US to Face Seven Compensation Claims from WTO Members

Following its decision to withdraw previously agreed-to online gambling commitments, the United States will face seven compensation claims from World Trade Organization members, under WTO rules.

The Casino City Times news website reported this morning that official claims had been lodged by Antigua and Barbuda, the European Union, India, Costa Rica, Canada, Macau and Australia. The claims have been made in response to the US deciding to exclude online gambling from its 1995 General Agreement on Trade in Services (GATS) schedule, after losing their appeal over a WTO decision after Antigua claimed the US had broken their agreement in regards to online gambling.

Last year, US legislators hurried a bill through Congress which prevented US banking institutions from processing financial transactions to online gambling companies, whilst carving out a protectionist clause for the US horse racing and lottery industries. The bill was, of course, the infamous Unlawful Internet Gambling Enforcement Act (UIGEA). The WTO has ruled that the US cannot prevent overseas companies from offering these services, whilst allowing domestic companies to do so.

Antigua and Barbuda are seeking over $3 billion in compensation. The details of the other claims are not known, although it is understood the EU will be looking for the US to open up other trade channels in compensation.

The claims are not expected to entice the US to change its protectionist stance on online gambling, however it gives Democrats looking to change the legislation more ammunition. Barney Frank (D-Mass) has introduced a bill that would regulate online gambling whilst Shelley Berkley (D-Nev) has proposed legislation that would create an independent study of the online gambling industry.

The real tragedy of the US position is the damage they will cause to the WTO if they are allowed to set a precedent of simply changing their stated position on a trade issue without being subjected to heavy penalties. Trade agreements may effectively become worthless, as WTO members point to the US example when withdrawing commitments made.

The US has been a driving force behind the WTO since its conception, and there are very few who do not see the value in having a global trade body regulating trade agreements and disputes between nations. It will be a sad day if the WTO allows the US to become the first nation to be allowed to withdraw trade commitments without penalty.

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