Last week the United States government conceded defeat in the WTO dispute with Antigua, but rather than abiding by court's ruling, the USTR (U.S. trade reprentatives) chose instead to remove its commitment regarding gambling from the services schedule under GATS. This is the first time a country has simply disobeyed a ruling of the WTO, and it could have serious ramifications for U.S. trade in the future. I am in the process of putting together a detailed article discussing the ramifications of the decision as well as the reactions of other WTO member countries and various free trade experts. However, prior to publishing that article I thought it was important to address the United States' response since making that decision and issue an editorial about the blatant misrepresentation and half truths spewed by the U.S. government.
As soon as the United States issued the announcement conceding defeat, they were quick to point out that they hadn't intended to include gambling in the agreement and the inclusion was just an oversight. That is just not truthful. As Mark Mendel, Antigua's lawyer, pointed out in a statement:
"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."
The reason the United States did not exclude gambling from its commitments is obvious. The USTR felt they could benefit at some point in the future by including gambling as part of its agreement. Gambling is prevalent throughout the U.S. and contributes enormous amounts of money to government coffers. Aside from selling gambling paraphernalia such as slot machines and blackjack tables worldwide, there is no doubt the United States envisioned someday of allowing Harrah's, Caesar's or some other U.S. companies to set up operations elsewhere in North or South America or overseas. And with this WTO agreement in place, should the time arise, they could force other countries who did not carve out exceptions to welcome those companies to set up shop in those countries. As for remote betting, the internet was hardly an issue in 1993 when the agreement was signed in Uruguay, but horse racing did allow for remote betting and no doubt the powerful U.S. horse racing lobby didn't want to shut itself out if they wanted someday to offer their product overseas. The U.S. may now regret that decision not to specify gambling in the agreement, but with hundreds of politicians and lawyers reading every word of what they signed, they knew full well what they were agreeing to and there was no "oversight."
As well, the United States has suggested that the laws in the United States make it illegal to bet online and hence they have no obligation to compensate anyone since "everybody was on notice that the United States had very strong criminal prohibitions at the state and federal level in the area of gambling."
Hogwash, gambling is legal almost everywhere in the United States. You can't drive more than an hour anywhere in the U.S. (save for Hawaii and Utah), without coming in contact with a casino, race track, poker room or other gambling establishment. And of course every store sells lottery tickets of some sort or another. So to say there are "strong criminal prohibitions in the area of gambling" is a misnomer. Sure, there are some laws on the books that make bookmaking illegal, but that is for local people operating as bookies in the United States. The U.S. superior courts have stated that the wire act really doesn't apply to online casinos or poker rooms and it is questionable if it applies to internet sportsbooks. As for the UIGEA, that law was only passed in October of 2006 upon being slipped into the Safe Port bill, but it can only apply for agreements signed after October 2006. You can't pass a law and then somehow backdate it to a time when the law wasn't applicable. Laws are always intended to apply from the time they were passed. Mind you, in this case both countries have different interpretations of the law and the only relevant agreement was the one signed at the WTO and ruled upon by the appelate court in Antigua's favour.
Furthermore, the United States continues to state its "morals objection," that betting at a brick and mortar establishment is ethical but betting remotely is unethical, except for horse racing, lotteries and fantasy games. This argument has always been illogical and still is. The internet is not immoral. The activity is the only thing that can be moral or not. People who oppose pornography oppose all pornography as immoral. They don't somehow suggest that Hustler Magazine is moral but sex.com is not. By this definition, buying a book at Barnes and Noble is ethical, but purchasing the same book from Amazon.com is immoral. At least Jon Kyl had the fortitude to state that he "is no fan of gambling." Clearly he doesn't like the activity and finds gambling to be immoral despite the fact that it is prevalent throughout Arizona. But the U.S. government, which is only too happy to take revenues from gambling, doesn't find the activity immoral. To state otherwise is just untrue. If the U.S. government truly finds gambling to be immoral then they should shut down Nevada and Atlantic City, close every riverboat and native casino, stop selling lottery tickets and close up every horse race track. Only then will the rest of the world believe that the U.S. has objections to gambling.
Finally, the United States is suggesting it should not have to compensate any other country for its decision because there is no real loss to the other countries as a result of its decision. That suggestion is unfathomable. The country of Antigua has built its economy around internet wagering, and most of it from U.S. citizens. It reaps hundreds of millions of dollars from the industry. When Britain was forced to pull out of the U.S. market, the country's stock market plummeted almost $6 billion. And many other countries which intended to get into the internet betting arena to raise badly needed funds, now have to abandon those plans. It's one thing for the USTR to believe their decision hasn't affected other countries, but the reality is that it has, and the United States could be on the hook for billions of dollars in compensation, which of course will all eventually come out of U.S. taxpayers' pockets.
The USTR is trying to justify its decision to breach the agreement at the WTO by making excuses. However, a country with as many international lawyers as the U.S. should know that signed agreements are binding regardless of whether a country regrets signing it later. Even in day to day life people sign agreements all the time that they may later regret. I recall signing a contract to join a fitness club for 3 years which I later regretted. However, my signature was legally binding and I paid the fee until the contract ran out. Movie stars sign prenuptial agreements and then often regret it when the marriage dissolves and they realize they could have received more assets. And in the United States large companies sign international agreements to import or export goods all the time and often regret it. But in the end they live up to the agreement because their signature is legally enforceable. That is where the U.S. currently stands. They signed an agreement in good faith along with hundreds of other countries, and now regret not excluding gambling. But they did indeed sign the agreement to include gambling in the schedule and should honor their commitment. The United States has been the biggest benefactor from WTO rulings, and while many countries that lost decisions to the United States may not have liked the ruling or wished they hadn't signed the agreement, in the end they live up to their commitments and obey the WTO court's ruling. The WTO is not a one way street. This decision by the U.S. shows them to be poor sports and dirty dealers. In the future why would anyone want to deal with the U.S. if they can't trust them to honor their commitments? The USTR likely feels that this will blow over soon, but the case was being watched with great interest worldwide to see how the U.S. would actually respond to a major loss, especially in light of recent decisions that went against the U.S. in agriculture and softwood lumber where the United States government dragged their feet as long as possible to force the other countries to accept lesser settlements.
As stated earlier, I am in the process of gathering quotes from many countries represented at the WTO as well as GATS representatives themselves. The next article will list all the quotes and also examine the ramifications of the decision so that U.S. taxpayers can decide whether they are being well represented by their government.