed those beliefs.

"U.S. laws banning interstate gambling have been in place for decades," stated Veroneau. "Most WTO Members have similar laws. Unfortunately, in the early 1990s, when the United States was drafting its international commitments to open its market to recreational services, we did not make it clear that these commitments did not extend to gambling. Moreover, back in 1993 no WTO member could have reasonably thought that the United States was agreeing to commitments in direct conflict with its own laws."

Veroneau continued with the following: "Neither the United States nor other WTO Members noticed this oversight in the drafting of U.S. commitments until Antigua and Barbuda initiated a WTO case ten years later. In its consideration of this matter, the WTO panel acknowledged that the United States did not intend to adopt commitments that were inconsistent with its own laws. However, under WTO rules, dispute settlement findings must be based on the text of commitments and other international documents, rather than the intent of the party. The United States strongly supports the rules-based trading system and accepts the dispute settlement findings. In light of those findings, we will use WTO procedures for clarifying our commitments."

Veroneau's statement attempts to evade the fact that dozens of other countries chose to exempt online gambling as a class of trade from the GATS [General Agreement on Tariffs and Services] during 1993-94, when the pacts were being created. Veroneau's claim itself is highly suspect, since all signatories would have had repeated chance to review the provisions submitted by all other participating countries. Furthermore, even if true the modified stance now seeks to punish other countries for U.S. oversight.

Veroneau also stated that because the U.S. never really intended to allow interstate and or international gambling, it should not be held liable for any compensatory damages sought by other countries, which can be sought after through continuing WTO processes. Said, Veroneau, in part confirming the protectionist nature of the move, "[I]t would be nonsensical for the U.S. to make a commitment to open up interstate gambling for foreign providers."
Vehement reaction to the move occurred on both domestic and international fronts. Errol Cort, Antigua's Minister for Finance and the Economy and the lead Antiguan official in the WTO case, offered this: "While we had of course been aware of the possibility of the United States taking such an action, we frankly considered it extremely unlikely. It is almost incomprehensible that the United States would take such an action in the face of an adverse dispute resolution ruling. This is going to have very severe consequences for the global free trade movement."
"We are now reviewing our options," added Cort, "and will be proceeding to use the WTO institutions to get full compensation for our citizens in the event the United States actually pursues this most regrettable action. We would strongly urge the United States to reconsider its decision."
Antigua's U.S.-based lead counsel, Mark Mendel, offered a similar thought. "There is simply no basis for such a statement. When the schedules were drawn up over ten years ago, there was extensive debate, proposal and counterproposal from all WTO members in determining what commitments would be made. More than a dozen countries were able to expressly exclude gambling from their commitments, and many dozens more excluded the commitment in other ways. For the United States to say this was a mistake is just not true."
Even a former Bush administration official, lawyer James Jochum, derided the U.S. move. "I am disappointed to see our country lead a degradation of the system," said Jochum, referring to the established WTO complaint and compliance process.
The rarity of the move stunned many onlookers, being only the second time in WTO history that a country has attempted to rewrite its own schedule of trade commitments after the fact. That unrelated case resulted in an extensive, highly negotiated settlement, though the U.S. has not to date shown willingness to compromise or deal honestly in the present dispute.
All WTO member nations, not just Antigua, are now eligible to pursue a related complaint against the U.S., which could result in multiple judgments valued at untold dollars. Parties with potential claims against the U.S. include the United Kingdom, home to several firms with many billions of dollars of market value wiped from the books by U.S. actions. Antigua, though, remains eligible to pursue increased damages against the U.S, such as the waiver of U.S. copyright protections on intellectual property. Granted such a waiver, Antigua could replace its lost gambling revenues --- which have declined from a high of over $1 billion annually to its present level of about $130 million --- with a WTO-legitimized industry manufacturing replicas of software, music, movies and books and many other items.
Carried to its extreme, it is this potential development that threatens the World Trade Organization process. The U.S. is gambling that other countries and the WTO really don't intend to go against U.S. wishes, even as the U.S. itself pursues a separate WTO complaint against another global trade giant, China. A U.S. refusal to abide by WTO regulations in the Antigua case is unlikely to win them support in the other trade dispute.

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