The Jolly Roger

Why hasn’t this story received much, much more attention in the political blogosphere? It’s potentially the biggest economic story of the year. The WTO has decided in favor of Antigua’s case against the United States on gambling:

The dispute stretches back to 2003, when Mr. Mendel first persuaded officials in Antigua and Barbuda, a tiny nation in the Caribbean with a population of around 70,000, to instigate a trade complaint against the United States, claiming its ban against Americans gambling over the Internet violated Antigua and Barbuda’s rights as a member of the W.T.O.

[…]

But a W.T.O. panel ruled against the United States in 2004, and its appellate body upheld that decision one year later. In March, the organization upheld that ruling for a second time and declared Washington out of compliance with its rules.

That has placed the United States in a quandary, said John H. Jackson, a professor at Georgetown University Law Center who specializes in international trade law.

Complying with the W.T.O. ruling, Professor Jackson said, would require Congress and the Bush administration either to reverse course and permit Americans to place bets online legally with offshore casinos or, equally unlikely, impose an across-the-board ban on all forms of Internet gambling — including the online purchase of lottery tickets, participation in Web-based pro sports fantasy leagues and off-track wagering on horse racing.

But not complying with the decision presents big problems of its own for Washington. That’s because Mr. Mendel, who is claiming $3.4 billion in damages on behalf of Antigua, has asked the trade organization to grant a rare form of compensation if the American government refuses to accept the ruling: permission for Antiguans to violate intellectual property laws by allowing them to distribute copies of American music, movie and software products, among others.

Let’s consider the possible outcomes of this case.

  1. The U. S. could allow Americans to place bets legally with offshore casinos online.
  2. The U. S. could ban all forms of Internet gambling.
  3. The U. S. could refuse to comply and the WTO could impose some other penalty.
  4. The U. S. could refuse to comply and the WTO could impose the penalty that’s been requested.

In the first instance the U. S. would abandon its rights of sovereignty and I think it’s pretty likely that all forms of gambling online and otherwise would be legalized throughout the country. Can you imagine a situation in which international online gambling concerns were able to operate freely and domestic offline ones were banned? I can’t.

In the second instance all forms of Internet gambling would be banned. Besides the outcry against the move, many states have been moving towards putting their state lotteries online. That would be out. Would an implementation of this with a wink and a nod be sufficient for the WTO? If not, it would require government-mandated Internet censorship, which I suspect would cause an even bigger outcry.

If the WTO elects the third alternative it runs the risk of looking feeble.

But it’s the final alternative that’s the most troubling. This goes far beyond allowing the 70,000 residents of Antigua to share DVD’s legally among themselves. It would turn the tiny country, once a haven for Caribbean pirates, into a haven for legalized intellectual property piracy of all kinds. Books, video, music, software, pharmaceuticals, the list is endless. U. S. intellectual property, on which it has based a substantial portion of its future, would be dead not merely in Antigua but everywhere.

I’m also trying to figure out how individual country restrictions, like the KSA’s morals restrictions on imports (which enables them to prohibit the importation of bibles or alcohol, for example), could possibly survive.

I suppose it’s possible that the U. S. would simply stonewall i.e. refuse to comply, period. In that case the WTO would be dead.

Big, big story.

Cross-posted from The Glittering Eye

FILED UNDER: Economics and Business, , , ,
Dave Schuler
About Dave Schuler
Over the years Dave Schuler has worked as a martial arts instructor, a handyman, a musician, a cook, and a translator. He's owned his own company for the last thirty years and has a post-graduate degree in his field. He comes from a family of politicians, teachers, and vaudeville entertainers. All-in-all a pretty good preparation for blogging. He has contributed to OTB since November 2006 but mostly writes at his own blog, The Glittering Eye, which he started in March 2004.

Comments

  1. Matthew Stinson says:

    I was unaware the WTO could agree to a “penalty” that would so radically violate one of the basic principles of the WTO. I’d guess the WTO would offer Antigua the right to some retaliatory tariffs (which would be felt as a “pin prick,” as the article notes) instead of granting Mr. Mendel’s request.

    This case opens up a number of thought experiments. For example, could a country that produces a large amount of pork or alcohol demand the right for its products to be sold openly in Muslim countries? Another: imagine if a WTO member allows legalized prostitution with girls as young as 16, but a US international sting operation nets a few dozen Americans for pedophilic sex tourism. Could the country in question try to sanction the US in the WTO for disrupting its goods and services?

    The above having been said, my inner libertarian says I don’t think it’s the US’ business to be picking and choosing which forms of gambling it considers illegal, so the government probably had this one coming to it.

  2. Dave Schuler says:

    It’s hard for me to see how all sorts of local proscriptions could survive this doctrine. IMO the WTO erred in granting Antigua standing on this case and now they’ve painted themselves into a box.