US could face repercussions from online gaming ban

30 July 2007

WASHINGTON, DC -- (PRESS RELEASE) -- A leading trade policy expert called for the U.S. to speedily resolve its trade agreement violation around Internet gambling with the World Trade Organization as the dispute could damage the WTO's credibility and force the U.S. to pay billions in compensation. The WTO's ruling in March, involving a dispute filed by the Caribbean island nations of Antigua and Barbuda, found 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. The United States Trade Representative announced in May that the U.S. would withdraw its commitments to the WTO to open its markets to offshore-based internet gambling operators.

The U.S. "response, and again I use that word loosely, is unprecedented in dispute settlement history," according to Sallie James, policy analyst at the Cato Institute's Center for Trade Policy Studies. James spoke at a recent Cato Institute Policy Forum in Washington, D.C., about America's high-stakes response to the WTO Internet gambling dispute.

Withdrawing commitments from the WTO would be unique in the organization's history and would also be extremely damaging to its credibility. These actions by the U.S. are an affront to other WTO members and could damage the WTO, James stated.

Currently, the European Union (representing 27 member states), India, Japan, Australia, Canada, Costa Rica, Macao, and CARICOM (representing 15 Caribbean nations) are also seeking compensation from the U.S. for economic injury resulting from this trade agreement violation. If the U.S. continues to violate WTO obligations, it could be subject to pay Antigua and Barbuda the $3.4 billion dollars that they demand and tens of billions of dollars to other countries.

Another 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. This bill, once enacted, would bring the U.S. into compliance with WTO requirements by regulating Internet gambling and creating a level playing field among domestic and foreign Internet gambling operators.

"The U.S. should act now to address this international trade violation and end its prohibition of Internet gambling," advised Jeffrey Sandman, representative of the Safe and Secure Internet Gambling Initiative. "If the U.S. continues to prohibit Internet gambling, our country could wind up being forced to pay billions in trade compensation. However, if we move to regulate Internet gambling, we can develop a responsible policy solution that allows the U.S. to come into compliance with WTO requirements and give every American the right to make up their own mind whether to gamble online," Sandman said.

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