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Latest WTO Internet Gambling Ruling Favors Antigua, Shows Effects of Harmful, Overreaching Trade Agreements on Domestic Policy

U.S. Ordered by WTO to Pay $21 Million in Compensation for U.S. Internet Gambling Laws

WASHINGTON, D.C. –   The World Trade Organization (WTO) announcement today that the U.S. must pay $21 million in compensation for the U.S. ban on Internet gambling is the latest stark example of how U.S. trade agreements can undermine a wide array of domestic policies unrelated to trade, Public Citizen said today.

“Americans just got a harsh wake-up call about the price of ‘trade’ agreements and entities such as the WTO that require us to conform all of our domestic policies to hundreds of pages of rules unrelated to trade that were pushed by global corporations behind closed doors in 1994,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division. “This ruling shows once again that the WTO’s incredible overreach and interference with domestic policy is a serious threat to Democratic policy-making and national sovereignty.”

Today’s announcement that the U.S. must pay the Caribbean nation of Antigua to compensate for gambling revenue Antigua lost because of the U.S. Internet gambling ban is the latest step in a WTO challenge Antigua launched in 2003. In 2005, a WTO Appellate Body issued a final ruling against the U.S. that implicated wide swaths of U.S. gambling policy extending beyond the Internet gambling ban. Under WTO rules, a losing country must bring its policy into compliance with WTO rules by a set deadline or face trade sanctions. When the U.S. did not change its laws as ordered by the WTO, Antigua brought a compliance case. In March 2007, the U.S. lost that case, and Antigua was authorized to begin imposing sanctions. Antigua’s lawyers raised the option of lifting Antiguan compliance with WTO copyright rules relating to U.S. music and software.

In May 2007, with growing threats from other WTO countries to use the expansive 2005 ruling to launch additional WTO challenges to additional U.S. gambling policies, the U.S. gave notice to the WTO that it sought to withdraw “gambling and betting services” from WTO jurisdiction. Under WTO rules, a country may withdraw a service sector committed to WTO jurisdiction only with the authorization of other WTO signatory countries interested in the sector and only after compensating for future lost revenue a WTO signatory country might have earned were the commitment maintained.

Today’s compensation order is not the end of the matter; the U.S. is engaged in negotiations with the European Union, India, Costa Rica and Macao to determine how much it must pay them for withdrawing the gambling sector. These negotiations focus on what new service sectors the U.S. will submit to WTO jurisdiction in exchange for withdrawing gambling. However, the Bush administration needs congressional approval for any new sector to be submitted to WTO rules.

“Congress must demand a vote to authorize any expansion of U.S. WTO service sector commitments,” said Wallach. “Especially after this case highlights the threats posed to U.S laws in service sectors under WTO jurisdiction, it would be unacceptable for the Bush administration to negotiate an expansion of U.S. WTO commitments.”

The WTO Internet gambling case began in 2003 when Antigua challenged three long-standing, U.S. federal anti-racketeering statutes that in effect banned Internet gambling as cross-border trade barriers. Antigua’s Internet gambling firms wanted continued access to the U.S. market for online gambling – worth an estimated $15.5 billion annually. Despite having one of the largest and most sophisticated negotiating teams, the U.S. claimed that it made a simple mistake when it first committed a sector called “other recreational services,” which includes “gambling and betting services” to WTO jurisdiction under the rubric of Uruguay Round negotiations in the early 1990s. Once a service sector is committed to WTO General Agreement on Trade in Services rules, even non-trade-related policies in that sector can be challenged as violating the agreement’s expansive rules. 

READ more information about the gambling case.

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