The Jolly Roger (updated)

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 staked 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.


Here’s the WTO’s synopsis of events in the case.

Economist Dani Rodrik pokes into this can of worms.

8 comments… add one
  • Abandon sovereignty? You bloody signed a treaty, treaties have obligations. Either one abides by them or not. No need to get hysteric. WTO requires like treatment – banning off-shore internet punting but not on-shore is differential treatment. Ergo.

    The Saudi restrictions are non-discriminatory – they’re not prohibiting bibles and then printing them or prohibiting alcohol imports and then setting up distilleries.

    Easy survival.

    Frankly given American scofflaw behaviour in this area, a bit of IP penalty would do some good, although I suppose the typically hysteric Congress with respect to trade issues would go off the deep end.

  • BTW, Dean has it right on the site, you’re utterly misreading this. The challenge was sustained on the issue of the US banning all internet gambling but allowing internet gambling domestically (if perhaps not all types).

  • You may be right, Lounsbury. I was taking my lead on this from economist Dani Rodrik.

  • He appears to have a certain POV as it were. I would look to trade policy people first.

  • Joshua Link

    Then, of course, there’s the dreaded Elephant In The Room(TM).

    Picking on tiny little Antigua is one thing. But keep in mind that a bunch of the online gambling sites the Feds want to keep away from U.S. consumers are based in places like Gibraltar and the Isle of Man – British territories. Now that the WTO has ruled, will London back them up? If they do, is Washington really willing to go toe-to-toe with its closest ally over something like this? Somehow I doubt it.

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