BRUSSELS, Belgium - A World Trade Organization case that could lead to a trade clash between the U.S. and the European Union was the subject of a forum held last week by the Centre for the New Europe, which believes that the U.S. could be liable for $100 billion in trade concessions for placing discriminatory restrictions on European online-gaming operators.
Panelists made harsh criticisms of the United States at the forum held last Wednesday about the case, the largest in the history of the WTO. The previous largest WTO case was a $4.3 billion tax issue between Europe and the U.S. that was resolved when the U.S. adjusted its tax code.
"The U.S. decision is a major threat to a rules-based international trading system," said Nao Matsukata, former director of policy planning for the office of the U.S. Trade Representative. "This is also a watershed moment for the WTO because a major world power is thumbing its nose at the institution and disregarding its obligations.
"If more countries follow the U.S. lead and do the same thing, the entire WTO system could implode, and that would be extremely dangerous for U.S. economic interests and for free trade, generally. Part of what makes the U.S. such a formidable opponent in international negotiations is its credibility. That credibility is now at stake for the U.S. government, not just in the trade area but in foreign relations, generally."
The arguments started following Antigua's victory earlier this year, when the WTO ruled that the U.S. violated its treaty obligations by excluding Antiguan gaming-site operators while allowing domestic operators to offer various forms of online gaming. The Bush administration withdrew the sizeable gambling industry from its free-trade commitments instead of complying with the WTO ruling.
The online-gaming dispute has broader implications for Internet commerce. It is the first WTO case supporting a small country's right and ability to create a globally important business sector on the Internet, as Antigua claims it was doing with online gaming.
Under WTO rules, the U.S. is required to negotiate terms of compensation with other WTO signatory countries before it is allowed to withdraw a sector. All 151 WTO members now are considering seeking compensation for the withdrawal, which is estimated at nearly $100 billion, about the size of the entire U.S. gaming market.
The European Union, along with India and five other countries, has filed notice of intent to seek compensation. The group, which is believed to be made up of the world's leading Internet-gaming businesses, has operations in the U.K., Gibraltar, Malta, Austria, Bulgaria, Ireland, Estonia and Sweden, with an estimated 15,000 workers.
"This is absolute discrimination against foreign operators that the WTO has found to be illegal," said Brussels trade lawyer Lode Van Den Hende, who criticized the U.S. for prosecuting foreign online-gaming companies while letting domestic online-gaming interests operate with impunity. "It is exactly the kind of practice that the WTO was set up to eliminate, and now the U.S. is violating this very basic principle that it fought hard to put in place at the inception of the organization."
U.S. laws excluding overseas operators reportedly have caused publicly listed European gaming-site operators, including PartyGaming and 888 Holdings, to lose billions of dollars in revenue and market value, while U.S.-based giants such as Yahoo! and the Sands Corporation are beginning to market online-gaming services in Europe.
Unless the matter is settled, the size and nature of the trade concessions will be determined by WTO arbitration.