The exact origin of this article is unknown. It may be from sort of medical trade group publication.
==========================
“Members' regulatory sovereignty is an essential pillar of the progressive
liberalization of trade in services, but this sovereignty ends whenever
rights of other Members under the GATS are impaired.”
WTO Panel, “United States – Measures Affecting the Cross-border Supply of
Gambling and Betting Services”, November 2004
Highlights of the US – Gambling Decision
The recently released WTO panel decision – “United States – Measures
Affecting the Cross-border Supply of Gambling and Betting Services” – ruled
in favour of Antigua’s complaint that US prohibitions on Internet gambling
were a violation of US cross-border market access commitments under the
GATS. The panel also decided that the US failed to justify its Internet
gambling prohibitions as “necessary” because it had refused to consult with
Antigua on what steps Antigua could take to address US concerns.
Media reports are presenting this case as a David versus Goliath contest,
proof that WTO dispute settlement can work for small countries. In fact it
is a win for the extremely powerful international gaming industry including
its most dominant players in the US. US transnational gambing firms that
have sought US deregulation of Internet gambling saw their stock prices go
up after the panel decision leaked out. A spokesman for the giant US
gambling conglomerate, MGM Mirage, told the Wall Street Journal, "I'm going
to send Antigua a thank you note." The European law firm, Herbert Smith,
that represented Antigua promotes itself as a lobbyist in the European
gaming industry and employs former EU Trade Commissioner Leon Brittan as a
consultant. Antigua’s legal team also included the American firm Mendel
Blumenfeld, which lists an Internet gambling firm based in Antigua as one
of its clients.
The US – Gambling decision is significant because of its:
1. Impacts on subfederal jurisdictions: Three federal and four state
laws were found to violate US GATS gambling commitments. To comply with
the panel’s decision, the US federal government would not only have to
change its own laws, but also override state authority to regulate
gambling, an area that is constitutionally within the jurisdiction of state
governments.
2. Interpretations of key clauses of the GATS: The decision is one of
only two exclusively based on the GATS, both decided this year. The other
decision was a win for the US government in its GATS challenge to Mexican
telecommunications’ laws. Mexico declined to appeal the panel decision in
the telecoms case, but the US is appealing its loss in the gambling case.
So the WTO Appellate Body will soon (perhaps by January 2005) give
definitive interpretations on the many ambiguous clauses of the GATS that
were disputed in US – Gambling. These include the meaning of market access
and what requirements have to be met to justify a regulation as “necessary”
under the GATS.
3. Impacts on the US at the WTO: If the Appellate Body upholds the
panel’s findings, the US will be faced with equally bad options:
a) It could ignore the decision. The US would have to hope, though,
that all WTO members will agree to ignore the decision as well. While as a
small country of only 68,000 people, Antigua may not have the clout to make
the US comply, any WTO member could successfully challenge the US if it did
not open up its cross-border gambling market.
b) It could try to withdraw the commitment under the provisions of GATS
Article XXI – “Modification of Schedules”. But any WTO member could then
ask for compensatory adjustments in the US GATS schedule. In negotiating
these adjustments, Article XXI requires that countries “shall endeavour to
maintain a general level of mutually advantageous commitments not less
favourable to trade than that provided for in Schedules of specific
commitments prior to such negotiations.” So the US would have to come up
with a substitute concession equivalent to gambling. The global online
gambling market is estimated to grow to about $14.5 billion by 2006, and US
customers already make up about 60% of the market even with the existing US
restrictions. Unrestricted access to the US Internet gambling market would
have to be worth billions to foreign gambling firms.
The US in fact faces an even greater problem in withdrawing its commitment
than substituting a concession for the “cross-border” aspect of it.
Something media reports have totally missed in coverage of the case is that
the US has also made a “commercial presence” commitment. That means a wide
variety of US laws on “bricks and mortar” gambling operations established
within US borders appear to be violations of the GATS, including state
monopolies on lotteries, exclusive rights granted native tribes to operate
casinos, local bans on certain forms of gambling like slot machines. US
state lottery monopolies alone were worth $44.9 billion in 2003. As the
largest gambling market in the world, the value of the US commercial
presence commitment in this sector is so large it is hard to imagine what
substitute concession the US could make to compensate other WTO members for
its withdrawal.
4. Impacts on the right to regulate: Like the panel in the Mexico –
Telecoms case, the US – Gambling panel concluded that a total prohibition
on a service is a violation of GATS market access commitments because it is
equivalent to a “zero quota”. The US tried to argue the limits it placed
on remote gambling were based on the particular character of the gambling
services being supplied, so they did not fit any of the quantitative limits
prohibited under full GATS market access commitments. The panel rejected
this argument. It said that full market access commitments were violated
when any sub-category of a committed service or any form of delivery under
a committed mode of trade was totally prohibited.
Ironically, the US has been the most aggressive in promoting e-commerce at
the WTO, yet it is the first country to be successfully challenged on its e-
commerce prohibitions. The panel quoted a submission the US itself had made
to the WTO negotiations on e-commerce: "there should be no question that
where market access and national treatment commitments exist, they
encompass the delivery of the service through electronic means, in keeping
with the principle of technological neutrality." The US argued that
Internet gambling created special risks since it was harder to prevent
abuse when gamblers were not physically present in a gambling
establishment, yet these same problems exist in trying to regulate other
services delivered through e-commerce.
But other WTO members have no reason to be smug about the US loss. The
European Commission, for example, has made unlimited commitments under
commercial presence for solid and hazardous waste disposal services. The
UN classification system says this includes “transport services and
disposal services by incineration or by other means” of waste “whether from
households or from industrial and commercial establishments”. Applying
the panel’s interpretation of market access to this commitment means that
no European jurisdiction - be it local, regional, or national – can
prohibit foreign-owned operations from disposing of hazardous waste
by “incineration or other means”, even if these means are totally illegal
for domestic firms under local laws. The panel defined a complete
prohibition of any subsector of a committed service as a zero quota and
therefore a violation of market access. The panel was clear that GATS
market access requires foreign suppliers to be treated as favourably or
more favourably than domestic suppliers, so it would be irrelevant that
governments would be forced to allow foreign firms to do what was illegal
for local firms. The only recourse the EC would have if its member states
hazardous waste laws were challenged would be to try to justify them by
using the exceptions clauses in the GATS – an almost impossible exercise if
the US – Gambling ruling on these clauses is any indication.
The problems posed for the US over the panel’s decision also highlight the
larger problem of trade treaties freezing a government’s ability to
regulate according to prevailing conditions when the treaties are
negotiated. The possibility of Internet gambling would not have raised any
alarm bells for the US government when it made its “other recreation”
commitments in the GATS negotiations in the early 1990’s. Technological
change has made cross-border commitments far more significant than they
were in 1993, yet governments are hamstrung by these commitments if
unanticipated problems start to emerge.
In the current negotiations, countries are under pressure from the US and
the EC in particular to make unlimited commitments in sensitive sectors
like financial, distribution and advertising services. The US – Gambling
decision means they should think again about making any new commitments, as
the panel is basically saying they would have to schedule all sections of
their legal codes that prohibit market access to any aspect of a service.
“US – Gambling” poses real challenges for the WTO. The US may be able to
get aspects of the panel’s ruling overturned on appeal. But the critical
panel finding that the US has to convince the Appellate Body to reverse is
that the US has made GATS commitments under gambling, and this is perhaps
the strongest part of Antigua’s case. The US argument that its commitment
of “other recreational services” did not correspond to the UN
classification code that covers was fatally weakened by the fact that the
US International Trade Commission stated in a public document that it did.
US appeals to the notion that it should not be held to its commitment
because it could not possibly have intended to commit gambling are
condemned by its own arguments in the case it took against Mexico. The US
is stuck – it cannot withdraw the commitment, it cannot comply with the
panel ruling, and so it has made a multi-billion dollar trade concession
that it has to hope other WTO members will ignore. This will act like an
elephant in the room in the GATS negotiations.
==========================
“Members' regulatory sovereignty is an essential pillar of the progressive
liberalization of trade in services, but this sovereignty ends whenever
rights of other Members under the GATS are impaired.”
WTO Panel, “United States – Measures Affecting the Cross-border Supply of
Gambling and Betting Services”, November 2004
Highlights of the US – Gambling Decision
The recently released WTO panel decision – “United States – Measures
Affecting the Cross-border Supply of Gambling and Betting Services” – ruled
in favour of Antigua’s complaint that US prohibitions on Internet gambling
were a violation of US cross-border market access commitments under the
GATS. The panel also decided that the US failed to justify its Internet
gambling prohibitions as “necessary” because it had refused to consult with
Antigua on what steps Antigua could take to address US concerns.
Media reports are presenting this case as a David versus Goliath contest,
proof that WTO dispute settlement can work for small countries. In fact it
is a win for the extremely powerful international gaming industry including
its most dominant players in the US. US transnational gambing firms that
have sought US deregulation of Internet gambling saw their stock prices go
up after the panel decision leaked out. A spokesman for the giant US
gambling conglomerate, MGM Mirage, told the Wall Street Journal, "I'm going
to send Antigua a thank you note." The European law firm, Herbert Smith,
that represented Antigua promotes itself as a lobbyist in the European
gaming industry and employs former EU Trade Commissioner Leon Brittan as a
consultant. Antigua’s legal team also included the American firm Mendel
Blumenfeld, which lists an Internet gambling firm based in Antigua as one
of its clients.
The US – Gambling decision is significant because of its:
1. Impacts on subfederal jurisdictions: Three federal and four state
laws were found to violate US GATS gambling commitments. To comply with
the panel’s decision, the US federal government would not only have to
change its own laws, but also override state authority to regulate
gambling, an area that is constitutionally within the jurisdiction of state
governments.
2. Interpretations of key clauses of the GATS: The decision is one of
only two exclusively based on the GATS, both decided this year. The other
decision was a win for the US government in its GATS challenge to Mexican
telecommunications’ laws. Mexico declined to appeal the panel decision in
the telecoms case, but the US is appealing its loss in the gambling case.
So the WTO Appellate Body will soon (perhaps by January 2005) give
definitive interpretations on the many ambiguous clauses of the GATS that
were disputed in US – Gambling. These include the meaning of market access
and what requirements have to be met to justify a regulation as “necessary”
under the GATS.
3. Impacts on the US at the WTO: If the Appellate Body upholds the
panel’s findings, the US will be faced with equally bad options:
a) It could ignore the decision. The US would have to hope, though,
that all WTO members will agree to ignore the decision as well. While as a
small country of only 68,000 people, Antigua may not have the clout to make
the US comply, any WTO member could successfully challenge the US if it did
not open up its cross-border gambling market.
b) It could try to withdraw the commitment under the provisions of GATS
Article XXI – “Modification of Schedules”. But any WTO member could then
ask for compensatory adjustments in the US GATS schedule. In negotiating
these adjustments, Article XXI requires that countries “shall endeavour to
maintain a general level of mutually advantageous commitments not less
favourable to trade than that provided for in Schedules of specific
commitments prior to such negotiations.” So the US would have to come up
with a substitute concession equivalent to gambling. The global online
gambling market is estimated to grow to about $14.5 billion by 2006, and US
customers already make up about 60% of the market even with the existing US
restrictions. Unrestricted access to the US Internet gambling market would
have to be worth billions to foreign gambling firms.
The US in fact faces an even greater problem in withdrawing its commitment
than substituting a concession for the “cross-border” aspect of it.
Something media reports have totally missed in coverage of the case is that
the US has also made a “commercial presence” commitment. That means a wide
variety of US laws on “bricks and mortar” gambling operations established
within US borders appear to be violations of the GATS, including state
monopolies on lotteries, exclusive rights granted native tribes to operate
casinos, local bans on certain forms of gambling like slot machines. US
state lottery monopolies alone were worth $44.9 billion in 2003. As the
largest gambling market in the world, the value of the US commercial
presence commitment in this sector is so large it is hard to imagine what
substitute concession the US could make to compensate other WTO members for
its withdrawal.
4. Impacts on the right to regulate: Like the panel in the Mexico –
Telecoms case, the US – Gambling panel concluded that a total prohibition
on a service is a violation of GATS market access commitments because it is
equivalent to a “zero quota”. The US tried to argue the limits it placed
on remote gambling were based on the particular character of the gambling
services being supplied, so they did not fit any of the quantitative limits
prohibited under full GATS market access commitments. The panel rejected
this argument. It said that full market access commitments were violated
when any sub-category of a committed service or any form of delivery under
a committed mode of trade was totally prohibited.
Ironically, the US has been the most aggressive in promoting e-commerce at
the WTO, yet it is the first country to be successfully challenged on its e-
commerce prohibitions. The panel quoted a submission the US itself had made
to the WTO negotiations on e-commerce: "there should be no question that
where market access and national treatment commitments exist, they
encompass the delivery of the service through electronic means, in keeping
with the principle of technological neutrality." The US argued that
Internet gambling created special risks since it was harder to prevent
abuse when gamblers were not physically present in a gambling
establishment, yet these same problems exist in trying to regulate other
services delivered through e-commerce.
But other WTO members have no reason to be smug about the US loss. The
European Commission, for example, has made unlimited commitments under
commercial presence for solid and hazardous waste disposal services. The
UN classification system says this includes “transport services and
disposal services by incineration or by other means” of waste “whether from
households or from industrial and commercial establishments”. Applying
the panel’s interpretation of market access to this commitment means that
no European jurisdiction - be it local, regional, or national – can
prohibit foreign-owned operations from disposing of hazardous waste
by “incineration or other means”, even if these means are totally illegal
for domestic firms under local laws. The panel defined a complete
prohibition of any subsector of a committed service as a zero quota and
therefore a violation of market access. The panel was clear that GATS
market access requires foreign suppliers to be treated as favourably or
more favourably than domestic suppliers, so it would be irrelevant that
governments would be forced to allow foreign firms to do what was illegal
for local firms. The only recourse the EC would have if its member states
hazardous waste laws were challenged would be to try to justify them by
using the exceptions clauses in the GATS – an almost impossible exercise if
the US – Gambling ruling on these clauses is any indication.
The problems posed for the US over the panel’s decision also highlight the
larger problem of trade treaties freezing a government’s ability to
regulate according to prevailing conditions when the treaties are
negotiated. The possibility of Internet gambling would not have raised any
alarm bells for the US government when it made its “other recreation”
commitments in the GATS negotiations in the early 1990’s. Technological
change has made cross-border commitments far more significant than they
were in 1993, yet governments are hamstrung by these commitments if
unanticipated problems start to emerge.
In the current negotiations, countries are under pressure from the US and
the EC in particular to make unlimited commitments in sensitive sectors
like financial, distribution and advertising services. The US – Gambling
decision means they should think again about making any new commitments, as
the panel is basically saying they would have to schedule all sections of
their legal codes that prohibit market access to any aspect of a service.
“US – Gambling” poses real challenges for the WTO. The US may be able to
get aspects of the panel’s ruling overturned on appeal. But the critical
panel finding that the US has to convince the Appellate Body to reverse is
that the US has made GATS commitments under gambling, and this is perhaps
the strongest part of Antigua’s case. The US argument that its commitment
of “other recreational services” did not correspond to the UN
classification code that covers was fatally weakened by the fact that the
US International Trade Commission stated in a public document that it did.
US appeals to the notion that it should not be held to its commitment
because it could not possibly have intended to commit gambling are
condemned by its own arguments in the case it took against Mexico. The US
is stuck – it cannot withdraw the commitment, it cannot comply with the
panel ruling, and so it has made a multi-billion dollar trade concession
that it has to hope other WTO members will ignore. This will act like an
elephant in the room in the GATS negotiations.
