Pirate island: online gambling dispute

Reason, April, 2008 by Jacob Sullum

IN 2003 THE tiny Caribbean nation of Antigua and Barbuda (population: 69,000) argued that America's restrictions on online gambling violated international trade agreements. When the World Trade Organization (WTO) ruled in the islands' favor, Antigua was widely described as "the mouse that roared." In December that roar changed to a whimper as an arbitration panel awarded the country compensation far lower than the amount it had sought.

Antigua, home to several online casinos and sports books, had argued that the U.S. was impermissibly discriminating against foreign-based gambling websites by trying to stop them from serving Americans while continuing to tolerate some forms of domestic Internet gambling. The WTO agreed, saying the U.S. owed Antigua compensation for the economic damage caused by shutting off the American gambling market.

Such compensation generally comes in the form of trade sanctions. Given the relative size of the two countries involved in this dispute, Antigua argued that the only effective approach would be suspension of its obligation to respect U.S. intellectual property rights, which would allow it to recoup its losses in the gambling market by selling unlicensed CDs, DVDs, and software. The WTO arbitration panel agreed, but it limited such sales to $2I million a year, 42 times the $50,000 award suggested by the U.S. but less than one hundredth the $3.4 billion Antigua had sought. Mark Mendel, the attorney representing Antigua, called the award "absurdly low."

Meanwhile, the U.S. has negotiated separate deals with the European Union, Japan, and Canada, which were inspired by Antigua's example to file gambling-related WTO complaints of their own. Those deals involve expanded access to the U.S. postal/courier, research and development, and storage/warehouse sectors.

One sector that won't be opened is online gambling. Rather than changing its gambling laws so they comport with its trade commitments, the U.S. government has said it will change its trade commitments so they comport with its gambling laws, a move that Rep. Shelley Berkley (R-Nev.) calls "the trade equivalent of taking our ball and going home."