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Antigua
wins and loses in gambling judgment
The
long running case initiated by the Government of Antigua
and Barbuda in 2003 against the United States over lost
gambling revenue had an untidy watermark last week.
The World Trade Organisation made a ruling that granted
the Caribbean nation the right to overrule copyright to
the tune of US$21 million per year as recompense for lost
revenue from its blocked gambling operations.
In October 2006, the US government made a decisive move
against online gambling by passing laws prohibiting the
processing of credit card transactions with overseas gambling
companies. That move, an acceleration of previous efforts
to block the online computer systems, effectively gutted
the booming gambling business in Antigua and Barbuda, which
has been seeking financial redress amounting to US$3.443
billion per year.
Seven other members of the WTO have notified the trade organisation
that they would also seek redress if the US sought to change
its trading commitments. These members are believed to be
the EU, Costa Rica, India, Canada, Macau, Australia, and
Japan.
The US has argued that in signing its commitments to open
trade, it did not intend to override its own internal laws
against gambling, which delimit public gambling to a few
demarcated areas within the country and specifically bars
gambling operations which cross state lines.
The basis of the charge goes to the heart of trade liberalisation
and the collateral transactions that are meant to be lubricated
when countries sign agreements to open trade. The US, in
essence, deliberately overruled an international treaty
to which it is a signatory, the WTO’s General Agreement
on Trade in Services (GATS), when the country’s Department
of Justice moved to stifle offshore gambling.
Caricom rallied to the cause in July 2007 when it announced
formal support for the case, advocating the regulation of
online gambling over the stringent measures implemented
by the US.
This case also highlights what happens when trade goes virtual.
When the US signed GATS in 1993, the Internet was in its
infancy and gambling across the ocean was an unimagined
possibility.
Online gambling grew into a major business within just a
few years. Antigua and Barbuda welcomed the business and
a growth industry was born.
The case, between an export giant and a small island nation
that depends on tourism income at a time of declining luxury
travel, highlights just how difficult it can be to address
trade imbalances between very different economies.
In the case of Antigua and Barbuda, the island imports 48.9
percent of its goods and services from the US, but is responsible
for less than 0.02 of US imports, making meaningful trade
sanctions an almost impossible calculation.
In an attempt to make sense of the situation, the WTO offered
as recompense the right to reproduce US copyrighted material
to a value of US$21million, far less than the Antiguan government
had been seeking, but far more than the US$.5m per year
that the US government had been offering.
The legal team for Antigua and Barbuda argue that the compensation
was arrived at by examining horse racing bets, which they
claim were a small slice of the overall gambling take.
Nobody can be said to have won in this case. The United
States is planning to alter its treaty obligations, narrowing
its commitment to open trade, in order to accommodate both
its efforts to eliminate online gambling and to avoid further
sanctions.
The government of Antigua and Barbuda has neither the online
business it once enjoyed nor the recompense that it hoped
for. Now the island’s government must figure out how
to monetise a messy award that appears to be punishing an
unrelated party, the copyright holders of music, software
and movies who are likely to be the ones paying the judgement
through lost income.
Such an activity would hardly be in the small nation’s
best interests and is likely prove to discouraging to investors,
so the WTO’s decision is best handled as the clear
punitive measure that it is, rather than as a genuine source
of financial redress.
The US response to the award is still to be fully articulated,
but will prove instructive not only in future challenges
to established free trade agreements, and government initiated
“adjustments” to GATS, but also in evaluating
the power and influence of the WTO as a regulator and enforcer
of these trade compacts.
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