WTO Case: U.S. Will Soon be a Rogue Nation

September 15, 2005
by Buzz Daly

By early April, the United States will be known as an international outlaw if it doesn’t revise its policy prohibiting Americans from engaging in interactive gambling that originates in Antigua. That’s the projection of attorney Robert Blumenfeld, a partner in the law firm that represents Antigua in its dispute with the U.S. over its failure to honor free trade of gambling under its commitments to the General Agreement on Trade in Services (GATS).

The U.S. has until April 3 to allow Antigua market access to gamblers in this country, or as a alternative to prohibit all “remote” gambling, stated the partner in the firm Mendel, Blumenfeld, LLP, El Paso, Texas. This is good news for sports bettors, but the prospect of enjoying immediate benefits isn’t very promising as the U.S. continues to stonewall the WTO.

Blumenfeld delivered his observations during a commentary on the status of the case pitting the country of 68,000 vs. the U.S., at the recent Global Gaming Expo (G2E) held in the Las Vegas Convention Center He is not optimistic that Uncle Sam will gracefully accept the ruling, but thinks that eventually international pressure will be the deciding factor, and the U.S. will grudgingly legalize online gambling.

The small Caribbean island last year filed a complaint with the World Trade Organization contending that the U.S. government’s efforts to crack down on offshore gambling sites crippled the country’s fledgling Internet gaming industry. It further contended that these actions violated general obligations under GATS to allow gambling across national borders in compliance with the free trade treaty.

The crux of Antigua’s argument was that U.S. actions caused gaming websites based on the island to lose significant revenue, which was responsible for layoffs of many employees, resulting in severe financial hardships. This was a clear violation of a commitment under GATS to eliminate trade barriers in services, including gambling.

Despite a ruling in favor of Antigua by the WTO, the U.S. has stubbornly clung to its position that the so-called clarification of a single federal law -- the Interstate Horseracing Act -- would allow it to continue its blanket prohibition on Internet gambling. The Act was amended in 2000 to allow states to legalize Internet gambling on pari-mutuel events, such as horse racing, and has considerably boosted the fortunes of an industry which had suffered serious setbacks. Elimination of such remote gambling, the U.S. believes, would provide the leverage it needs to let it disregard the WTO ruling.

Meanwhile, the legal status of pari-mutuel horse racing effectively negates the U.S. attempt to find a loophole in GATS, by using a morals clause that allows a commitment to be broken if it violates the morals of a country. Invoked by the government at the end of the case, the clause didn’t sway the WTO’s ruling body.

Blumenfeld suggested that the strategy is disingenuous since the highly organized and politically well connected horse racing industry would never permit any legislative change that would compromise its bottom line. The U.S. government’s desperate ploy to circumvent the law, an attempt to ban all remote gambling in the country, hasn’t made ay legislative headway.

Despite overwhelming international support for Antigua, there is no evidence that the U.S. has intentions of any time soon fulfilling its legal obligations under GATS. It is ironic that while President Bush tries to convince world leaders of the necessity of all nations to adopt and adhere to laws prohibiting incitement of terrorist activities, he blatantly ignores a definitive WTO ruling.

Our government’s unenlightened position is driving all innovation and development of online gambling to countries other than the U.S., Blumenfeld noted. Eventually, the U.S. will be forced to recognize the free market forces that make Internet gaming so popular and have contributed to its impressive growth.

But by the time the issue is resolved with the U.S. accepting and perhaps regulating online gambling, the industry will have matured and it will be too late for Americans to take advantage the growth enjoyed by early innovators and pioneers. This belated acceptance will happen when international pressure is too strong for the U.S. to deflect, Blumenfeld predicted.

Its unyielding position is just another graphic example of the U.S. government’s dubious legal strategy. Uncle Sam’s convoluted position, in which it concurs that its gambling laws violate the trade agreement -- but maintains that Antigua has not proved the violations -- resembles a mindset that might be found in the Twilight Zone.

This case is pivotal, because it is unconscionable and unthinkable that the U.S. can bully everyone else simply by ignoring a legal directive from a sanctioned international agency and suffer no consequences. It is important that Antigua prevail because:
 * It legitimizes the I-Gaming industry;
 * It further establishes the WTO as a meaningful forum for bilateral negotiations;
 * It would serve as a productive and effective countermeasure to U.S. attacks; and
 * It puts pressure on the U.S. to comply with directives, whether or not it agrees with them, and shows that the WTO works, even when the U.S. loses a decision.

While George Bush is busy promoting the concept of law and order on our own Gulf Coast as well as in Iraq and Iran, it is curious that on this issue, he has dug in his heels like a spoiled preppie and takes his marching orders from his constituency of religious zealots.

Their agenda mandates that the law of the land proclaims gambling to be the Devil’s work, and removes it as an option in the freedom of choice equation.

But historically, the forces of darkness lose, even when they have a huge advantage. The human spirit inevitably rises to the occasion and smites the true believers, or fanatics.

Amen.

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More Good News. Empty-suit politico Senator Jon Kyl’s effort to prohibit Internet gambling in the U.S. has been Deep Sixed by the Senate. For years, the Arizona Republican has been trying to impose his antediluvian standards on the nation without success. His latest failure buys gaming proponents another year of respite from having to deal with Kyl’s intellectually challenged agenda.

However, it wasn’t an inspired political awakening that recognized the importance of keeping Kyl-like influences far away from the Internet. It was political hijinks as usual that came to the rescue.

Kyl’s amendment to an appropriations bill was defeated on a point of order invoked by Democratic leaders. They argued that the half-witted amendment should instead be placed on a bill before the Banking and Finance Committee.

A majority vote concurred, so you can stick a fork in Kyl’s brainchild, because it’s done.

© 2005 EOG.com