EU Accepts US Deal on Online Gambling

Reports are being posted online that the EU has capitulated and accepted the US compensation offer which will keep European online gambling companies out of the valuable US market.

The Independent online news website reports the bilateral agreement will give EU service suppliers access to new trade opportunities within certain sectors of the US, in lieu of the US decision to exclude foreign betting companies from accessing US residents.

The tiny Caribbean island of Antigua took the mighty US to task over the UIGEA, claiming the US had reneged on its GATS obligations. The WTO found in favor of Antigua, the US appealed the decision, the WTO rejected the appeal saying the US clearly had broken their agreement and were now liable to compensation claims from any WTO member who wished to claim damages.

As Antigua is not an economic powerhouse, the hopes of the online gaming industry rested largely with the EU entering the fray and demanding compensation. As many large online gaming companies are based in Europe, the US decision to block them from accessing US residents caused high financial damage to these companies, giving the EU a solid case for compensation. Some analysts had put the possible compensation figure as high as $100 billion.

The hopes of the online gaming industry appear to have been dashed today with the news the EU has accepted an offer from the US which will give European companies access to the US postal and courier, research and development, and storage and warehouse sectors as compensation.

The Independent quotes an EC official as saying:
"This deal is the result of negotiations within the WTO framework and compensates us for the loss of trading opportunities in the gambling sector. We have accepted the most meaningful package in that regard."

The precise value of the deal is unknown at this stage, but it definitely seems like a clear case of "robbing Peter to pay Paul". This deal certainly does not help the online gambling companies (like PartyGaming and 888) who were hurt by the US failure to meet their obligations, and it will probably hurt the companies in the US who were previously not liable to European competition in their sectors.

Naotaka Matsukata, a senior policy adviser at Alston & Bird in Washington and a former director of policy planning for Robert Zoellick, the ex-US trade representative and current World Bank president, pointed out the agreement could set a bad precedent.
"This could put a question mark on the credibility of the WTO system. The US announced that it was withdrawing from its GATS obligations and then it negotiated a way out by offering compensation. What stops another country like China doing the same thing? They may decide that they do not want to keep some of their WTO obligations and offer to pay their way out as well."

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