U.S. deadline extended in WTO case

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The latest negotiation deadline between the United States and the European Union and seven other trading partners related to the online gambling case in the World Trade Organization has come and gone. Both parties once again agreed to extend the deadline.

"In order to provide all parties with sufficient time to reach a successful resolution, the United States and the claimants have jointly agreed that these negotiations should be extended until Dec. 14," said Gretchen Hamel, a spokeswoman for the U.S. Trade Representative's office, in a Reuters article.

The United States is compelled to negotiate the compensation packages over online gambling because of a WTO case brought against it by Antigua and Barbuda in 2003.

The tiny Caribbean nation argued that the United States was violating trade agreements with its laws restricting online gambling. It took a few years, and more than one ruling in Antigua's favor, before the United States admitted it was violating the trade rules.

According to the WTO ruling, the United States could restrict online gambling for public policy reasons as long as the country treated foreign and domestic companies the same way. But the United States does allow for online horse race betting and state lotteries, thereby violating the agreement.

Instead of coming into compliance after the WTO once again ruled in Antigua and Barbuda's favor this year, the United States chose to exercise a rarely used right under WTO rules to clarify its commitments and exclude online gambling from them.

Doing that opened the door for trading partners to seek compensation from the United States. Along with Antigua's initial compensation claims of $3.4 billion for the WTO violation, now the nation is facing a possible $100 billion or more in claims from the European Union, India, Japan, Costa Rica, Macao, Canada and Australia.

According to the Safe and Secure Internet Gambling Initiative, the WTO Internet gambling conflict is by far the most significant WTO case in history and the implications are enormous.

"Failure by the U.S. to meaningfully engage in the compensation talks puts at risk U.S. negotiating credibility and undermines the institutional process of the WTO," said Naotaka Matsukata, a senior policy advisor with Alston + Bird and former director of policy planning for U.S. Trade Representative Robert Zoellick.

"With potentially up to $100 billion in damages at stake, there remains a significant threat to certain U.S. industries if the matter is not resolved in a timely manner."

The Safe and Secure Internet Gambling Initiative said the United States has already settled with Japan, but the terms of the agreement have not been made public.

If the other nations and the United States can't come to an agreement by Dec. 14, the WTO could step in and take the argument into arbitration to be decided.

All of this could have been avoided had the United States come into compliance with the WTO ruling instead of deciding to continue to break the rules. Rep. Barney Frank (D-Mass.) has already introduced a bill in Congress that would legalize and regulate online gambling and solve the problem.

The Internet Gambling Regulation and Enforcement Act would allow online gambling companies to become licensed and regulated in the United States, making the industry safer for the residents as well as creating a level playing field among domestic and foreign Internet gambling operators.

"The (U.S. Trade Representative) should seriously engage with the U.S. Congress to consider legislative solutions provided by the Frank bill, which would bring the United States into compliance with the WTO on the Internet gambling case and eliminate the rationale for potentially significant economic compensation concessions to the EU and a number of other countries," Matsukata said.

Jeffrey Sandman, Safe and Secure Internet Gambling Initiative spokesman, reiterated that Frank's bill could help the United States avoid a major trade clash with billions of dollars in trade compensation and penalties at stake.

"Congressional action now to regulate Internet gambling can provide a responsible policy solution that would allow the U.S. to comply with WTO requirements," he said. "It would also give all Americans the right to make up their own mind whether to gamble online."

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