From the Department of Justice took the dot com domains PokerStars, Full Tilt Poker and absolute convictions against the United States remained stable. Parties within the EU have expressed their disgust at the action, is clearly broken Kahnawake and Antigua has threatened to sue the U.S. government and bring them back before WTO tribunals. In the past, this reaction may have initiated some concern in the office of U.S. Trade Representatives (USTR), and even the White House, but now it is almost certain that the results in a shrug. And now the world condemning the United States is to blame for that indifference.
Let’s start with the WTO itself. Throughout the year the U.S. was the main beneficiary of WTO decisions and when making decisions on behalf of the United States, USTR expects its immediate implementation. However, when the WTO ruled against the USTR in almost all cases, the U.S. have shaken and in some cases even refused to comply. What happened to the softwood lumber from Canada, where the WTO ruled in Canada and the United States refused to accept the decision, which came to Brazil in the competition of cotton dumping, and it seems to happen with the decision in favor of China on anti-dumping complaint filed by the United States. But for players of the decision almost always comes to mind is the complaint of the game in Antigua, where the USTR has refused to accept this decision.
In 2003 the tiny island of Antigua issued a WTO complaint against the U.S. regarding America’s prohibition of cross border gambling services. According to Antigua, the U.S. signed a GATS agreement that permitted the offering of cross border services to U.S. citizens including remote gambling. The U.S. chose to ignore the complaint and simply stated that gambling that does not take place on U.S. soil is illegal stateside. Antigua requested the U.S. to discuss it over and over but the USTR said there was nothing to talk about. So Antigua went to the WTO with their complaint and documentation and in 2004 the WTO ruled in favor of Antigua. The WTO agreed that the U.S. signed a GATS agreement that required them to allow for free trade in the area of gambling. The U.S. stated it was a mistake, ignored the ruling and said they would not comply although they did appeal the decision suggesting that remote gambling goes against the country’s “morals”. The USTR stated this despite the amounts of legal gambling in the United States including remote gambling on horse racing and lotteries. The WTO Appellate court upheld the original decision stating that the morals defense was invalid because the U.S. already allowed for remote gambling in the area of horse racing. In better words, the U.S. are hypocrites and the WTO weren’t going to fall for it. The Appellate Court did, however, give the United States an “out” suggesting that if the U.S. revoked the Interstate Horse Racing Act, then they would reconsider the morals argument. Not surprisingly, the horse racing industry called foul and the USTR didn’t budge. The U.S. ignored the decision as long as they could and at one point even said they were in compliance with the WTO decision despite doing nothing. By April 2006, the United States’ time to comply with the decision ran out so the U.S. instead announced it would rewrite its commitments. That announcement was unprecedented, unethical and unfair. If any other country tried that tactic against the U.S. no doubt there would have been hell to pay but the WTO agreed they could rewrite their commitments provided they agreed to the provisions of rewriting them.
The provisions for rewriting commitments meant that the U.S. had to come to terms with concessions for any countries who claimed they were affected by the decision and Canada, Japan, India, Antigua, Macao and the EU all asked for concessions. At the same time Antigua, as the initiator of the dispute was entitled to further compensation as a penalty against the U.S. This is where the WTO failed miserably. Antigua asked for $3.4 billion in annual concessions which may have appeared high but when one considers the $100,000 license fee Antigua charges and the percentage of revenue from the multi-billion dollar industry it was likely not unreasonable. One can’t forget that projections were that hundreds of companies would operate in Antigua prior to the U.S. interfering with their industry. Antigua also factored in the projected growth of poker. But to the WTO’s failing they only considered the amount of money they believed Antigua lost from horse racing when they announced the penalty and in December 2007 awarded Antigua a measly $21 million per year in annual concessions. This didn’t even cover the cost of the dispute. The WTO could have made a bold statement to the United States that they were not so important that they could skirt their responsibilities and commitments but instead, as they have always done, the WTO backed down in the face of controversy and gave the U.S. a sweetheart deal. To the WTO’s credit they allowed the concession in the area of TRIPS, i.e. allowing Antigua to receive its settlement by ignoring U.S. intellectual property rights.
Antigua’s failing in the whole situation involved the latter. Antigua couldn’t be faulted for any of their actions up until the final decision by the WTO and in fact should be commended for agreeing to take on the challenge. Where Antigua was to blame was their inaction after the award. Without question $21 million was a fairly insignificant sum but what was relevant was the WTO allowing them to apply it to intellectual property rights. In fact the USTR were so concerned about that award they told Antigua not to do anything drastic until the U.S. could come to a different settlement. That statement itself should have caused Antigua to jump on the opportunity and flood the market with cheap knockoffs of American products. Five dollar copies of Windows 2007, $1 DVDs etc. all fully legal and functional with product key codes should have been available from the island of Antigua. Even if the products weren’t sold in the United States it would have certainly had management at Microsoft, Warner Brothers, etc. screaming foul and forced the USTR to meet with the country to work out some kind of settlement that was more realistic. However, Antigua chose to sit on the judgement and to date never took up the option or for that matter even threatened to use the judgement. It’s not surprising, therefore, that when Antigua now threatens to take the U.S. back to the WTO courts it results in nothing but a laugh.
The other countries like Canada and Macao can be blamed for not demanding the United States live up to their commitments, particularly when those countries have been screwed over by the U.S. on other WTO issues, but the EU especially deserves responsibility. There was absolutely no question that the U.S. actions were going to affect the EU drastically. After the passing of the UIGEA numerous European companies, including Party Poker and Neteller had to leave the U.S. market. Billions were wiped off the AIM stock market and estimates had the UK alone losing billions in potential revenue by the decision. Groups within the EU like the Remote Gaming Association cried foul and practically begged the EU to stand firm against the United States and force them to live up to their agreement. If not, the groups demanded that the U.S. pay upwards of a billion dollars in trade concessions, which could be given to affected gambling operators. The billion dollars was seen as a conservative estimate of how much gambling operators like William Hill, Party Poker and Bwin could have made offering gambling to the U.S. market. Instead, Peter Mandelson, the man in charge of the EU trade negotiations, came to an agreement with the USTR for $14.4 million in trade concessions in the areas of shipping and storage. The gambling groups in the EU were naturally disgusted. Not only did the EU not get what they deserved, but they also allowed for the trade concessions in areas that wouldn’t benefit EU gambling entities one iota.
Is it any wonder that the U.S. could care less about the threats to them now? Actions speak louder than words and actions by all countries that now threaten to turn proved fruitless in the past. Perhaps the best analogy to what happens to be the school bully that usually takes up the other children. When a child is turned to the boy goes to the principal, who in turn tells the bully is cool or get a stiff penalty. When the bully is still available for the death penalty is a brief detention. The next time a bully picks up a child than the same result happens. Of course, at some point the bully only shrug at the main threats or children, he bullies. He knows very well the sponsor fails to take concrete action against him and other children do not go over the top of the head, because they fear retaliation from the bully later. Other countries have shown just that.
They have established a clear precedent that the WTO is a paper tiger that fears of the United States or simply do not have the power to impose real sanctions against them. And other countries have shown they are willing to give America a real way for fear of subsequent reprisals. To make matters worse, to date the United States to rewrite its WTO commitments, no country has received any compensation from the United States, however, the U.S. rules of their world trade in the field.
If the WTO and other countries want the U.S. to take seriously, they must resist the USTR and force them to respect their commitments. The United States could threaten punishment, but at some point in the WTO should call their bluff. If they do, the U.S. continue to take the law in all areas of commerce.