Uncle Sam and the WTO

September 13, 2005
by Tanya Lea

What bettor doesn't love a good underdog?  Especially an underdog going to bat for a hobby we all hold so dear to our hearts.  And so bettors everywhere cheered triumphantly when the World Trade Organization (WTO) ruled in favor of Antigua, ordering the U.S. to open its markets to Antiguan online gaming operations.

Officially, the U.S. has until April of 2006 to comply with the WTO ruling. 

The question of course begs to be asked: Will they?

Using precedent as our guide, there is much reason to be skeptical.  Though the U.S. is the most active complainant at the WTO - filing 60 cases against other nations, compared to 47 by the entire European Community (EC) and 7 by Japan - they have been slow to respond to rulings against them.

For example, complaints filed by the EC, Canada and Mexico over the Byrd Amendment and the U.S. Foreign Sales Corporations (FSC) have long been decided by the WTO, yet to date are not fully resolved.  In the case of the Byrd Amendment and its effect on steel trading, the WTO gave the EC and Canada permission to apply counter-measures.

This is all well and good; a rather nice, peaceful way to solve problems.  If the 'defendant' doesn't comply with a ruling, the WTO will grant permission to the 'plaintiff' to impose the trade barrier equivalent.  If the plaintiff is a country of great economic standing, such counter-measures can be an effective remedy for non-compliance. 

But what if the plaintiff is the little tiny island of Antigua and Barbuda, with a population of less than 69,000, a GDP of only $524 million, and a U.S.-facing trade deficit of nearly 2800 percent?  With only $3 million in U.S. exports but $84 million in U.S. imports, Antigua isn't really in a position to inflict significant damage.

Adding to the concerns of how - or if - the U.S. will respond to the WTO ruling are statements by many ‘experts' claiming American victory in the dispute. Some have argued that the U.S. need only ‘re-word' some of it's discriminatory legislation to be in compliance.  While these claims are naive at best, it does lend some insight into how the U.S. intends to respond.  Or not respond, as the case may be.

Imagine for a moment that the U.S. decides to not open up its markets to foreign online gambling operations.  What can Antigua realistically do about it?  They could request financial compensation through the WTO, though again, the U.S. could easily ignore this decision.  They could impose trade sanctions, but on what products?  Tourism accounts for over half of their economic activity.  They could file complaint after complaint at the WTO charging the U.S. with non-compliance, but at what cost to their bankroll?

In the end, the ruling may prove to be more symbolic than effective.  Certainly, other nations in which online gambling is legal could use it as a precedent to file their own independent complaints against the U.S.  Carribean nations could effectively band together and pool their collective muscle.  But even if you add up the trading power of Antigua, Costa Rica, Panama and others, there is still not enough economic strength to concern American authorities.  Many European nations, where gambling is both legal and regulated, may not wish to engage in a trading dispute with the U.S. over a market that is largely self-sufficient.  And with the Asian market booming far beyond levels enjoyed in the U.S., many of these nations may simply re-direct their efforts.  

Sadly, the road to legalized gambling in the U.S. is not likely be paved in April of next year.  It will remain riddled with potholes and detours.  That is, until such time as the unwritten rules of personal liberty cause the U.S. government to acknowledge that there is simply no effective way to permanently ban online gambling. 

It may take another ten years, but as increased demand causes new markets around the globe to legalize and regulate online gambling, the U.S. will (undoubtedly) begin to realize the futility of outlawing an industry based on ‘personal responsibility', the most sacred of American beliefs.

© 2005 EOG.com