WTO Internet Gambling Ruling Could Require U.S. to Pay $100 Billion in Trade Compensa

[mollila]

Press Release by Safe and Secure Internet Gambling Initiative

WTO Internet Gambling Ruling Could Require U.S. to Pay $100 Billion in Trade
Compensation Penalties

September 26, 2007 – International trade policy and Internet gambling experts spoke
today about the need for the U.S. to quickly resolve the trade dispute around Internet
gambling as it could result in penalties in excess of $100 billion in U.S. trade
compensation, discredit the World Trade Organization (WTO) and undermine U.S.
credibility. The experts, including Naotaka Matsukata, a senior policy advisor with Alston
& Bird and former director of policy planning for U.S. Trade Representative Robert B.
Zoellick, Lode Van Den Hende, a Brussels-based trade lawyer with Herbert Smith, Raul
Herrera, a Washington-based lawyer with Arnold & Porter and Clive Hawkswood, chief
executive of the Remote Gambling Association, presented their comments on the WTO
Internet gambling trade conflict and likelihood for a major trade clash between the
European Union and the Bush Administration at a press conference in Brussels,
Belgium.

“The $3.4 billion claim by Antigua and the much larger claim of potentially over $100
billion by the seven economies seeking compensation are some of the largest penalties
in the history of the WTO,” stated Matsukata. “This is by far the most significant WTO
case ever and its implications for both the US and the EU are enormous. Given the size
of the US gaming market, both the potential benefit for European industry and the
corresponding potential damage to U.S. companies is unprecedented.”

The WTO previously ruled, in response to a dispute filed by the Caribbean island nation
of Antigua and Barbuda, that the U.S. unfairly prohibits foreign Internet gambling
operators from accessing the U.S. market, while allowing domestic companies to legally
accept online bets. In response, the Office of the U.S. Trade Representative announced
the U.S. intention to withdraw its commitments to the WTO, thus allowing the United
States to keep its markets to offshore based internet gambling operators closed.
Currently, the European Union (representing 27 member states), India, Japan, Australia,
Canada, Costa Rica, Macao, and CARICOM (representing 15 Caribbean nations) have
joined Antigua and Barbuda in seeking compensation from the U.S. for economic injury
resulting from this trade agreement violation. If the U.S. does not settle with each
country, the trade concessions will be determined by WTO arbitration.

Withdrawing from a binding treaty commitment could undermine U.S. negotiating
credibility and risks discrediting the WTO as an effective rules-based body. Essentially,
the U.S. is disregarding the rules it helped put in place with the creation of the WTO.
“When the US decides to ‘clarify’ its commitment, its creates a deep anxiety about the
credibility of the WTO as a rules based institution – how many other countries may
decide to follow suit by similarly ‘clarifying’ previously made commitments that may now
be politically difficult or economically unpopular to fulfill?” commented Matusaka.

Lode Van Den Hende added, “By withdrawing its commitments the US is opening a
Pandora's box because if it becomes easy to withdraw commitments they become
meaningless. And you have to ask yourself whether this is in the long term interest of the
US?"

A solution to the U.S. noncompliance with the WTO obligations may be found in the
Internet Gambling Regulation and Enforcement Act that was introduced in the spring by
U.S. Representative Barney Frank. Matsukata argues that the bill would “effectively
extend national treatment to WTO members in the area of gambling services; satisfying
U.S. obligations under the WTO General Agreement on Trade in Services, and
eliminating the rationale for potentially harmful compensation concessions to a number
of countries.“

“Rather than face paying billions in trade compensation, which would have a significant
adverse impact on the American economy, the U.S. should embrace the legislative
solution presented by the Frank bill, which brings the U.S. into compliance by regulating
Internet gambling and creating a level playing field among domestic and foreign Internet
gambling operators,” said Jeffrey Sandman, spokesperson of the Safe and Secure
Internet Gambling Initiative.

About Safe and Secure Internet Gambling Initiative
The Safe and Secure Internet Gambling Initiative promotes the freedom of individuals to
gamble online with the proper safeguards to protect consumers and ensure the integrity
of financial transactions. For more information on the Initiative, please visit
Safe and Secure Internet Gambling Initiative. The Web site provides a means by which individuals can
register support for regulated Internet gambling with their elected representatives.